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Major Findings

Despite recent price declines, Texans have lost ground over the long term.

Although average electricity prices in Texas have declined since a peak in 2008, they nonetheless remain higher than average electric rates charged in adjoining states. Relative to electricity prices nationwide, Texans also have lost ground during the first 10 years of deregulation. In most recent years, Texans paid average prices 6.4 percent below the national average. In the 10 years after deregulation, Texans paid rates 8.5 percent above the national average

Choices Increased, but so has customer dissatisfaction

As the number of electric providers has increased, so has the complexity of electric contracts. The number of discrete billing charges also has grown. Complaints from electricity customers have been much greater during deregulation, as compared to those filed with the Public Utility Commission prior to deregulation. However, customer complaints filed at the Public Utility Commission have declined in recent years, after peaking in 2003 and 2009.

Market Power Abuse Remains a Concern

Although the Texas Legislature adopted a helpful reform in 2011, abuse in the wholesale power market remains a concern. Alleged abuses have contributed to the financial failure of at least one market participant. One major electric company profited by about $4 million from alleged anti-competitive activities — even after paying a punitive settlement in the case.

Power reserves have dwindled

Texas had the highest generation reserve margins in the nation prior to the implementation of the deregulation law. Texas now has among the lowest. This has led to serious reliability challenges for the state’s power grid.

Price to Beat Mechanism Failed to Protect Consumers

High natural gas prices, a flawed “price-to-beat mechanism” under Senate Bill 7, and a reluctance of Texas consumers to switch providers contributed to high average electricity prices in Texas for much of the deregulated era. Although natural gas prices have come down in recent years and the price-to-beat has expired, the Texas market by many important measures continues to underperform.

Costs Incurred by Generators Shifted to Consumers

Deregulation-related charges known as stranded costs will add nearly $7 billion to consumer bills. Texans will continue to pay these charges for years to come.

Renewable Energy Gains May Be Tempered by Higher Costs for Consumers

Over the past 10 years Texas has become a leader in the development of wind power. However, the construction of transmission lines to serve West Texas wind generators will increase transmission costs for all Texans. The aggressive pursuit of wind power has created new reliability challenges.

The Power Grid Operator has suffered persistent management problems

The Electric Reliability Council of Texas (ERCOT), the operator of the power grid for most of the state, has a history of management problems. A major market overhaul overseen by ERCOT was completed years behind schedule and substantially above original cost estimates.

Transmission System Constraints Hamper Seamless Flow of Power

The transmission system in Texas was built to support the old monopoly system, not the dynamic deregulated market. As a result, moving power from parts of the state where power is plentiful to areas where it is needed most has remained a challenge in the state’s deregulated market. Creating a transmission grid to accommodate the deregulated market will cost Texas consumers billions of dollars.

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