Clearly the biggest shortcomings of the Texas electricity free market experiment were laid bare a couple of weeks go. However, there have been lots of other market failures that need to be addressed too. The free market advocates have been saying that at least Texans have had really cheap electricity rates. The problem is, they like to compare Texas to the rest of the country. Instead, we need to compare rates paid by the 60% of Texans buying in the free market versus the 40% who are still being served by traditional electricity utilities. By that metric, the Wall Street Journal found that those buying power in the Texas free market have paid $28 billion more for electricity than those served by traditional regulated utility companies. Essentially, those buying power from regulated utilities paid 8% less for electricity than the national average while those in the competitive market paid 13% than the national average. Yikes!
WSJ Source
How can this be? One of the requirements of a well functioning competitive market is that there is perfect information regarding prices. The Texas electricity market falls well short on that score. Regulated utilities have to make their rates transparent and obvious to customers and there are limits to extra fees that can be charged. This is not so in the less regulated free market. As Dallas Morning News' "The Watchdog," Dave Lieber, reported today (DMN, Sec. B, page 1 on Feb. 28, 2021), the PUC (Public Utility Commission) allows electricity contracts to contain 28 different add on fees in the fine print. If the electricity company uses a third party for billing, there can be a fee for that. If you call and talk to an agent, there can be a fee for that. Use the minimum electricity allowed by the contract for a month, there can be a fee. Pay the minimum payment for a month, there can be a fee. Change the date you want to end service when you move, there can be a fee for that. None of these show up in the rates charged, but they contribute to what you pay. Companies also include the potential for rate changes in your contract. But if you autopay you might not notice that your rate has slowly crept up from $0.08/kWh to $0.20/kWh. According to my reading of Lieber's column, companies also like to use variable or indexed rates as ways of hiding what customers pay. All of this is geared to bring in extra revenue without losing customers.
Unlike The Watchdog, I am all for variable rate plans that charge higher rates when usage is highest and lower rates (like at night and on weekends) to provide an incentive for people to do laundry and other more energy intensive activities when the supply is not so strained. But there has to be a way to make the market more transparent. There should be an approved list of things where fees can be added and that list must be prominent in the contract. Second, rates paid and when and how they might vary over a 12 month contract must be plain to see.
I can say that I visited Comparepower.com and typed in my ZIP code and checked out dozens of plans available in my area and, if the data provided can be trusted, I saw very little in the way of hidden fees or complicated rate structures. But I know different companies operate in different parts of Texas. Until the legislature takes steps to make the market more competitive, your best bet may be to become a more careful consumer.
I enjoyed reading your analysis of my story.
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