When Texas deregulated its electricity market two decades ago, proponents promised that consumers would get better service at lower prices. Long before the service half of that equation proved spectacularly wrong during last week's freeze, the 60 percent of Texans required to buy their electricity from retail power companies, not local utilities, were already getting a lousy deal, The Wall Street Journal reports.
"Those deregulated Texas residential consumers paid $28 billion more for their power since 2004 than they would have paid at the rates charged to the customers of the state's traditional utilities," the Journal found, based on its analysis of federal Energy Information Administration data. "From 2004 through 2019, the annual rate for electricity from Texas' traditional utilities was 8 percent lower, on average, than the nationwide average rate, while the rates of retail providers averaged 13 percent higher than the nationwide rate."
The theory behind deregulating the electricity market was that forcing retail power companies to compete for customers would lead to innovation and lower prices. "In other states that allow retail competition for electricity, customers have the option of getting their power from a regulated utility," the Journal notes. Large parts of Texas don't have an incumbent utility to compete against, and the retail industry has been consolidating under two major retailers, Vistra and NRG Energy, which now control at least 75 percent of the retail market.
On the power generation side, Texas deregulation has rewarded companies that can sell cheap power to retailers and utilities — or sometimes really expensive power — but it provides little incentive and no requirements to invest in infrastructure that would have prevented last week's widespread blackouts. Now, "Republican Gov. Greg Abbott wants to force power plants to winterize," The Associated Press reports, and the GOP-led Texas Legislature will start lashing the state's grid operators in hearings Thursday.
"In a lot of respects, we're victims of our own attempt to let free market forces work," state Rep. Drew Darby (R) told AP. "Typically, you know, the Texas Legislature pushes back on overregulation," but "my view on something as basic to human survival and need is we need to have reliable power and water." State Rep. Rafael Anchia (D) agreed that "regulation is a four-letter word in this building at times," but said "four million people without power and 12 million people without drinkable water, right, that gets everybody's attention."