Industry-Financed Study Compares Electric Markets, But Ignores Prices

ba-light-bulbHere’s a January reality check, courtesy TCAP.

The Public Utility Commission, in a recent draft of its Scope of Competition report, makes the following bold statement: “Texas continues to be recognized as the most successful competitive retail market in North America.” To justify this assertion, the PUC cites the very important-sounding “Annual Baseline Assessment of Choice in Canada and the United States,” also known as the “ABACCUS” report.

But here’s the problem: ABACCUS is not an unbiased academic report, but rather created for and by the electric industry. As reported by the Texas Energy Report, the ABBACUS report was sponsored by a number of retail electric providers, including ConEdison Solutions, Constellation Energy Group Inc., Direct Energy, Green Mountain Energy, PPL EnergyPlus LLC, Shell Energy North America, Spark Energy and TXU Energy. These companies all have a direct financial interest in extracting as much money from consumers as possible.These reports are far from impartial.

Particularly troubling about this report is its insufficient focus on pricing. The cost of electricity is probably the single most important aspect of the electricity market to most people not actually employed as a manager in the electric industry. This is common sense. But when ranking electricity markets nationwide, the ABACCUS report did not consider the direct cost of electricity for the home consumer or overall pricing trends. These are especially shocking omissions, given that the industry professionals surveyed for the ABACCUS report even listed low prices as a top goal of deregulation.

Had the ABACCUS report taken electricity prices into account, it might have reached different conclusions about Texas. For instance, according to a recent study by the Texas Coalition for Affordable Power, residential consumers in deregulated areas of the state have consistently paid much more for electricity than those living in areas exempt from deregulation.

Here are other facts ignored in the ABACCUS analysis:

  • Electricity prices above the national average have cost residential consumers in deregulated areas of Texas more than $10 billion since 2002.
  • Had Texans in deregulated areas enjoyed the same lower prices as Texans living outside deregulation, the savings in deregulated areas would have exceeded $19 billion.
  • Residents in Texas continue paying substantially more for electricity than residents in Louisiana, Oklahoma and Arkansas.
  • Since 1999, electric prices in Texas have increased by a greater extent than they have in about half of all deregulated states.

It’s clear from even a cursory examination of the available data that Texans should be enjoying greater benefits from the deregulated market. The good news is that reform is possible. But we can’t make a fix without first acknowledging that there’s more work to be done.

The Texas Coalition for Affordable Power recently released a report on the history of deregulation. The report includes pricing data, as well as policy recommendations. It can be found here.

— R.A. Dyer

What is the Texas Coalition for Affordable Power?

TCAP is a coalition of more than 160 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.