Austin Contributor Backwards on Electric Deregulation

Posted on Posted in Deregulated Electricity, Green/Renewable Energy, PUC/ERCOT, Texas Deregulated Electricity, Texas Electricity

I was perusing an article from Carol Penny, a local contributor for the Austin American Statesman, and I couldn’t help but think one thing: at least the article was published under the “Opinion” category. Sheesh. Opinions don’t need factual support, so she has that going for her, I suppose…

Penny’s article talks about why bringing the deregulated electricity market to Austin would be a terrible idea. This is a topic that has come up with Austin’s impending rate hikes and the public outcry surrounding them. And Penny wants to be sure everyone knows WHY deregulation is such a horrible idea for Austin. Quotes with my commentary below.

Electric deregulation has a long history of high rates and widespread customer dissatisfaction. It has brought huge price increases and volatility over the past 10 years to our fellow Texans in Dallas, Fort Worth and Houston.


Hmm. I’m curious where she gets the idea of rampant customer satisfaction. She must be reading Recharge Texas’s take on things. Personally, I’ll stick with my own understanding of how the internet has changed consumer behavior as well as the JD Power & Associates’ claims that customer satisfaction in Texas is as high as it has ever been for deregulated electricity.

Oh, and as for the rates, lets not forget that for people who actually SHOP the deregulated marketplace, Texans have the 3rd lowest electric rates available to them in the nation. Huge prices indeed.

In contrast, large city-owned utilities like Austin Energy that remain outside deregulation have experienced greater rate stability and allow for democratic rate-setting.


Yes, Austin has been stable. They haven’t raised rates in 17 years. As a result, they’ve also put up almost a quarter billion dollars in debt. Their rates are stable because they’ve simply been running up debt and offering rates they can’t afford to offer. As for the notion of “democratic rate setting,” I’m sure the people protesting the massive increase in rates coming down the pipe have really felt part of a democratic rate-setting process.

Case in point is the proposed rate hike by Austin Energy. Even under the new proposal, AARP is concerned that dramatic increases in the customer charge will disproportionately impact older Austinites, who generally use less electricity. But at least these arguments are being aired in a public process with all sides having ample opportunity to make their case.

In a deregulated market this conversation wouldn’t be happening. And when the public is not well-represented, bad things happen to consumers.


I’m sorry, how is the AARP thing relevant? If deregulation came to Austin and cheaper rates came with it, and senior citizens used less electricity, wouldn’t they have cheaper bills? I imagine the proposed $22 a month mandatory fee for all Austin citizens isn’t going over too well with the AARP. This wouldn’t be in an issue in a deregulated market.

Also, when the public isn’t well represented bad things happen to consumers? I’d argue that when politicians insert themselves into anything, bad things happen because public interests gets muddled with political interests and elections. Additionally, I don’t remember bad things happening to me because my local politicians didn’t represent my interests in buying a new car, ordering my cable service, or deciding to purchase an iPhone.

A recent report by the Texas Coalition for Affordable Power found that Texans in deregulated areas consistently pay higher average annual electricity rates than other Texans, including Austinites. It estimated that the added expense has cost a typical customer more than $3,000 since 2002. Deregulation can also lead to huge price spikes, as it did in early 2008, when the average rate was more than 60 percent higher than Austin Energy’s rate. Electric customer complaints have been significantly greater under deregulation.


What a shocker, I was right, she was getting her information from TCAP/RechargeTexas. Well, lets see, I’ve already tackled their baseless insistence that complaints are a sign of dissatisfaction with the whole market. The added expense notion is pretty funny considering that Austin Energy has racked up a 236 million dollar debt during this time span, so lets not pretend the two have had a level playing field.

I’ll use a separate paragraph to once again attack the idea that deregulated areas have higher annual electric rates than regulated areas. The information RechargeTexas uses to make this statement is flawed. It only looks at deregulated areas as a whole, which includes people who pay unnecessary premiums because they don’t shop the market for the best deals. It’s a flawed illustration. The competitive rates in the deregulated areas of Texas are as low, or lower, than the regulated areas, including Austin. And especially Austin after their rate increase makes them the highest rates in Texas, which is about to happen.

Moreover, deregulation brings us confusing electric contracts, rife with “gotcha” clauses in fine print. Don’t use a certain amount of electricity in a given month? Your deregulated electric company may charge you a $10 fee. Want to switch companies before your contract expires? Your deregulated electric company may charge you $300. Your deregulated electric company goes belly up? You could end up paying double the going market rate.

Oh, yes, another person complaining about how complicated contracts are…sheesh. Just let the utility do the thinking for us, right?!?! Yes, there are minimum usage charges. They’re different for each REP, and so is the electricity usage levels where they kick into effect. Read your Electricity Facts Label. Austin is about to have a $22 Any Usage Or No Usage Charge, is that preferable?

Yes, if you sign a year long contract for a certain rate, you are going to have to pay a cancellation charge for breaking your contract. The same things exist for satellite television and cell phones and the world still turns every day without public outcry over cell phone contracts. Why is this any different?

Since Carol obviously doesn’t know much about the deregulated electricity market, let me help clarify her last two sentences: “Your deregulated electric company goes belly up? You could end up paying double the going market rate.” When your REP goes out of business, a customer is released from their contract and allowed to select a new provider on their own without penalty. If they fail to do so, they are then moved to the “Provider of Last Resort,” on a month to month contract, which they can leave at any time penalty free. Yes, those rates are typically higher. Of course, if your electricity company goes out of business, you can just read the multiple pieces of mail you will receive informing you of this, and then switch to a provider of your choice. Oh, the horror!

There’s also the key issue of accountability. Because Austin Energy is a publicly owned utility, we have the ability to make it reflect the priorities of our community. Do we value affordable rates for older residents who use less energy? Do we value being an environmental leader? Do we value attractive commercial rates to draw more businesses to Austin? Whether the answer is yes or no, what’s important is that we have the power to make it happen because Austin Energy is our utility.


Can’t argue with this point. Well, except the older residents getting better rates for using less energy, I mean, I’ve already addressed that nonsense. And the attractive commercial rates she speaks of are part of the huge uproar in Austin because residential customers are flipping much of the bill for the upcoming rate hike. That and the rates aren’t any more attractive than anywhere else in Texas. But yes, they certainly have the power to force environmental priorities on the entire community. I guess customers in deregulated areas will have to be satisfied with their choice of choosing a 100% green energy plan for their home or offices.

Colyandro and Aldred state, “Providers in competitive parts of the state continually respond to market pressure.” But the fact is that this doesn’t compare to the amount of accountability a publicly owned utility like Austin Energy has to its customers, whose voices are heard before changes are made and who wield a hammer to hire and fire the city’s decision makers.


In my opinion, the “accountability” is part of the problem with Austin Energy. Who was accountable for Austin Energy running up a 236 million dollar debt because they didn’t raise rates for 17 years? I’m guessing it was the politicians that refused to approve raising rates because they were concerned their constituents might vote them out of office. Why do you think the politicians are so vocally against the rate hikes now? They’re concerned for their jobs. That is a conflict of interest and extra layer of complication that doesn’t exist in deregulated markets.

Rate cases are a rough-and-tumble activity. We should closely examine the overall estimated revenue needed to operate Austin Energy. We should vigorously debate which electricity customers should pay what part of the revenue. Again, the process can take many months, with several opportunities for community input. Conflicts will arise and compromise is a certainty, but what emerges from this ultimately reflects the priorities of the Austin community.


A process that can take many months. Or 17 years. You know, give or take.

So speak up, Austin! Let’s hold the ground on unfair electric rate hikes. Let’s make Austin Energy — our electricity utility — work as well as it can for us. We need a utility that is truly accountable and reflects our values as a community, not higher prices and less oversight. We have the power.


Yes, all hikes are unfair even though Austin Energy is 236 million in debt! And I’m sure she meant “lower prices and less political complications,” you know, if she wanted to be factually accurate. But who’s quibbling, right? Also, deregulated areas have plenty of oversight in the form of the PUC.

Penny is an Austin resident and member of the all-volunteer AARP Texas Executive Council.

Oh, she’s an AARP member…that explains the earlier mentions in the article. Well, you know, as long as she’s an expert in the electricity field.


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