Editorials

As Texas temperatures rise, consumers can expect both gasoline prices and electricity prices to rise, as well. But Bill Peacock of the Texas Public Policy Foundation points out that the rate hikes are less than they could be, and that electricity deregulation has proven to be a net benefit to Texans.

"In the past, increases in electricity prices have prompted calls for more regulation of the Texas electricity market," Peacock says. "While we might hear those refrains again this summer, a recent review of the market reveals that Texas has benefited by freeing buyers and sellers of electricity from government interference in their transactions."

In its new report, "Texas Electric Meter: Measuring the Effects of Electricity Deregulation," the Foundation puts a pencil to the debate.

"Our research establishes conclusively that last year's critics of the Texas electricity market spoke too soon," Peacock reports. "Using data from the still-regulated 2006 market, they claimed that deregulation wasn't working."

That's a common tactic across the county by proponents of market regulation.

"For instance, deregulation was widely blamed for causing California's power crisis several years ago," Peacock says. "However, the California electricity market, in fact, was never deregulated. A poorly designed set of wholesale regulations combined with retail price controls led to that market's collapse when natural gas prices skyrocketed."

Texas, on the other hand, has seen significant increases in consumer choice and competition.

"In September 2006, the average Texas consumer in an area open to electric competition had access to about 17 retail electric providers offering about 36 different rate plans," Peacock says. "Today, those same consumers can choose from 28 providers (on average) and nearly 100 rate plans. Consumers can lock in today's rate for the long term or let it float month-to-month. They can pick providers and rate plans based on their fuel sources. They can even choose electric providers who will give them a commission for each household they recruit to the company."

Those are free market truths at work.

"Since competition began, the five former monopoly electric providers have lost between 53 and 78 percent of their market share," Peacock says. "The percentage of residential customers who chose competitive rate plans more than doubled during 2006 and 2007 as the state completed the transition into full deregulation."

Nearly three of every four residential consumers have taken advantage of deregulation.

"As of December, 72 percent of residential consumers had chosen a competitive rate plan, and 80 percent had made an observable choice of providers. And, of course, the remaining 20 percent of the market can choose (or not choose) a new plan at any time," Peacock says.

Electricity isn't just less expensive; it's also more reliable.

"As much as anything, the reliability resulting from these massive investments testifies to the success of deregulation," Peacock says. "Texans have been spared the repeated rolling blackouts that have afflicted California and New York."

When demand increases in the coming warmer months, prices will likely increase as well, Peacock acknowledges.

"However, the higher prices won't be just in Texas, or due to deregulation," he says. "The facts clearly show that Texans benefited from deregulation in 2007 and will continue to do so in the future."

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