Monthly Archives: July 2011

Recharge Texas’s Analysis of Complaints is a Complete Farce and Embarrassment

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So I recently saw an article that a group called Recharge Texas released through Business Wire discussing some truly wrongheaded ideas. Recharge Texas claims to be the state’s “premier website for energy consumers.” I wonder if just maybe that title was something they gave to themselves. Without further ado, let’s jump right in and examine this foolishness.

Electricity complaints have skyrocketed under the Texas electric deregulation law — from fewer than 2,100 received each year by the state’s Public Utility Commission to an average of more than 12,000 under deregulation, according to an analysis by RechargeTexas.com.

Texans have lodged more than 800 percent more electricity complaints on an annual basis after retail deregulation than they did before deregulation, the analysis shows.

Jay Doegey, TCAP president, said the colossal jump in complaints reflects continued frustration with the deregulated electricity market in Texas.

Ok, two of the statements I’ve listed above are (arguably) facts. One of them is entirely an opinion based on a conclusion drawn by someone with no real background for consideration as either a statistician or expert. Can you guess which one is the opinion? That’s right, it’s the statement made by Jay Doegey of the TCAP (Texas Coalition for Affordable Power, which runs Recharge Texas). I’d be curious to know if Mr. Doegey took into account that before deregulation, the ability for customers to lodge complaints online didn’t exist, as well as the fact that the internet was not nearly as robust and ever-present as it is today. Do you think that perhaps the fact that people do everything online, and can find phone numbers in a few seconds instead of thumbing through a phone book to find a number to complain to makes a difference in how many people actively participate in the marketplace? Additionally, I wonder if he considered whether or not sites like Angie’s List, Yelp, Facebook, Twitter and even my own Texas Electricity Ratings have helped reinforce to people more than ever that one voice does make a difference in a marketplace? Lets face it, the shift in culture in the past 10 years in how people behave can be measured in light years, not just leaps or bounds. In fact, 10 years ago I didn’t have a cell phone with internet access. Now they all do. And within 5 minutes I can go from checking my electricity bill online, to google searching the phone number to the PUC, to calling their complaint line if I so choose — all from my cell phone. Does anyone think this hasn’t played a huge part in the increase in complaints for electricity companies?

Something else that absolutely should be considered is that in the past 10 years the state of Texas has been part of what can only be called explosive population growth. In 2002, the population of Texas was 21 million and change. In 2011 it’s projected to be around 26 million people. That’s a population growth of almost 20% in under 10 years. Am I the only person that thinks our state increasing its population between 15-20% might also play a part in a massive increase in electricity complaints? I hardly think it’s inconceivable that mistakes could have been made and those people are much more likely to have to get on the phone to lodge complaints just during the process of figuring out how a deregulated market works. Doegey overlooks the possibility of this situation again in the article when he references how high the spikes in complaints were initially following deregulation. Of course the number of complaints spiked. All of a sudden people were immersed in a new system that was confusing. What a shock the the road was a bit bumpy.

However, what gets absolutely no consideration in this article is that now people honestly had a REASON to complain. In a regulated market, what exactly is the incentive of calling in and complaining? It changes literally nothing. One certainly can’t complain and then move to another provider. And what motivation do they have to provide any better service to someone who lodges a complaint when that person LITERALLY has no other option except to continue to get their service from the provider with whom they’re currently displeased? Absolutely Nothing! In fact, an excellent case can be made that people would avoid complaining because of the fear they might receive WORSE service. Does it make sense for an employee to yell and scream at their boss and tell them how terrible they are at their job and expect no negative consequences? Absolutely not. That’s why people who are frustrated wait to tell their bosses that on their way out the door after finding a new job. Well, when Texas was regulated, there were no new “jobs”, and there were no doors to escape to when you were unsatisfied with your electricity service. It doesn’t appear that Recharge Texas considered that when they were looking at the numbers. If so, I’d love to see them show their work and quantify how this factored into their equations.

The greatest irony of this article is that the same thing that Doegey and Recharge Texas are claiming, that the increase in complaints is a sign of dissatisfaction, is completely backwards. The increase in complaints is a sign that the free market for electricity is WORKING! Complaints now have meaning because there IS electric choice, so now people are actually taking the time to rate their electricity providers while working the market to their advantage! This is exactly what the deregulated market was intended to do, and it’s actually happening. And by the same token, the electricity providers with the greatest number of complaints are far and away the former incumbents, Reliant and TXU, the electricity companies that we’d be saddled with if we were still regulated. It’s extremely easy to make an argument that the companies who have been the slowest to figure things out in terms of customer service and satisfaction are the large incumbent monopolies we had before deregulation. It should only be shocking to groups like Recharge Texas that more than 40% of all complaints on record at the PUC for 2011 come from 3 companies that used to be former incumbent electricity providers: Reliant Energy, TXU Energy, and Direct Energy. The presence of new companies actually gives customers an alternative to the biggest offenders in the marketplace. I wonder if Recharge Texas would consider alternatives to bad customer service to be detrimental to electricity service for Texans? It certainly seems that would be a strange stance for the “premier website for energy consumers” to take, however, they seem to have adopted it nonetheless.

Additionally, I question this report’s Math. According to this statement in the article:

During the entire period of deregulation, complaints against electric companies filed with the PUC have never dipped to below 7,700 per fiscal year.

If that’s true, then I suppose 2011 is special. Because through 6 months of this year, there are currently 2,210 customer complaints on record at the PUC’s website complaint summary. That means we’re on pace for about 4500 complaints this year, which certainly is less than 7700. It also makes their earlier statement that there are 800 percent more complaints on average seem more than a bit sensationalist. By their own math, Recharge Texas claims that there were 2062 complaints filed in 2001, the year before deregulation. If there are 4500 complaints this year, that comes to just more than twice as many complaints filed. I can easily chalk up to an active market which offers incentive for people sharing their experiences. A 150% increase is nowhere near an 800% increase in my book. Even if there were 12k reviews a year, that’s a 600% increase. Which is ALSO not an 800% increase. I wonder if the rest of their numbers are as sound as this math.

Are there any more absurdities in this article? Well, I’m glad you asked:

The plurality of complaints submitted to the PUC over the last two fiscal years relate to electricity bills. The relatively high number of billing complaints is unsurprising given that electric prices have increased in Texas by more than 40 percent since the adoption of the deregulation law. That’s a greater percentage increase than that registered nationwide. Likewise, average electricity prices in Texas are higher than prices in adjoining states.

I’d absolutely love to see the research they’re drawing from to put out this statement. Because I’m tempted to say it’s a flat out fabrication. According to research I did in an article many months back comparing Texas Electricity prices to the rest of the country, Texas flat out has the lowest rates of everyone. Certainly much cheaper than New Orleans, which I believe is located in a neighboring state. As for Oklahoma, Arkansas, and New Mexico, well none of those states are home to 4 of the 10 largest metropolitan areas in the entire country. In fact, if memory serves, none of those states are even home to 1 of the 10 largest metropolitan areas in the entire country, compared to Texas’s 4. I wonder if that has anything to do with the electricity rates, and that’s IF they’re cheaper, which I doubt. The fact of the matter is, the deregulated electricity rates at this point for Dallas and Houston are on par with San Antonio and Austin, the two major metropolitan areas that remained regulated. So if the rates all over Texas are all the same, both regulated and deregulated, then why is Recharge Texas so keen on painting deregulation as a problem in regards to billing in the quote above? Or customer service earlier in the article? Maybe the people in Austin and San Antonio aren’t filing that many complaints because they realize the futility of wasting their time complaining about billing and service with the only electricity provider in town.

One thing is certain, and that seems to be that Recharge Texas has an agenda against a deregulated electricity market. And digging around their website gave me some indications as to why that might be, but more on that in another article.

Texas Electricity and the New EPA Changes

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I’m sure that anyone who’s been keeping an even casual eye on the news cycles the past few weeks have seen a number of articles written about the new EPA changes and how they will effect our Texas electricity market. The act that has been pushed through the EPA by our current administration is called the “Cross-State Air Pollution Rule.” You can read a number of articles attacking it from different angles here, here, and here. There’s a lot to wade through in regards to the different accusations and concerns flying out there about this new ruling, as well as a lot of anger and vitriol. I’m going to skip that, however. I just want to take a look at the plan, as well as how it could potentially effect the retail Texas electricity market.

First off, lets take a quick look at what the plan is, and why it is going to effect deregulated electricity in Texas. The rule is designed to lessen certain kinds of emissions, lessening air pollution, specifically the kind of pollution that will float into and contaminate the air of other states that didn’t produce the pollution. In terms of a practical description, the plan is attacking the emissions that are produced by coal burning plants, of which Texas has many.

Why do the coal plants matter for our electric rates? We all know that a bulk of our electricity plants are natural gas plants, as well as the fact that the cost of natural gas is what sets electricity prices for the market. So why should the coal plants matter? Well, the first answer is that while those things dominate the market and set the rates, it doesn’t mean that the coal plants aren’t an important part of that product. If these plants get shut down (not all of them will, but many might) that means a larger burden has to be carried by the remaining plants. Or if the plants have to be fitted with expensive technology to lessen emissions, then that cost will translate into higher energy prices from the coal plants. Less plants carrying a heavier burden will also mean higher electric rates. This will all translate into higher prices for Texas electricity customers.

And that’s not all. The biggest issue that ERCOT has with this situation is that removing these coal plants will cut heavily into the minimum amount of electricity needed in the grid to consistently keep up with demand. This should be especially fresh in the minds of Texans considering the issues we’ve had recently. Just this past winter the entire state had do deal with huge rolling blackouts because of a demand shortage due to historic cold freezes which took several electric generation plants offline. The rolling outages kept people from suffering without energy too long, but the truth of the matter is that the grid didn’t have enough electricity to meet with demand. Additionally, there’s been several shorter blackouts all over Texas because the historic drought has upped the demand for electricity to the point the grid is having trouble meeting demand. And this is happening without any specific plants being offline or broken. So things are pretty tight right now. Imagine what would happen if we lost the use of several of our plants permanently? Naturally ERCOT is concerned that this new EPA law will seriously harm our ability to meet general electricity demand for the entire state. And any shortage in demand also will contribute to higher prices. And right now, Texas has the lowest energy prices in the United States.

Another big facet that is enraging people over this issue is the potential loss of jobs, as well as the accusation that Texas wasn’t given enough notice before landing on this list for states that had to adopt this new law. But none of that will directly tie into this stuff in regards to Texas electricity. The other points I’ve discussed, however, will have a heavy effect on our market moving forward. So that is what people should know about how the EPA will effect Texas electricity.

Texas Electricity Market Misunderstandings: Minimum Usage Rates

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I was running through the latest reviews at Texas Electricity Ratings and I came across some reviews complaining about being charged for using too little electricity. In past posts, I know I’ve explained to people how minimum usage charges exist in the Texas electricity market. So this week, I saw two specific reviews left for Mega Energy, both of which complained about a minimum usage charge that was tacked onto their bills. While not the most common complaint about electricity providers, it’s still one I see regularly. Here are the two quotes below:


During an era of oppulence in America, some people are striving for ways to cut back and reduce their impact on waste and energy consumption. In comes Mega Energy with “new and inventive ways” to punish you for not contributing to the smog and CO2 emissions for the Houston area. Each of the last two bills received had penalties for not meeting minimum power kWh usages. I spent the spring trying to make my place more energy efficient in preparation for this summer. Reward for these measures, less coal burned and charges unforseen when researching energy providers. Even their website under the “understand your bill” section there is no mention of these requirements and even Item N contradicts the charge. There is little chance I would ever meet their cryptic minimum usage and am gladly looking forward to our breakup. Unfortunately, they will win again since there is a $200 cancellation charge.

Cannot recommend Mega Energy at all! – never got a confirmation email letter with contract details and you cannot find it in your online account. – had to wait for at least 2 months to get our first bill. – and, they charge you EXTRA $12 per month when using less than 300 kw/h!!! so don’t even bother to save energy! -customer service is unfriendly, too


While I can understand why both of these people would be angry and upset at being penalized for, in their mind, simply being energy conscious, the fact of the matter is that this is standard operating procedure. Every electricity provider has an additional charge for minimum usage. It’s literally called a “minimum usage charge.” And it’s listed on the back of every company’s Electricity Facts Label. Now, the amount a company will charge if a customer doesn’t meet the minimum usage requirements, as well as the minimum usage kWh threshold can differ from company to company. However, that is something that customers should look into when they’re researching new providers. Typically the usage thresholds are at 500 kWh, and the fee is anywhere from $5-12 per month if the threshold isn’t met. But what I really am trying to inform people of here is that this isn’t a “hidden charge.” It’s not nefarious. Every provider has one. It’s listed in the Facts Label.

So the last question is, why do electricity providerscharge this fee? Well, people don’t want to hear this, but the fact of the matter is having a customer costs a certain amount of money from the providers. The costs associated with paper bills, customer support and welcome packets and the basic functions that are provided to customers all cost money. If a customer isn’t using enough electricity, then the electric company tacks on a few dollars to try and break even on the customer. It’s really that simple, and in the big picture, getting $8 tacked onto your electricity bill (a bill that is probably only $25 or very low) doesn’t even come close to the energy savings a customer is getting by using so little electricity. This is an imperfect metaphor, but think of it like a service charge or membership fee to shop at some places like Costco. At any rate, I don’t fault an electricity company for trying to simply break even on a customer. And at the same time, this is standard procedure, both for deregulated as well as regulated areas of America. It’s always existed, and it’s just part of the industry that we have to accept.

It might not be a truth people are happy to hear, but I hope that this article helps inform people about this part of the Texas deregulated electricity market.

Deregulated Electricity Expansion: Sharyland Utilities

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In what looks to be the first major regulated area opening up since the initial deregulation in 2002(that I can remember, there may have been others), Sharyland Utilities is set to transition to a deregulated electricity market. Starting in January 2014, Sharyland Utilities and their 44,000 residential and commercial customers in 28 different counties of Texas, will be open to electric competition. Some of the bigger territories include Brady, Celeste, Colorado City, Stanton, Mission and McAellen.

What makes this process interesting is that Sharyland doesn’t have an incumbent electricity provider for customers to default to when the regions open up to electric competition. So they’re actually going to have to pick someone to be the “default” provider, and then let customers know that if they don’t select someone from the competitive market, then they’ll be moved to the “default provider.” It should be a pretty interesting process for customers. No word on whether these people will be folded into an existing TDSP or remain their own entity with different rates.

From a business perspective for the electricity providers, 44,000 potential customers is no small amount at which to sneeze. Some of the smaller providers operating in Texas don’t even have 44,000 customers on their books. I would be extremely surprised if most of the electricity providers in Texas wouldn’t start making their presence felt in the Sharyland footprint with advertising and other materials in an effort to sway future customers.

Sure, none of this happens until 2014, which is still more than two years away. And while that might seem like plenty of time, I’d be willing to wager that won’t stop most of the electricity companies in Texas from trying to get a head start on shopping their brand.

If you currently are serviced by Sharyland Utilities and are curious to learn more about this process, there’s a great article with a ton of details written by Paul Ring at the always information Energy Choice Matters. You can link to that article here.

Around the Texas Electricity Blogosphere: 7/13/011

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I just wanted to drop a few tidbits of Texas electricity market that didn’t deserve their own blog post. So instead, I’m just going to group the tidbits below.

PUC Chairman Resigns – Barry Smitherman, who has been a commissioner of the PUC since 2004 and the Chairmen of the PUC since 2007, resigned his position last week. He has instead been appointed to a position on the Texas Railroad Commission. The PUC is the regulatory agency for the deregulated Texas electricity market. No word (That I’ve heard) about who will be replacing his spot, both as a Chairmen as well as a new commissioner.

TNMP Begins Smart Meter Deployment – The Texas-New Mexico Power company, which is a TDSP company that maintains the electricity infrastructure for many pockets of electricity service in Texas, is beginning to deploy smart meters in their territory. This is on the heels of Centerpoint and Oncor, the two biggest TDSPs in Texas, having successfully begun deploying massive amounts of smart meters in their footprints. Here are a list of the energy charges that might apply to each customer:

Residential: $3.40

Secondary Service Less than or Equal to 5 kW: $8.20

Secondary Service Greater than 5 kW: $13.63

Primary Service: $17.32

Lighting Service (Metered Facilities): $7.22

More information about the deployment can be found from the always informative Paul Ring at Energy Choice Matters, here.

Oncor Reports AMS Surcharge Unchanged – Staying on the topic of smart meters, Oncor announced that there would be no change to their AMS Surcharge, which is the fee that is associated with having a smart meter. So that’s good news.

Eggs, Milk & Electricity: The Future of Electricity Sales?

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I ran across what I considered to be a fascinating read about what could be the future of electricity sales in Texas. To summarize, the article discusses how in the UK, much of Europe and Australia have been deregulated for quite awhile compared to the still young and immature US deregulated markets. And over there, an interesting trend has occurred: the Electricity companies are partnering with large retail stores to help sell residential electricity.

To put it simply, large retail stores with excellent brands and customer service records have a level of trust that many of the electricity companies themselves might not have with potential customers. Which isn’t to say they’re bad companies, but a new electricity provider that’s been around for 5-10 years isn’t going to match the equivalent of a Wal Mart or Target that people have been visiting their entire lives. Retail Stores might also have more of a history and understanding of successful customer service practices and dealing with the human part of the equation that some electricity providers might not have mastered yet.

This might not be as out of the normal as it appears on the surface. Bundled services are nothing new, even here in the US. For example, lots of companies combine forces to sell products, like Satellite TVs and Phone Service, once upon a time. Hell, some electricity providers here in Texas have started offering satellite TV service bundled with their energy offerings. The point is, this kind of thing isn’t new. Additionally, I’ve seen Green Mountain Energy booths set up outside several of my nearby grocery stores in Houston on a regular basis. We’ve already seen Kroger and other grocery stores start to sell gas at special rates at pumps set up outside there stores. Does Kroger Electricity really seem that far-fetched? Personally, I don’t think so. And I’m not sure it isn’t a good idea. I think it’s only a matter of time before people stop off for some milk, eggs, and a new fixed term electricity plan.

So what do you guys say? Would you buy your electricity from a grocery store or a retail warehouse?

Deregulated Electricity is Working

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The deregulated Texas Electricity market receives a lot of criticism from the people who live here. However, ironically, it is universally praised and used as a model by every other state that is moving to deregulation. And in an awesome article in today’s Fort Worth Star-Telegram, author Mitchell Schnurman takes a look at why Texas deregulated electricity is considered such a home run by the other 13 deregulated states. The entire article is worth a read, but I wanted to break down some of the most interesting items here on the blog.

Adjusting the ’01 price for inflation, today’s rate is 31 percent lower in North Texas, he reported. One more metric: Since December 2001, rates in the regulated sector — municipal utilities, cooperatives and investor-owned utilities — often climbed by double-digit percentages. But prices offered by competitive retailers dropped by 26 to 43 percent.

Here’s the first item I wanted to take a look at, and the reason should be obvious. One of the most consistent and common gripes I hear from people is how prices have gone up since Texas deregulated. This manifests in people, lots of people, complaining about how deregulation was all a ruse to gouge prices and make profits at the expense of Texans. Well, that’s absolutely not true. Yes, we had some years with exorbitantly high prices, but prices would have been high no matter what, because they’re based on natural gas rates. The rest of the country had high rates that year as well. Per the quote above, prices are 31% lower in the deregulated areas than they were before deregulation in 2001. And the areas that remained regulated are actually higher than they were in ’01, while the competitive areas dropped between 26-43%!

Still, the state’s success also depends on competition among retailers and generators, and the design of the state’s deregulation scheme. That’s spurred more wind generation, making Texas easily the largest producer of wind power in the country and fifth-largest in the world.

I actually don’t have much to elaborate on this point, but I definitely wanted to single it out for posterity. When deregulation was set in motion, the idea was that the companies themselves would be forced to work more efficiently to reduce the bottom line for customers in an effort to remain competitive with the other providers. And that is largely what has happened. And in the process, Texas has also become the fifth largest generator of wind power in the world. So a side effect to innovation and market efficiency is remarkable grown in Green Energy.

To gauge the competitiveness of a market, analysts often focus on the number of customers that switch providers. In North Texas, about half the residential base has left TXU Energy, the affiliate of the incumbent monopoly, and statewide, the total switch from the previous incumbent is about 56 percent.

In Pennsylvania, over roughly the same period, 19 percent of residents have switched, and in some areas, it’s less than 5 percent, Hudson said.

Many Texas customers shop aggressively and stay with their provider because they get good terms. TXU estimates that 87 percent of residents in North Texas have changed either their provider or their electricity plan, and that’s a better gauge of competition in practice.

Well, this quote certainly is a site for sore eyes. It’s also interesting because the number one thing I consistently see in the market for Texas electricity is that a lot of people still don’t seem to understand how the market works at all. Many aren’t even aware of choice. However, according to this metric, it seems that half of Texas actively shops and takes advantage of the Texas Electricity deregulated market. That’s fantastic news. Now if I can just get the other half to pay attention, we’ll be doing great.

Also of interest in that quote is how many people have left TXU.

Since 1999, hundreds of power plants have been built in the deregulated electric market, adding 45,000 megawatts of generation to the grid controlled by the Electric Reliability Council of Texas. Peak demand in ERCOT, set last August, was 65,776 megawatts.

Interesting. So our market and our demand is growing substantially bigger, while our prices continue to drop. That is the definition of positive grown, in my opinion.

I strongly urge everyone to read the entire article in the Star-Telegram. It really is a great read, and it touches on a number of fascinating things in regards to how the market works in Pennsylvania, how the two states compare, as well as some other items that can keep markets like Texas low. And those were quotes and topics I didn’t even highlight here for examination.