More than 20 Years of Facts Prove Electric Deregulation is Dangerous for Customers.

Since the 1990s, Texas and many other states have explored deregulating their electricity markets. Deregulation means that consumers can choose their electricity supplier and that prices fluctuate with the ups and downs of wholesale costs for generation, transmission, and the distribution of electricity.  

What did we learn from these efforts to impose deregulation or “customer choice” on unsuspecting ratepayers? When opportunistic companies sell a bill of goods to state policymakers, consumers are ultimately left holding the bag with higher electricity rates, reduced reliability, and fraudulent practices perpetrated on unsuspecting elderly and low-income consumers.

Theoretically, in a deregulated power market, prices are left to the market. However, in the years since electricity deregulation first became popular, 11 states, including California and Montana, had buyer’s remorse after these costly experiments failed. Realizing their mistake, they abandoned deregulation and returned to a regulated electricity marketplace. 

In the states that remain deregulated, residential consumers often pay the highest rates in the country.

According to the Michigan Public Service Commission, eight of the top 10 states with the highest electricity rates in the continental U.S. are states with deregulated marketplaces.

But high rates weren’t top of mind for Texas consumers when they needed reliable electricity the most during Winter Storm Uri.

What happened during Uri? As we wrote last year, Uri made it abundantly clear that the purpose of a deregulated electricity marketplace is to serve power providers, not provide affordable and reliable power to consumers.

Before Uri, studies clearly illustrated 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. And then, as if to rub salt in the wound, Uri demonstrated how UNRELIABLE electricity delivery is in a deregulated marketplace when millions of Texans were plunged into the cold and darkness.

Uri sent electricity demand soaring to a seasonal record of 69,150 MW on Valentine’s Day 2021 and the Texas grid couldn’t deliver. This historic storm proved that the power system in Texas wasn’t designed to deliver power to customers. It was designed to deliver revenue to the patchwork quilt of companies that choose to participate. Companies that could disappear in one year. Companies that collect bills from customers but don’t have to restore downed power lines because someone else owns them. 

We now have 20 plus years of data about what happens when we deregulate electricity markets. The promise simply doesn’t live up to the hype. If legislators are lured in by the promise of “choice”, abandoning regulated marketplaces that have consistently delivered incredible reliability and consistent prices, customers will suffer when it comes to their ultimate access to affordable, reliable, and resilient electricity.