Last week, the James A. Baker III Institute for Public Policy of Rice University released it’s study, Electricity Reform and Retail Pricing in Texas showing (in spite of a copy editing error) that “by 2016, the average price paid by residential customers in some competitive market areas was lower than the average price paid in non-competitive market areas.”
The study found that rates in competitive markets, like those that offer the best electricity rates in Houston, more closely tracked wholesale prices than those in regulated areas. While residential prices were more volatile in competitive areas, that close tracking to wholesale price as cheap natural gas drove electricity rates lower wound up benefiting customers in the competitive areas with lower prices in recent years than customers in regulated markets.
The study also points out the pricing dynamics between 2002 and 2016. While prices were higher in competitive areas when deregulation first started (particularly in 2008), falling wholesale prices over time brought competitive prices to parity with non-competitive prices. While competitive prices fell between 2002 and 2016, prices in all non-competitive areas actually rose.
The study concludes by asserting that residential rates in competitive and non competitive markets have essentially followed economic theory with electricity providers minimizing costs to meet market demands. That is, “competitive retail markets have delivered cost reductions consistent with electricity service providers reducing their marginal costs.” That includes improvements in both firm and market efficiency.
In short, deregulated competitive markets have delivered cheap Texas electricity to all Texans.
