About Air and Water

Thursday, July 19, 2007

Deregulation - Why You Pay More

by lightseeker - Texas Kaos - Wed Jul 18, 2007
The short and sweet of this TV report is this:

But the bottom line is: Consumers in deregulated areas of the state are paying more. For 1,000 kilowatt hours, which is typical for a Texas home, TXU charges $129.70. Its lowest-priced competitor, Amigo Energy, charges $114.90.

But if you live in the state capital, your bill from Austin Energy is just $87.28.

And why? It's the free market stupid!

Deregulation: Raw deal for power users


Austin Energy operates much like TXU did before deregulation; the customer's bill is based on the cost of making electricity. The city of Austin owns gas-burning plants, coal-fired generators and part of a nuclear station. Because gas prices have tripled in recent years, they use the gas plants as little as possible, and pass the savings on to consumers.

"And that cost can be five to ten times as much as if you were able to get coal or nuclear-based power," explained Austin Energy spokesman Michael McCluskey.


TXU owns coal, gas and nuclear plants, too. But under the deregulation law, the power generation part of the company—Luminant—is now separate. It sells the power it makes to TXU and other competitors on the open market—often for much more than it costs to generate.

"They're charging you for all the electricity they sell, as if it were made from natural gas," Smith said. "About 60 percent of the electricty you consume is coming from coal and nuclear power plants, which provide electricty at a fraction of the cost."



Read more

Deregulation: Raw deal for power users
By GARY REAVES - WFAA-TV - Friday, July 13, 2007
AUSTIN — He's lowered the temperature; installed efficient lights; even installed a smaller dishwasher.

But frugality isn't the only reason Mike Sloan's electric bills are ridiculously low.

The primary factor is where he lives—Austin. The power company is owned by the city and is committed to keeping rates low.

Most Texans get power comes from private companies like TXU that also have to make a profit.

TXU in North Texas, like Reliant Energy in Houston, had been monoplies, with prices regulated by the state. State lawmakers figured if they broke up the monopolies and made them compete with one another, competition would push prices down.

Instead—fueled by the rising cost of natural gas—electric bills skyrocketed.

"You're paying a Cadillac price for Chevrolet power in the D/FW area," said Tom Smith, director of the Texas office of Public Citizen, a consumer advocacy group. "The reason TXU is charging you so much is because of deregulation."


Austin Energy operates much like TXU did before deregulation; the customer's bill is based on the cost of making electricity.

The city of Austin owns gas-burning plants, coal-fired generators and part of a nuclear station. Because gas prices have tripled in recent years, they use the gas plants as little as possible, and pass the savings on to consumers.

"And that cost can be five to ten times as much as if you were able to get coal or nuclear-based power," explained Austin Energy spokesman Michael McCluskey.


TXU owns coal, gas and nuclear plants, too. But under the deregulation law, the power generation part of the company—Luminant—is now separate. It sells the power it makes to TXU and other competitors on the open market—often for much more than it costs to generate.

"They're charging you for all the electricity they sell, as if it were made from natural gas," Smith said. "About 60 percent of the electricty you consume is coming from coal and nuclear power plants, which provide electricty at a fraction of the cost."


TXU spokeswoman Lisa Singleton said its Luminant division charges a "fair, market-based, wholesale price for the power produced." She said there were other factors beyond the price of gas that determine the price per kilowatt.


But the bottom line is: Consumers in deregulated areas of the state are paying more.

For 1,000 kilowatt hours, which is typical for a Texas home, TXU charges $129.70. Its lowest-priced competitor, Amigo Energy, charges $114.90.

But if you live in the state capital, your bill from Austin Energy is just $87.28.

Privately-owned utilities that are still regulated also charge less.
Amarillo consumers pay $78.84;
in Beaumont, 1,000 kilowatt hours is just $72.24.
Both cities get more of their power from cheaper coal or nuclear power, but since they remain regulated, consumers get the benefit of their lower costs.

Critics say these numbers prove deregulation isn't working. But a recent state study of the last four years says that without deregulation, we'd be paying even more.

"We concluded the average customer in Dallas and Houston has saved money—about $800 in Dallas and about $1,400 in Houston," said Barry Smitherman of the Texas Public Utility Commission.


He concedes that deregulation would have worked better if gas prices had stayed low. Smitherman says if customers will shop around, they'll put pressure on TXU and others to cut prices.

With time and competition, the PUC predicts rates will come down—but they're not likely to ever be as low as Mike Sloan's deal in Austin, where the power company is busy pushing a conservation scheme by installing thousands of thermostats designed to shut down air conditioners for up to 20 minutes an hour.

That will delay the need to build two new and expensive power plants.

Also Online
Texas Electric Choice from Texas PUC

Who benefits from electricity deregulation? from Public Citizen

TXU Energy official site

Austin Energy official site

More stories by Gary Reaves

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