Opinion: Competition is helping Texans pay less for electricity

December 8, 2011 – Houston Chronicle

By John W. Fainter Jr.
President and CEO, Association of Electric Companies of Texas, Inc.

The business of electricity is complex, but for Texas consumers eligible to shop around in the competitive retail market, the data is clear: competition is saving you money.

Retail offers in Texas’ competitive electric market are among the lowest prices available nationwide.

The chart above shows the latest U.S. Energy Information Administration data on average statewide electric prices, from August 2011, plus historical information from AECT on offers available from Power to Choose. Note the bar in red. It shows that the average price in Texas, regardless of provider, is below the national average. But note the orange bars, which show the lowest offered fixed-price and variable offers available in the Houston area. Customers who shopped and selected those plans have prices that are among the lowest in the nation. The same holds true for other competitive areas of the state.

Electric prices have multiple underlying factors.

Of course, there are countless underlying factors that affect electric prices, such as regional economic growth, electric grid boundaries and investment in new power plants and environmental improvements. In fact, prior to the opening of the competitive market, many municipally-owned utilities and rural electric cooperatives had electric rates well below those of, say, Houston or Dallas. This makes it necessary to more closely examine the factors behind prices, as well as pricing trends.

Within ERCOT, electric prices are affected greatly by changes in natural gas prices—a marked contrast to the rest of the nation, which is more dependent on coal. During 2008 and 2009 when natural gas prices began to fall, competitive forces—in the form of hundreds of available offers—helped push retail prices downward more quickly than they would have fallen under a still-regulated market. Competition also works when input prices rise by creating pressure for retailers to hold on to customers through competitive prices, better service and other benefits.

And it’s been working. Since 2007, nationwide prices outside Texas have risen by 21 percent, while, within the state, prices have fallen by six percent. Over the same period, the average lowest competitive price has fallen by 34 percent.

In the competitive market, one of the most effective ways to lower electric bills is to shop around.

Visiting the state-sponsored website www.PowerToChoose.org helps consumers find dozens of options in the market; consumers may also start by contacting their current retail electric provider, which may have different pricing plans to better suit their needs. Consumers have the opportunity to enjoy the benefits of lower prices, which is a welcome relief during difficult economic times.

The past 10 years have seen incredible changes in the Texas electric industry. Our state’s comprehensive adoption of technology and innovation has changed the way power is generated, distributed and consumed, while maintaining our tradition of effectively serving customers.

April 16, 2011

By FEDERICO PENA
HOUSTON CHRONICLE

I recently visited San Antonio to address the 2012 KEMA Executive Forum, an annual event focusing on retail energy markets, and reflected on the broad range of choices I had in planning my trip. When I booked my flight from Denver, I had my choice of carriers and was able to select the best options based on cost, reliability and service. When I arrived at the airport and called my office, I marveled at the various data plans, devices and services available to me as cell phone customer. Yet when I turned off the lights as I left my house in Denver, I realized that I had no choice in buying my electricity and that I only have one electricity supplier.

Today, the electricity sector remains one of the last holdouts of U.S. large industries fully open to competition. In many parts of the country, electricity is delivered to residents and businesses via an anti-competitive monopolistic system. As such, there’s little incentive for innovation as monopolies are guaranteed a profit and the costs for new power plants are generally passed on to rate payers who have no choice in selecting another electricity provider.

In Texas, however, my friends and relatives do have choices. Shortly after my tenure as secretary of the U.S. Department of Energy in the late 1990s, Texas lawmakers wisely enacted legislation opening up much of the state’s electricity market to competition. Today, the state’s energy marketplace has matured into one of the most successful in the nation.

Texas has moved away from the one-size-fits-all monopoly structure of the mid-20th century. In its place: a progressive, entrepreneurial and competitive approach that meets customers’ individual electricity needs. Texans can choose from more than 200 residential plans offered by approximately 40 energy service providers — far more choices than in any other U.S. market. As a result, customers benefit from lower electricity prices, efficiency gains, innovative products and the opportunity to select from a mix of diverse energy sources. At the heart of these benefits: innovation.

Competition drives innovation. We have seen this in telecommunications, finance, aviation, and oil and gas, to name a few examples. To compete in an open electricity market, suppliers must constantly differentiate themselves by finding new and better ways to serve customers. Unlike a monopoly, where there is no competition, suppliers in competitive markets must risk their own capital to invest in improved efficiencies to attract and retain customers and remain profitable.

A recent study by KEMA, a leading global energy consulting firm, found that competitive markets have become incubators for innovation and will continue to promote innovation well into the future. Stable market rules and low barriers to market entry foster competitive markets, and thereby enable new entities to offer innovative approaches to meet customer needs.

In Texas, competitive electricity markets support products and services like demand response, smart meters and intelligent grids. The transparency in price and usage – a hallmark of competitive markets – allows suppliers to respond to consumer needs accurately and efficiently.

The state’s wholesale power market has attracted tens of billions of dollars of investment. Texas now leads the nation in wind capacity and numerous older power plants have been replaced with new, efficient facilities – helping cut emissions. The development of new, clean energy generation is another major benefit of competitive markets.

I firmly believe that competition is best for the country, for businesses both large and small and for customers. It also generates innovation and emerging technologies.

The Lone Star State, where customers are choosing their electricity suppliers and getting access to new innovative products and services, has become a successful model for markets across the country. States operating electricity monopolies should take note and learn from the Texas experience.

Pena is co-chairman of the COMPETE Coalition and the former secretary of the U.S. Department of Energy (1997-1998) and U.S. Department of Transportation (1993-1997).

http://www.chron.com/disp/story.mpl/editorial/outlook/7524989.html

Mar. 23, 2011

By Mitchell Schnurman / Star-Telegram

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.

http://www.star-telegram.com/2011/03/22/2942329/electricity-deregulation-paying.html#ixzz1I1lnwA2F

Competitive electricity markets around the United States promote and accelerate innovation and will continue to foster future innovation, according to a white paper released today by KEMA, a leading global energy consulting, testing and certification firm. The paper was commissioned by COMPETE. The white paper, along with the economic and environmental benefits of competitive markets, were topics of discussion at an event held this afternoon on Capitol Hill.
 
Following keynote remarks by The Honorable Patricia Hoffman, Department of Energy Assistant Secretary for the Office of Electricity Delivery and Energy Reliability, panelists Allen Freifeld, Senior Vice President of External Affairs Allen for Viridity; Gene Hunt, Beacon Power Corporation Director of Corporate Communications; Rick Fioravanti, KEMA Director of Storage Applications and Support; and William Massey, former FERC Commissioner and COMPETE Coalition counsel (moderator) discussed how competition drives innovation:

• “These findings confirm that competitive markets encourage innovation along with significant economic and environmental benefits – new entry by innovative resources, energy efficiency and conservation including demand resources, competitive prices and clean energy development,” said William Massey of COMPETE. “Competitive markets provide a level playing field and fair rules that welcome innovation.  And what we are seeing is only the beginning of the innovative resources that competitive markets will deliver into the future.”
• Speaking on behalf of Viridity, President and CEO Audrey Zibelman added, “Competitive markets have paved the way for Viridity’s work with the nation’s sixth-largest rail system, SEPTA, in Philadelphia. We are installing an advanced battery storage system to recapture and deploy power from trains’ regenerative braking. We are excited to support the creation of a scalable model for energy savings and power optimization that may be deployed nationally.”
• “Last month, Beacon began commercial operation of the first flywheel energy storage facility to provide frequency regulation service on the U.S. electricity grid. It’s no coincidence that our facility is located in New York, a competitive market. By providing clear market tariffs for different technology solutions, competitive electricity markets level the playing field and drive innovation,” said Gene Hunt, Director of Corporate Communications for Beacon Power.
• Ralph Masiello of KEMA stated, “Through our research, we found that the competitive electricity markets at wholesale and retail levels have witnessed innovation in a number of ways. Two case studies demonstrated that the wholesale markets have influenced demand response applications and energy storage technologies and the third case study showed that the transition to a fully competitive market in Texas has resulted in a proliferation of innovative electricity offerings.”

KEMA’s white paper draws on three in-depth case studies in the North American wholesale and retail electricity markets over the last decade, and concludes that competition in electricity markets is actively creating and accelerating innovative electricity service offerings and practices. The white paper provides further evidence that competitive markets are driving innovation by rewarding new ways of delivering power and encouraging participants to develop services that quickly adapt to meet customer needs.
 
View the full white paper:

 http://www.competecoalition.com/files/Innovation-Whitepaper-print2-24_0.pdf

The Texas Consumer Association (TCA) is impressed with the results of a recent study that ranks Texas first on consumer choice in competitive retail electric markets. Texas was the only residential competitive electricity market rated “excellent” in the study. The Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS) gauges progress in the implementation of commercial and retail electricity choice.

“Consumers exercising their choices is a key indicator of a healthy competitive market. Clearly, the retail electricity market in Texas is following a growth path similar to the competitive telecom market — and that’s good for consumers,” said TCA’s Executive Director, Sandra Haverlah. TCA advocates for consumer choice in many non-competitive markets, including telecommunications, to bring greater selections and advanced services to Texans.

Sandra Haverlah has been working on consumer pocketbook issues with the Texas Consumer Association (TCA) since 1988 and has served as President of TCA for the last decade.

http://www.benzinga.com/press-releases/b54614/healthy-consumer-choice-in-texas-retail-electric-market

By JACK Z. SMITH

jzsmith@star-telegram.com

Texas’ oft-criticized deregulated electricity market rated No. 1 among competitive electric markets in North America in both the residential and commercial/industrial sectors, in a study done by The Energy Retailer Research Consortium.

Texas ranked excellent in both categories. New York was the only other state cited as excellent in either sector, drawing that rating for residential.

The study surveyed 14 U.S. states, the District of Columbia and two Canadian provinces. Ratings were based on how effectively states implemented a competitive electric market giving consumers a choice of retail electric providers.

The consortium describes itself as “an independent research consortium that supports retail energy choice” and says it is “comprised of companies with a stake in competitive retail energy markets.”

Texas’ deregulated market has been heavily criticized by some consumer groups, but that has waned somewhat this year with lower natural gas prices driving down electric rates.

http://www.star-telegram.com/business/story/1815450.html

November 5, 2010 – Houston, TX (PRWEB)

Texas Electricity Ratings, a website that specializes in Texas electricity comparison and consumer advocacy, has released an extensive review of the electricity prices in most of the major cities in America. The analysis takes an honest look at the rates of electricity in major American cities in an effort to see how Texas electricity rates stack up almost a decade after electricity deregulation.

Read More

Oct. 07, 2010

By Jack Z. Smith

In the spring of 2009, Richard Bennett was frustrated with high electric bills for his 2,700-square-foot home in east Fort Worth.

His monthly bill had run as high as $596, and no wonder — Reliant Energy was charging him 14.8 cents per kilowatt-hour.

But his electric bill “is not one of my concerns now,” said Bennett, who switched from Reliant last year. He now has a rate of 9.2 cents with Champion Energy on a one-year contract that began in June.

Bennett’s highest bill this past, scorching summer was $254. A retired Bell Helicopter Textron researcher, he has a Ph.D. in mechanical engineering and uses his math skills to analyze electricity costs and track rate trends.

Not everyone is so attentive. Many Texans pay much higher rates than necessary, and many have never switched retail electric providers (REPs). But now is an excellent time to shop for a lower-rate plan, with rates dropping dramatically the past two years as a result of depressed natural gas prices.

There are one-year fixed rates available that are below what most North Texans were paying just before the majority of the state’s electricity market was deregulated nearly nine years ago, on Jan. 1, 2002.

On Thursday, the website overseen by the Texas Public Utility Commission, www.powertochoose.org, listed these offerings:

Nineteen one-year, fixed-rate plans below 9 cents per kwh, including two at 8.4 cents, six at 8.5 cents, three at 8.6 cents, four at 8.8 cents and four at 8.9 cents.

Six two-year fixed-rate plans at 9 cents per kwh.

Fourteen all-renewable energy, one-year fixed-rate plans below 10 cents, ranging from 8.8 cents to 9.8 cents per kwh.

The 12 cheapest rates were for variable-rate plans priced from 7.1 to 7.9 cents per kwh. But variable rates can change from month to month, and some of the cheapest variable rates are one-month promotions that can escalate dramatically in the second month.

Shortly before retail deregulation began, Dallas-based TXU Corp., the dominant electric utility in North Texas, was charging a retail rate of 9.7 cents per kwh. It was required by law to lower that to 8.3 cents effective Jan. 1, 2002, the date deregulation began.

TXU Corp. was renamed Energy Future Holdings, or EFH, after the company was acquired in 2007. TXU Energy, a retail electric provider in today’s deregulated market, is a subsidiary of EFH.

Today’s cheapest one-year fixed rates are also lower than some municipally owned electric utilities and cooperatives, which are exempt from deregulation. In April 2007, when the Star-Telegram published an in-depth story on electric rates, “munis” and co-ops had markedly lower rates than the deregulated REPs.

Today’s low deregulated rates are the result of weak natural gas prices, said John Fainter, CEO of the Association of Electric Companies of Texas.

The price of electricity from natural gas-fired power plants, a major source of supply in the Texas, drives pricing in the state’s deregulated markets. In the summer of 2008, gas prices shot above $13.50 per million British thermal units, contributing to sharply higher electric rates that in many instances exceeded 15 cents per kwh.

Now gas is selling for less than $4 per million Btu, the result of oversupply, spurred by rising U.S. shale-gas production from fields like North Texas’ Barnett Shale, and weak demand in a slow economy.

That has sharply lowered wholesale prices for electricity, enabling REPs to lower their rates. In September, the average wholesale price was $35.75 per megawatt-hour for the power grid operated by the Electric Reliability Council of Texas.

The average price was $42.14 for the first nine months of the year, far below the average price of $77.19 for all of 2008.

Strong competition in the deregulated retail market has also been a factor in producing today’s lower rates, with dozens of REPs offering a variety of plans.

http://www.star-telegram.com/2010/10/07/2529781/shop-now-for-cheaper-electric.html

Sept. 14, 2010

Requires Them to Pay What They Owe Before They Go

AUSTIN, Texas–(BUSINESS WIRE)– Catherine J. Webking issued the following statement today on behalf of 17 retail electric providers, known as the Retail Electric Provider Group (REP Group):

“The Public Utility Commission is considering new rules that significantly expand protections for electricity customers who need help paying for electricity during the hot Texas summers and extremely cold winters when bills can be very high. The REP Group supports the Commission’s goal to protect these at-risk customers.

“Under the new rule, more customers will be eligible for Critical Care status or for a new category called Chronic Condition. Retail Electric Providers (REPs) will be required to offer extended payment plans to these customers as well as to low-income customers and any customer who has not been disconnected in the past 12 months. To help ensure that customers who accept the extended payment plans pay their bill, the Commission included a requirement that customers cannot switch to another electric provider unless their bill is paid in full.

“Balancing the need to help customers with the need to ensure companies are paid for the electricity service they provide is a thorny issue not easily resolved. Over a decade ago, Chairman Pat Wood identified it as an issue the Commission needed to tackle. The current Commission held numerous public meetings and received input from all interested parties.

“If you use a product or service provided by a company, it’s only right that you pay for it. If you don’t, then the cost for everyone else that does pay goes up. That’s true whether you’re talking about groceries, cable TV, gasoline or electricity.

“It’s really simple. In exchange for what amounts to a no interest loan, the new rule simply says you must pay what you owe before you can go… to another service provider. In doing so, it will help electric companies manage their overall cost of service for all customers while still providing important protections for at-risk customers. Most important of all, the new rules maintain the fundamental concept of customer choice in our competitive market. Under the new rule, the customer chooses whether to enter a payment plan and chooses the type of payment plan.

“Unfortunately, some customers in the competitive Texas market exploit a loophole that allows them to switch to another electricity provider even though they haven’t paid what they already owe. They’re gaming the system at the expense of the vast majority of customers who pay in full and on time.

“In our opinion, the new rules don’t go far enough. It only eliminates the loophole for those who enter into longer-term payment plans. However, this is step forward and a reasonable compromise that tries to balance the concerns we have to better manage our costs to the benefit of most of our paying customers while still preserving a customers right to choose.”

The REP Group is composed of the Alliance for Retail Markets (ARM), which includes Direct Energy, First Choice Power, Green Mountain Energy Company, Gexa Energy and Stream Energy; Texas Energy Association for Marketers (TEAM), which includes Accent Energy, Amigo Energy, Bounce Energy, Cirro Energy, Green Mountain Energy Company, Hudson Energy Services, Just Energy, StarTex Power, Stream Energy, Tara Energy, and TriEagle Energy; CPL Retail Energy LP; TXU Energy; and WTU Retail Energy. Catherine J. Webking serves as General Counsel for TEAM.

http://www.businesswire.com/news/home/20100914007217/en

Champion Energy Services Ranks Highest in Customer Satisfaction with Texas Residential Retail Electric Service Providers

WESTLAKE VILLAGE, Calif., Aug. 18 /PRNewswire/ — Declining electricity prices have led to an increase in overall customer satisfaction with residential retail electric service providers in Texas, according to the J.D. Power and Associates 2010 Texas Residential Retail Electric Provider Customer Satisfaction Study(SM) released today.

The study, now in its third year, measures customer satisfaction with retail electric utility providers in Texas by examining four key factors (listed in order of importance): price; billing and payment; communications; and customer service.

Overall satisfaction among residential customers of electric retailers in Texas has increased in 2010 to 634 on a 1,000-point scale—up by five points from 2009. Primarily driving this overall improvement is increased satisfaction with price, which improves by nine points from 2009 to an average of 610 in 2010. In addition, satisfaction with the communications and billing and payment factors have also increased from 2009.

“Natural gas prices have stabilized from the volatility seen during the past few years, which has led to lower rates and greater satisfaction with price among electric retail customers,” said Jeff Conklin, senior director of the energy and utility practice at J.D. Power and Associates. “Typical customer-reported bill amounts have declined to an average of $156 in 2010 from $167 in 2009.”

Champion Energy Services ranks highest among retail electric utility providers in Texas and achieves a score of 737. Champion Energy Services performs particularly well in the price, billing and payment and customer service factors. Following in the rankings are Amigo Energy (717) and StarTex Power (716).

In 2010, a shift toward switching providers has emerged, with only 41 percent of customers indicating they have been with their current provider for three years or longer, compared with 49 percent of customers in 2009 who said the same. The study finds the primary reason that retail customers switch providers is to take advantage of a better deal offered by a competing retailer. Slightly more than one-fourth of retail customers indicate they “definitely will” stay with their retail provider, while 15 percent of customers indicate they “probably will not” or “definitely will not” stay with their current provider.

The study also finds that slightly more than one in 10 retail customers in Texas indicate they are “highly committed” to their electricity provider. Among highly committed customers, overall satisfaction averages 864—nearly 200 points higher than satisfaction among customers with medium commitment levels and more than 350 points higher than satisfaction among customers who have low levels of commitment. In addition, highly committed customers are much more likely to stay with their provider and to provide positive recommendations about their retailer, compared to less-committed customers.

“Satisfying retail electric utility customers is an ever-changing process with respect to improving pricing and presenting better offerings and promotions,” said Conklin. “As competitive pressures grow in the Texas retail market, retail providers will need to continue finding ways to maintain long-term relationships with their current customers, as well as implementing innovative products and improving existing services. Creating loyal and committed customers allows retail providers to maintain positive brand appeal and to attract and enroll new customers.”

The study also includes the following key findings:

• Nearly one in 10 retail customers in Texas in 2010 indicates using power that is fully green or renewable—an increase from 7 percent in 2009. Green pricing plans are notably more satisfying than other pricing plans, with satisfaction among customers with green pricing averaging 120 points higher, on average, than satisfaction among customers with different pricing plans.
• The primary reason cited by customers regarding why they are unlikely to continue using their current provider is poor customer service. Approximately 14 percent of customers in 2010 report receiving poor customer service, compared with 12 percent in 2009.
• Retail customers are most likely to recall televised communications from their providers, compared with other methods of communication, such as bill inserts or radio ads. However, customers indicate the most satisfying method of receiving communications from their electric retailer is e-mail.

The 2010 Texas Residential Retail Electric Provider Customer Satisfaction Study is based on responses from more than 7,300 residential customers of electric retailers in Texas. The study was fielded between September 2009 and June 2010.