Many of my republican buddies continue to defend the high cost of electricity deregulation by blaming the failure on the fluctuating cost of natural gas. Unfortunately the argument doesn't hold water, but they really don't seem to care. Maybe this will help. Here is a comparison between what we had pre-deregulation and what we have now.Pre-deregulation:
Only one company sold electricity, in our area it was Houston Lighting and Power. HLP also generated the electricity. They maintain the "grid" and provided service to consumers.
- Consumers would sign up with HLP
- Consumers would pay about 8 cents a kWh
- When they moved, consumers would cancel their service.
Many companies sell electricity, but none generate it or maintain the grid. In our area there is one that maintains the grid, Centerpoint Energy. They do not sell electricity to consumers instead many middle men buy from Centerpoint then resells the service.
- Consumer can sign up with any of the various middle men.
- If they have internet access, they can "shop around" to find the lowest rate, based upon the time of year. If a consumer requested service in the summer, then they would lock in at a higher rate than if they if requested service during the winter. There is no "negotiating" for a lower rate. There is competition between resellers during that time frame only.
- After their one year contract is over, the consumer must once again, "shop around" to find yet another company, resign with their current service, or they would automatically be put on a month to month plan with their current provider. (Those who never signed up with a company was automatically put on a month to month plan with wild fluctuations in prices.)
- Consumers on a month to month plan would pay the lowest rates (relatively) during the winter months and some of the highests rates (as high as 24 cents per kWh) during the summer.
- If a consumer moves prior to the conclusion of their contract, they would have to pay a disconnection fee ranging from $79 to over $300.
- If their middle man would go out of business (and many have), the consumer is put on the rolls of the "provider of last choice" with extremely high rates no matter what time of the year. Consumers would, once again, have to find a new provider with rates depending upon the time of year.
- Consumers pay anywhere from 10 cents per kWh to 24 cents depending upon the time of year the service is needed and the cost of resources determined by the industry.
Before deregulation we had low rates, reliable energy, and a long term open ended contract. We usually had to call HLP twice, once to sign up, and once to cancel.
After deregulation we have much higher rates and a complicated, closed end contract that fluctuates on a month to month basis providing competition based upon what month a consumer needs service. It is a service that must be maintained on a yearly basis.
So for those with you who are sporting an uncomfortable grin defending those who are putting it to you day after day after day, enjoy the 4th of July. A day when we celebrate our freedom from those who put it to us, day after day, after day.
Forecast for the area is HOT!
23 comments:
For as much as I follow this crap, I locked in to a 12.3 rate for 2 years, and yet two months later I could have stayed with my company at 10.7 cents.
Imagine those who who cant jack with this like I have. Many of the elderly and poor looked to reliable service for a long period at a reasonable rate. Now they are probably on a month to month basis paying extremely high rates.
"Many companies sell electricity, but none generate it or maintain the grid."
I suppose the electricity just magically appears, huh?
"If they have internet access, they can "shop around" to find the lowest rate, based upon the time of year."
They can also shop around without internet access. Telephones are amazing things.
"If a consumer requested service in the summer, then they would lock in at a higher rate than if they if requested service during the winter."
In a similar injustice, cut Douglas Fir trees are only available in December. There's no negotiating for one at Kroger in May.
Wow. It is almost funny to watch republicans grin and bear it.
The point of the post, which cannot be denied is that we were much better off not deregulating. We had the chance not to.
Even the republicans in East Texas realized it hasnt worked and has stopped it from happening.
But....you republicans just continue to grin.
On a philosophical level, why shouldn't a company be allowed to sell its product for the market price?
Why should the government dictate the price of a product?
I work for a Retail Electricity Provider, and before that, I worked for a company providing choice that worked with all of them. Before that, at the prior organization, we worked with TXU and Reliant. I've worked across the country with regulated and deregulated providers.
You're writing with an agenda, but it's your blog, so that is understandable.
That said, I disagree with or would like to elaborate on a number of points you make.
1) We didn't have 8 cents/kwh ahead of deregulation, except during winter periods. Look it up.
2) The price of Natural Gas does play a role. Through most of the 90's it hovered near $2/mmbtu. That commodity started to appreciate in value around 2002 and hasn't hit $2 since. That is a global price issue and Texas is affected. With the price drop in NG, the prices in the market have been sliced in half.
3) "Many" REPs have not gone out of business. Some have, most of them tiny. Despite the hue and cry created within the press last spring, 5 companies went out of business that accounted for less than 1% of the marketplace. A deregulated market will have companies come and go, and an affected group of less than 1% of a market hardly indicates something broken.
4) No one is charged a disconnection fee within the market. That is simply factually untrue. People can be charged an early termination fee if they bail on an agreement that they signed. Is the notion here that we should disband the function of default penalties within contracts for this market? As to disconnection fees, I am not sure they're even legal. I know we don't charge them. If someone leaves, they can leave whenever they like. There is also no fee to switch.
5) You fail to make any mention of several core benefits within this market that are not present elsewhere. For one, when prices go down for the REPs, the customer receives lower prices too. Last spring, as prices soared for NG, yes prices went up as well. They did the same for other markets with monopolies. PGE in San Fran, FPL in Florida, PECO in Philly. The list goes on. Guess what, those monopolies didn't have a downward price adjustment approved at any later date for which I'm familiar. The prices for them is tough to find at a moment's notice, unlike here in Texas, but if you dig you will find them. San Francisco customers, for instance, are averaging $.173/kwh right now and that has been true since March. That is only about 40-50% higher than either Houston or Dallas on a per unit basis. Here is the link to it if you don't believe me:
http://www.pge.com/tariffs/electric.shtml (click the March 1 spreadsheet)
Beyond that, the innovation and infrastructure buildouts for renewable energies in this market lead the country in terms of growth and production. That is led by the private sector and customer demand, both derivatives of choice within the market and competitive product and price availability. Do you think a company like Green Mountain (I am not affiliated with them) would thrive in another market selling 100% renewable energy? They tried in Pennsylvania and other markets and ended up departing, despite consumer interest in their higher priced products. They have over 200,000 customers in Texas with overtly higher priced power.
There are plenty of cons to what's happened up to 2009 within the Texas market for competition. That said, there is a lot to point to for change for the better. The PUC has upped the entry requirements to keep the fly-by-nights out of the market, moving the entry fee from $100k (never should have been that low) to $1.5 million. In addition, prices are as low as they were in regulated periods, and this with Natural Gas still twice as expensive as it was in that period. More renewable is being created here than elsewhere, with more on the way. The infrastructure continues to keep pace with rapid population growth, unlike almost every other US state.
I appreciate the notion that deregulation in this market has had its hiccups, no doubt it has. But don't throw the baby out with the bathwater.
And yet our rates have never been higher............Keep grinning!
wow. that sure is a lot of writing to say we are getting screwed.
why is it so many people have excuses for deregulation?
The rates aren't anywhere close to all-time highs. That simply isn't true. We can all have our own opinions, but we can't have our own facts.
John, you never answered my question -- why should the government establish prices at all?
Whether prices are high or low is only incidental to the real question, which is about market participants' freedom to make deals.
WOW. Not only are you grinning, you are delusional.
If you know of lower rates, TELL US WHERE WE CAN GET THEM!!!!
John, why are you qualified to speak about electricity? You can't even spell electricity.
No, seriously. You can't.
Anonymous, you never answered my question, Why do you like being screwed?
seriously, what is it with you republicans? Your party tripled your insurance rates, doubled your electricity rates, and yet you are acting like they did you a FAVOR!
Geez. At the very least give a little fight. You belly ache like a two year old when you get a $2.00 tax increase on your water bill, but then make excuses when they triple your insurance rates.
Geez. talk about being surrender monkeys.
The comparision was between what we had and what we have now.
No one wrote about San Antonio who are paying 7 cents a kWh, up by a penny for the summer heat.
But I bet if you had the choice of buying from San Antonio for 7 cents on a long term contract or paying your middle man an outrageous rate, you would opt to pay more.
And you will grin doing it. Like you are doing now.
Anonymous, I am real serious. Why do you enjoy getting screwed?
Really. You act like a battered spouse coming back for more and more and more.
What is it with you republicans.
"Anonymous, you never answered my question, Why do you like being screwed?"
I don't. Market forces are not a screwing, they're a fact of life. I know you don't materially participate in the economy, but most of us do.
"seriously, what is it with you republicans? Your party tripled your insurance rates,"
Nonsense. I'm paying less than I did when I first bought my home in 2004.
"doubled your electricity rates, and yet you are acting like they did you a FAVOR!"
When were rates 5.5 cents/kWh?
Again,
Wow. and yet you just grin and bear it. It is funny and sad.
But I will take funny. Remember we are not laughing with you, we are laughing AT you.
:) and bear it.
Screwed? You mean like this coming increase in our power bills?
http://www.wral.com/news/local/story/5493655/
I can already hear you, Coby, emitting squeals of pleasure as you holler "Once you go black, you never go back! Give me some more, big boy!"
I let this post in because it shows the incredible racism that still exists in the republican party.
And you wonder why you are the minority party?
yep.a non white voting republican is like a chicken voting for colonel sanders.
(gosh that is an oldy but goody!)
"You act like a battered spouse coming back for more and more and more."
I don't know what a battered spouse acts like. How do you?
Retail Electricity Providers do NOTHING except buy electricity at wholesale rates off the grid and sell it to us at retail rates. They do not produce anything, they do not transport anything, they do not repair anything, they do not even read our meters. Electricity is produced by generating plants (wind, hydro-electric dams, coal burning plants). All Houston area REPs use CenterPoint for transporting electricity to our homes, for repairs to poles, wires, transformers, etc., and for meter reading. There is NO competition where electricity itself is concerned. When it reaches your house or mine, it is electricity. Can I argue that my electricity is better than yours? (I’m not talking about the methods of producing electricity—one could argue that some methods of production are “better” than others.) Deregulation of the retail electricity market in Texas was a SCAM, a SCAM to enrich political supporters of politicians, whether individuals of corporations , and maybe even politicians. I can only hope that the old saying which I think is attributed to Abraham Lincoln is true—You can fool all of the people some of the time; you can fool some of the people all of the time, BUT YOU CAN’T FOOL ALL OF THE PEOPLE ALL OF THE TIME. From the comments I have read about REPs it is fairly clear who is among the group that is fooled all of the time.
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