Two decades ago Texas deregulated its power sector and required 60% of its residents to buy electricity from a retail power company. The other 40% stuck with traditional local utilities. The Wall Street Journal shows us the results:
According to the Journal, retail customers have 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:
From 2004 through 2019, the annual rate for electricity from Texas’s traditional utilities was 8% lower, on average, than the nationwide average rate, while the rates of retail providers averaged 13% higher than the nationwide rate, according to the Journal’s analysis.
The Texas Coalition for Affordable Power, a group that buys electricity for local government use, produced similar findings in a study of the state’s power markets and concluded that high statewide prices relative to the national average “must be attributed to the deregulated sector of Texas.”
So what happens now? Probably nothing. In Texas, deregulation is something like a religion: it works by definition, even if it doesn't work. Just give it another 20 years and you'll see.
Deregulation can never fail, it can only be failed . . .
It is working exactly as intended. Republicans just weren't honest about their intentions.
It is a little more complicated. The economy as a whole is based on skim: layers and layers and layers of skim. It has to be, mostly because there is not nearly enough real work to go round, but also because of the political sidewinds of "giving" anybody anything. So you (government) create new classes of middlemen/skimmers, and they hire, and they buy, and their employees buy, and their suppliers buy, etc., so that there is a multiplier effect -- but never as large as you planned for, because anyone who is in a position to skim the skim skims the skim. Anyhow, shut down the skim and you shut down the economy.
"customers have 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"
If you are an ardent supporter of crony capitalism, that's a not a bug. It's a feature.
We moved from California to Texas a couple years ago. I didn't know the ins and outs of power deregulation over the past two decades (of course everything is coming to light again now after last week's disaster), so thank goodness that I guess we just ended up in a traditional power utility area where we live.
We blue folk here are doing are best to change things, it's an uphill battle for sure.
Obviously, Texas is a free enterprise Mecca. Ayn Rand must be smiling at the fleecing of the rubes.
lol, more like a Crony Capitalistic mecca.
The deregulation of the phone business beginning in the 1980s arguably led to benefits for customers. Prices came down, from more than a quarter per minute for a coast-to-coast call to virtually nothing. New technologies emerged, which have revolutionized how we communicate with one another.
The deregulation of electric utilities has been nothing like that. Customers get worse service (outages when power is most needed) and higher prices.
I don't see what benefit electric dereg has delivered for customers. The $28 billion more that Texans have paid for their kilowatt-hours is exactly what the electric industry was hoping for.
That $28 billion went to another Republican mantra "Shareholder Value". The companies own nothing to their customers, (or workers) only to the shareholders.
The improvements in phone service are mostly from technology. A great deal of the fundamental research for all electronics came from Bell Labs, which Congress required to be supported as a partial price for the AT&T monopoly. They had to put all discoveries in the public domain. In other words a lot of the technological progress was a product of a regulated monopoly.
...and what is left of Bell Labs today? To an Nth approximation, nothing. There is a nominal successor, after two acquisitions. Go look it up, you wouldn't guess.
No doubt much tech came out of Bell Labs, one of the great success stories. It's not clear how quickly that tech would have reached the marketplace if the old Bell System had remained intact. Much of the innovation today is happening elsewhere.
No, prices didn't get cheaper, inflation subsided. Those techs were coming no matter what. A con of a con.
I still ride for 10-10-321.
I bet you still call 900 numbers on your rotary phone.
More ethical than the P'hub. Cheaper than OnlyFans.
The US has some of the worst, most expensive and predatory phone services.
Yes, but at least the coverage is bad and the service is awful.
Driving I70 in Kansas west of Lawrence was a dead zone of dead zones.
Prior to deregulation, local telephone service was subsidized by long distance charges. (The initial justification for this was that during WWII, reducing long distance charges would have increased demand, forcing AT&T to install more capacity at a time when we were trying to redirect as much of our industrial capacity as possible towards the war effort. After the war, lower prices for basic telephone service became an end in itself.) To see how deregulation affected customers, total cost of service is a better measure than the price of long distance calls alone.
And even if it not only doesn't work but everybody knows it, and they also know that the reason it doesn't work is that the politicians are bought and sold by the fossil-fuel companies, the moron Texas voters will STILL elect them, because they make tough noises about them illegals comin' 'cross our border 'n' invadin' the home-land.
Maybe, but Republicans are fraying in Texas. A bunch of dixiecrats and heirs of the Dixiecrats have been "coming home" and it is showing up with the "white shift" there. Republicans can't stand much more moves.
Maybe so, maybe not.
Either way, this seems like something for TEXANS to solve for themselves, and for the rest of us to ignore...
There are few problems that can't be made worse by a bunch of outsiders with no stake in the matter insisting that they're now going to take over. (cf Iraq)
The people who thought we should take over matters in Iraq were a few TEXANS, not the rest of us. If we could have had TEXANS refrain from any involvement in national politics, we would have been better off. If you're proposing TEXANS won't mess with the rest of us, we might have a deal.
But if TEXANS are going to screw up TEXAS just like they screwed up Iraq -- and then expect the rest of us to bail them out when the emergency hits -- then I don't think we can ignore them.
We don't know the federal cost yet of the disaster, but don't pretend no one else but TEXANS have a stake in the matter.
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I particularly appreciated the fact that, as Republican Senator Ted Cruz jetted off to Cancun, and Republican AG Ken Paxton left for Utah, Democrat Alexandria Ocasio-Cortez, she of the Green New Deal, Which Is To Blame For All Things, was busy raising over five million dollars for Texas families in need.
I also appreciated how a Member of Congress from Texas, when asked how Texans were going to deal with the disaster, and with the absurd order-ten-thousand-dollar electric bills some of them were receiving, said it was all up to FEMA and Federal aid, which of course he very much appreciated.
I swear, we should just go back to the Alamo, pull down the Stars and Stripes, text Mexico "¡los sentimos mucho!" and hand the whole damn state back. With Oklahoma as interest. (Maybe we can keep Austin, in a sort of West-Berlin-type arrangement.)
Buncha moochers ...
If TEXANS are prepared to eat all of the damages related to their worship of "free market" confidence games, I would agree with you. But if they want to participate in our AMERICAN community and receive our help in their time of need, they really do need to not make the assumption that they can cut corners and then look to the rest of us to pay the bill when things go wrong.
It turns out that since we AMERICANS are going to be picking up the tab for failure by Texas to regulate utility to stop price gouging and require winterization of equipment, I think we're entitled to have a say in how Texas designs its electric grid. Can't have one without the other.
I don't think basic utilities should be privately owned. Electricity, water, streets, highways, bridges, prisons, none of these things have any place in private ownership, aside from criminal exploitation.
Basic utilities are typically privately owned monopolies, sanctioned and regulated by the government. If a state government can't successfully regulate its power industry, how likely is it that it could operate it?
There's a difference between can't and won't.
While I agree with you, there are some issues.
1) Installing a service like an electrical grid or water system is a huge expense, back in the day it was preferable to push those costs onto those who wanted and/or could pay for them. In today's world, no sane local or even regional government wants to take on the job of managing a grid, gas, or water distribution system.
Lot's of smaller areas purchase their own power and turn their own utility, but they have someone else do all the maintenance on poles and infrastructure.
Local jurisdictions are in a bind on big ticket items like bridges. A bridge might be needed but they have to get it by the local tax payers (or federal pork) and selling someone else "rights" to charge is a way around both issues. We all want stuff, nobody wants to pay for it.
Prisons are just a kick-back racket for politicians and government officials who want to be "tough on crime" while lining their pockets.
Service typically serve more than one community, so regional commissions would have to oversee them.
A lot of banks/hedge funds/etc. got involved in taking over municipal services, e.g. water, a while back. They sold the cities on lower prices now and improved services--until it blew up on them. And the customers are the ones on the hook for the bill.
Public versus private ownership is actually a red herring. The problem is perverse incentives.
Was someone suggesting that as a possibility? Doubt that Mexico would take it back now.
Another WordPress habit: showing a draft response to a specific comment, then when another one gets posted below (to the main article), one's comment instead is deposited below that one. I actually miss Coral.
It’s kind of like having Trump and thus missing Nixon.
Shortly after Trump's inauguration I began missing George the Second.
move to texas and you'll have george the third ... george p. bush is a member of the state railroad commission, i believe.
I'm just old & especially cranky because WordPress notified me that this is our anniversary.
Sorry.
Texas is much wealthier than most of Mexico. Of course Mexico would take it back if offered. About the only reason not to is fear of violent uprising from all the armed Texans.
Yes, the racist & armed Texans were exactly what I thought would make Mexico think twice.
I'm good enough, I'm smart enough, and, doggone it, Ted Cruz's beard looks like 1930s butt hair.
Ted Cruz's beard is like if we made Lilith Faire out of the performers's armpits exclusively.
It would look so much better if he did that!
Lilith Faire should all collect their armpit hair and knit him a beautiful, natural scented beard snood.
If he wore that he would be getting attention that's positive and interested. It would be a game changer.
Don't you understand?
It's all about the FREEDOM to choose how you want to be gouged.
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You misspelled FREEDUMB.
Freedom isn’t free. $$$$$
The wall street journal has an article pointing out that capitalism doesn't always work?
I am flabber-gasted.
...wait until the gob smacks you 😉
The invisible hand will be smacking them down any day now.
Is the chart of retail rates an apples-to-apples comparison?
1. Many of the "traditional utilities" in Texas are municipal entities that are exempt from some taxes, and therefore have some cost advantages over private companies.
2. Does the chart show average retail rates for all customers, or just residential customers? Traditional utilities can subsidize residential rates by charging more to large commercial and industrial customers. I don't think unregulated retail providers can enforce such cross-subsidies.
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Some traditional utilities, both investor-owned and municipal, produced poor results by, for example, continuing to spend on nuclear power plants despite cost overruns and poor operating performance, because those utilities could pass the costs to captive customers. Think of the Washington Public Power Supply System (or "Whoops"), the Sacramento Municipal Utility District's Rancho Seco plant, or Pacific Gas & Electric's Diablo Canyon plant. Deregulation of electricity generation is not a panacea for all ills, but it does make private investors bear cost overruns.
Are you really suggesting that private power companies aren't allowed to charge a different rate to commercial customers?
I'm not sure what should happen, but one thing that should most definitely not happen is for the federal government to pay $16k power bills for individual homes/businesses. Don't get me wrong, I think those rates are criminal, and no one should actually have to pay those bills. But if we bail out individual rate payers than the criminals will be rewarded. What should happen is that the criminals running those power companies take the hit by limiting any rate increase to some (very) small multiple of "normal" for TX winters. Jerry Jones can eat it.
He'll make it up in Dakota Prescott jersey sales (assuming he signs Dak longterm).
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I live in Wilmington NC
Have gone through multiple hurricanes
Snow and ice storms
Moved here from RI and was born and raised in Mass.
"THe Grid" is not a republican problem, it's not a democrat problem. It's a money problem.
When designed it was easier to install and repair above ground conductors. Breaks were easily seen and repairs were simplified. But if we are talking reliability underground conductors are the way to go. Expensive to install and repair but subjected to much less strain and no falling objects will break them. What Texas did was to remove the billing safeguards so that in the event the un thinkable happened the customers got billed at a much higher rate.
They got lazy. pure and simple. Sure they pride themselves on being "go it alone Texas" but in the end they got plain lazy. They did not winterize their generating units and lines.
California deals with this during extreme heat when rolling blackouts happen. NJ dealt with it after Hurricane Sandy. Texas is just a glaring example of a nationwide problem of antiquated distribution lines unable to contend with winter weather.
This would make a fine infrastructure project for infrastructure week
My Buddy moved to Houston about 40 years ago. He told me the other day he’s moving soon because the State Government is useless. Having lived through a lot of flooding, electric failure, now cold weather and seeing the State do squat he’s enough.
My Buddy moved to Houston about 40 years ago. He told me the other day he’s moving soon because the State Government is useless. Having lived through a lot of flooding, electric failure, now cold weather and seeing the State do squat he’s had enough.
I live in Texas and buy electricity from the deregulated model. I have lived here for decades and have had little trouble with electricity except for the fiasco last week. My electric bills are always lower than the average for the rest of the country. And retail electricity prices are low for the five largest states (cents/kWh):
California 16.89
Texas 8.50
New York 14.34
Florida 10.44
Pennsylvania 9.81
If traditional utilities can really do better in Texas, I guess I'd like to see more data. For one thing, the WSJ says 40% of people here get their electricity from traditional utilities, but I have always seen numbers like 15%. And for those who get it from traditional utilities, what are the special circumstances for why they get it and how are prices set?
I heard a local expert on NPR say yesterday that the Texas deregulated system is like what the Soviet bloc used to do. To reduce costs they made a few large industrial entities compete for providing a good or service . Well, we know that didn't end well. I don't think the Soviet model is what state leaders had in mind.
I've lived in Missouri forever and paid less than .07/kwh last month to a state regulated monopoly. Other than a bit of hydro and nuclear we are not an energy producing state. So you comparisons to Texas don't look particularly impressive to me.
And we get more snow and ice than Texas but don't have people freezing to death in the dark when we get a little winter weather.
The link below says for the yearly average (2019 is latest year given), in Missouri the rate was 9.68/kwh and Texas was 8.60/kwh. The US average is shown as 10.54/kwh.
https://www.eia.gov/electricity/state/
In Missouri, a particularly red state, we have a regulated monopoly and our bill was less than $.07/kwh last month. Even regulated power in Texas is expensive. Truly a free market success story.
The only issue I have with this article is the unconditional assignment of blame for these higher prices on deregulation. We have deregulated all sorts of things over the past 40 years with more or less universal lowering of prices coupled with better alignment of services to mach consumer preferences (a VERY careful choice of words). Perhaps deregulating the electric utilities in Texas was a bad idea but to really make that case one needs to identify differences between electric service and other deregulated industries, explain why those difference matter, and then research any other deregulated electric utilities in the US, perhaps also in North and West Europe (assuming there are some), and see if the relative higher prices hold across. That's a big job, quite possible book length, and one for which I am wholly disqualified.
I would also really like to see a treatment of the seeming contradictory coexistence of a right-wing priority (deregulation) with a left-wing priority (high use of renewables). There may or may not be causation in either direction, but inquiring minds want to know.
This is not news. Years ago when I lived in Palo Alto the city had a city-owned utility. We paid less for power than the people in surrounding towns who had one or several commercial suppliers.
It's like health insurance. The private sector charges what the market will bear. The government charges the actual cost. This difference is almost alway greater than potential gains in efficiency through competition (competent management in state owned operations also strive to work efficiently--homo capitalisticus is not the only human species.
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