With millions of Texas suffering from energy blackouts due to extreme winter weather, Energy Fairness Executive Director Paul Griffin explains the state’s 20 year plus experiment with deregulated power markets is the culprit for the state’s dire energy crunch:
“We fear many observers may have missed the real point. It wasn’t an electricity source that failed customers in Texas’s mostly deregulated marketplace. It was an electricity system. That’s because while regulated electricity markets are designed to serve customers, deregulated electricity markets are made to serve power providers.”
The Texas experiment with electricity deregulation has been a long one, dating back to 2002. The system is far from simple. Unlike large, centrally-controlled utilities in a regulated market, electricity in Texas is generated by more than 650 different power plants owned by various companies or just a single merchant owner. After power is generated, five major utilities are responsible for delivering electricity to customers across 46,500 miles of transmission lines. Unlike a regulated market, 5 in 6 Texas customers are free to choose their retail energy supplier, meaning the company they choose as their retail provider likely doesn’t own the means of generation and transmission of electricity but simply pays to contract those services.
“The result for Texas customers hasn’t always been clear. Some customers have saved money under deregulation, but many have been worse off. Energy choice, it turned out, wasn’t all that it seemed,” said Griffin.
Texans in deregulated markets have paid higher average prices than those in regulated ones. In fact, one report showed that Texas customers could have saved $27 billion from 2002 through 2016 had they paid the same price as customers living in regulated parts of the state.
“Sadly, the result for Texas’s power system is also becoming clearer by the year – the state’s grid is a proverbial House of Cards,” continued Griffin.
In just under 20 years, Texas went from having the most robust reserve margin in the country (25%) – the measure of how much surplus power the grid can count on in extreme conditions – to the lowest in the country by the Summer of 2019 at 7.5%. This precipitous drop prompted the Texas Public Utilities Commission Chairman, Dee Ann Walker, to call the state’s reliability predicament “very scary” as the state faced another July of record-blistering heat. Unfortunately, those fears have become real thanks to a record-setting blast of Arctic cold.
“There is no doubt officials will work hard to get to the bottom of exactly why millions in Texas have been left in the cold. And they should. But the current disaster in Texas is also an opportunity for policymakers across the U.S. to learn, too. Texas has seen higher prices and lower reliability since it abandoned the regulated electricity model. Following the same path is a losing move for customers,” said Griffin.
