Electricity deregulation paying off for Texans

It has been a decade since Texas deregulated residential electricity, so how about checking the scoreboard?Consumers are finally winning big time. In competitive markets, they have plenty of power and plenty of options, at prices far lower than when dereg began.
In North Texas, it's easy to find electricity for 25 percent less than the national average, a welcome reversal after lagging the U.S. norm for years. Many rates are now lower than regulated municipal plans and cooperatives in the state.
The lowest rate in the area, 7.9 cents per kilowatt hour, matches the lowest averages in the country, including Idaho and North Dakota, and the price is locked in for a year.
Commercial and industrial users are doing well, too, as they have from the beginning. And Texas remains a global leader in developing wind power, another benefit of deregulation. Wind accounted for 8 percent of energy produced in 2010 for ERCOT, the state grid operator. At one point in December, wind provided more than a quarter of the load, a notable feat in a state that grew up on oil and gas.
The Texas experiment in free electric markets has been wobbly at times, but it's looking like a winner now. That's easy to say when natural gas prices are relatively low, but give credit to private investors, too. They put up tens of billions of dollars for new generation -- on their nickel, not on a regulated rate base -- and they overwhelmingly built natural gas plants.
The new plants are cheaper, more flexible and burn clean, and they don't provoke the opposition that comes with coal and nuclear. In the early years of dereg, investors didn't realize that huge gas fields would emerge from plays like the Barnett Shale, said Mark Armentrout, who served on the ERCOT board from 2003 to 2009.
That abundant supply led to lower natural gas prices, the key factor in determining electric rates in the state. That's helping residents today and proving that markets can turn their way, too.
"It's great to be lucky, and it's great to be good," Armentrout said. "When they both happen at the same time, there's nothing better."
Average electric rates, which rose in the years after dereg was launched, have fallen by roughly 28 percent since their peak in 2008, according to industry data. Texas has a more expensive mix of fuels, because it gets less energy from coal and nuclear, which are the cheapest sources. Coal is a threat to air quality and climate change, and nuclear expansion raises safety fears, especially after Japan's accident. So it's difficult to grow their capacity.
Nationwide, coal and nuclear provided almost 65 percent of electricity last year, while they accounted for 53 percent of the load in ERCOT.
Texas has other advantages, notably an independent grid that can respond quickly. A $5 billion transmission expansion is under way for wind power, for instance, helping Texas maintain its lead.
In most states, grid operators face layers of oversight, including a federal agency and multiple public utility commissions. That can delay progress significantly.
"We have a postage-stamp process for electricity," said Armentrout, who heads the Texas Institute, a sustainable-technology research firm based at the University of Texas at Dallas.
In Austin, the Legislature has been relatively quiet on electricity, unlike a few years ago, when prices were sky-high and more than a few retailers went under. But in February, a record freeze led to rolling blackouts and a call to conserve. Regulators are studying why the disruptions spread to 82 plants and interrupted gas supplies.
In general, reliability has been strong since deregulation. Attribute that to 45,000 megawatts of new generation added since 1999, which is more than two-thirds of the peak demand last August. Over the same period, ERCOT says that 136 older plants were decommissioned.
But with natural gas plants providing most new generation, rates have taken consumers on a roller-coaster ride.
For a while, gas prices rose steadily, and then Hurricane Katrina sent them spiking. Texas' electric rates, which were lower than the U.S. average in the 1990s, were consistently higher for the past decade.
I always believed that dereg was about more than just rates. Investors, not residents, took on the risk of building plants, and the profit motive led to a surge in construction. The law promoted energy efficiency and consumer awareness. Retailers are bringing innovations, including time-of-day pricing to work with smart meters.
Still, the No. 1 goal was to lower prices. Finally, that box can be checked, too, because prices have fallen and most residents and companies have changed plans at least once.
Across the country, the average electric rate was 11.58 cents per kilowatt hour in 2010. That was officially the average for Texas, too, according to the Energy Information Administration in Washington.
Except that local residents don't have to pay anything close to that. In a sampling of 33 offers in North Texas by the PUC, based on averages for last year, every one was less than 11.58 cents.
This week, on the state's Power to Choose website -- www.powertochoose.org -- more than 75 one-year, fixed-rate plans are listed. Only one is higher than the EIA's reported state average. In fact, 57 offers were less than 10 cents a kilowatt hour.
The deals are out there. But in a free market, it's up to consumers to choose them.

Read more: http://www.star-telegram.com/2011/03/22/2942329/electricity-deregulation-paying.html#ixzz1HRP7XTOz

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