Feature Stories - Breaking Bauer News
:: Is Deregulation Good for the Consumer? Texas is a pioneer state in deregulating its electrical energy. With Texas electric consumption right behind that of the United Kingdom, all eyes are watching to see how it’s going. The UH-GEMI conference June 14, 2005, provides a progress report.
Houston Chroncile / KUHF Coverage
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Houston Chroncile, June 14, 2005, 11:24PM
Power savings off and on: Panelists call deregulation a work in progress
By Tom Fowler
© Copyright 2005 Houston Chronicle
When Texas power markets opened to competition in 2002, grocery giant H-E-B became a winner overnight.
"It drove our electric bills down 25 percent almost instantaneously" in parts of Texas opened to competition, said Bob Manning, director of engineering for the 300-store chain.
Three years later those savings have disappeared, as a tripling of natural gas prices sent Texas power prices through the roof.
H-E-B stores all over the state have seen power prices go up, but Manning said it's been somewhat worse in the competitive markets.
"In the competitive parts of the state, our retail providers aren't able to deliver savings to us anymore," he said.
Manning was just one of more than a dozen panelists to discuss the pros and cons of electricity deregulation in Texas at a University of Houston Global Energy Management Institute conference on Tuesday.
Most speakers at the event, titled "Is Deregulation Good for the Consumer?" were more upbeat about Texas' open markets. They stressed its effect on lowering wholesale power prices and providing product choices.
But more importantly, they said, it is still a work in progress that will reap benefits over time.
More than 70 percent of Texas' large businesses, 55 percent of small and medium businesses, and 20 percent of residential customers have switched to new providers since competition began, said John Wilder, chairman, president and CEO of TXU Corp.
For a region that is the 11th-largest power market in the world, just behind England and ahead of South Korea, that's an impressive record, he said.
The 28,000 megawatts of power plant construction during deregulation's early phases helped drive down wholesale prices. In the past, the cost of that construction would have been passed on to ratepayers, said Evan Rowe, an adviser to the Public Utility Commission of Texas. But under deregulation, it was private companies that took on that risk.
"This business is about risk management, and at the end of the day, the consumer will benefit when risks can be transferred to those most willing and able to handle them," said Guy Braden, vice president of Suez Energy Resources.
Even though deregulation made the Texas power market heavily reliant on natural gas at a time when that fuel has become so expensive, with competition one can still find lower rates comparable to the pre-price-spike days, panelists said.
James Robb, senior vice president of retail marketing at Reliant Energy, noted that the variable rate plans, green power plans, rebates and customer incentives available from many of the retail electric companies never would have come into being before deregulation.
And the spate of product innovations that followed the deregulation of the telecommunications industry — such as cell phones and high-speed Internet access — are seen by many as a sign of things to come for electricity deregulation.
"In telecommunications, I pay more than what I used to, but boy, do I get more," said Lynne Kiesling, a senior fellow at the Reason Public Policy Institute.
Randy Chapman, a consumer advocate with Texas Legal Services in Austin, said he didn't doubt that large companies have seen benefits from deregulation, but he called the law a series of broken promises for residential customers.
He noted the thousands of dollars paid by TXU and others to regulators for a variety of rules violations, the larger deposits required and the practice of credit scoring to determine whether to serve certain people as signs that consumers are getting the short end of the stick.
H-E-B's Manning said another area of deregulation that has proved to be more expensive is that of stranded costs, which represent earlier investments by utilities that could be recovered under regulation but not in a competitive market. In one part of the state it will cost 60 of his stores $100,000 per year for 15 years.
"I feel like in return for this we ought to own our own power plant," Manning said.
TXU's Wilder said he supports deregulation, but it hasn't been easy for his company.
"TXU made zero in the retail business — we have made no money," he said. "It's been a very humbling experience for us. It's a fun business to be in if you like competition, if you like being scared."
tom.fowler@chron.com
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http://www.chron.com/cs/CDA/ssistory.mpl/business/3226155
