By Jack Z. Smith
Retail electric providers in Texas deregulated market are offering residential rates that in many instances are lower than those of some municipal power companies electric cooperatives and investor-owned utilities that are still under rate regulation a Star-Telegram survey shows.
A decade after the Texas Legislature passed a law authorizing deregulation retail electric providers compete intensely to win new customers. They have sharply lowered rates in response to a plunge in prices for natural gas which is burned to generate much of the electricity produced in Texas.
Deregulation critics have frequently noted in the past that residential electric rates in the deregulated market were considerably higher than those charged by municipal power companies called munis rural and suburban electric cooperatives and investor-owned utilities or IOUs in areas such as the Texas Panhandle and East Texas that are outside the deregulated market. But that price gap appears to be narrowing the Star-Telegram analysis shows.
Many consumers in Dallas-Fort Worth and other deregulated markets have been entering into fixed-rate plans of one year or longer to lock in lower rates before natural gas prices bounce back as energy analysts have forecast will occur once the economy rebounds and gas supplies tighten.
Other consumers have chosen low-rate variable plans in which the rates are directly tied to the current low natural gas prices. They include former state Sen. David Sibley of Waco who has represented the Association of Electric Companies of Texas in Austin and was a prime sponsor of the state electric deregulation law passed in 1999.
Sibley declined to name his retail provider but said hes enjoying a rate of less than 10 cents per kilowatt-hour. He said it appears that a lot of people are switching companies to get better deals while gas prices are low.
Lower-priced deregulated plans
Texas principal Internet shopping mall for deregulated rates the
www.powertochoose.org Web site operated by the Texas Public Utility Commission lists many plans with much cheaper rates than were available a year ago.
On Friday the 110 plans listed offered an average rate of 10.64 cents per kilowatt-hour. The average rate for the 50 cheapest plans was 9.62 cents. Five plans were under 9 cents with Southwest Power & Light the lowest at 8.6 cents. Twenty-eight ran from 9 to 9.9 cents and 35 ranged from 10.0 to 10.9 cents..
Many of those deregulated rates are lower than rates offered by some munis co-ops and IOUs operating outside the deregulated market overseen by the Electric Reliability Council of Texas.
The Star-Telegram survey showed average rates of 9.58 cents for five regulated IOUs; 10.43 cents for six munis; and 10.88 cents for six co-ops. The survey was for September rates.
Three traditionally regulated IOUs offered exceptionally low rates. Beaumont-based Entergy Texas which serves far Southeast Texas counties had a rate of 8.07 cents. The East Texas unit of Southwestern Electric Power Co. had a rate of 8.48 cents and Southwestern Public Service Co. a unit of Xcel Energy charged 8.56 cents to Panhandle customers.
Bryan had the lowest muni rate at 8.82 cents. San Antonio was second at 9 cents and Denton was third at 9.25.
HILCO Electric Cooperative based in Itasca in Hill County had the lowest rate among six co-ops surveyed 10.62 cents. Cleburne-based United Cooperative Services was second at 10.7 cents.
The regulated power providers have historically entered into long-term power purchase contracts. Their rates typically have fluctuated less than those of the deregulated retail providers. But some regulated providers expect to see their rates change markedly either up or down soon.
Weatherfords roller coaster
Weatherford had the second-highest electric rate 12.7 cents among six munis surveyed (Granbury was highest at 12.87 cents). But Weatherford Utilities Director Joe Farley said the citys rate should drop by 2 cents in November to 10.7 cents with the expiration of some provisions in its power-purchasing contract.
In July 2008 with natural gas prices skyrocketing above $13 per 1000 cubic feet Weatherford residents were stunned to see their electric rates soar to 19.9 cents virtually double what they had paid less than a year earlier. That rate shock contributed to an election defeat for two City Council members.
Pending rate adjustments swing both ways however.
While Entergy Texas charged residential customers 8.07 cents per kilowatt-hour in September billings that rate is likely to jump to about 11 cents by years end said David Caplan the utilitys spokesman. A fuel refund and another credit that lowered customers bill will expire and the utility will add a $5 monthly charge for recovery costs related to hurricane damage.
While deregulated retail providers are offering many rates comparable to or lower than some regulated rates a strong case can be made for the benefits provided by munis and co-ops.
We basically just want to give our members the best possible service we can said Marty Haught vice president of communications for United Cooperative Services the Cleburne-based co-op serving about 52000 members in parts of 14 North Texas counties.
When it comes to co-ops the model is to provide the best possible service at the lowest possible cost because we dont have to meet the revenue requirements for shareholders as a for-profit utility does Haught said. Our members are our shareholders.
The not-for-profit co-op which has about $200 million in annual revenue recently distributed dividends of more than $3.4 million to 191000 current and former member-owners.
Austin residents enjoy a modest electric rate of 9.94 cents levied by city-owned Austin Energy and take pride in the fact that it has been a leading advocate for clean renewable wind and solar energy. In addition the utility transferred $95 million into the citys general fund this year spokesman Carlos Cordova said.
Texas rates still high
While electric rates in Texas have tumbled along with natural gas prices the latest U.S. Energy Information Administration data show that the state as of June still had a higher average residential rate than 35 other states. Louisiana and Oklahoma had average residential rates that respectively were about 39 percent and 35 percent lower than neighboring Texas.
Tim Morstad associate state director for AARP Texas said the states deregulated wholesale power market overseen by ERCOT is structured in a way that allows power generators . . . to be paid much more than it costs them to generate electricity.
While many residential rate plans in the deregulated market are now priced at less than 10 cents per kilowatt-hour Morstad said many consumers are doubtless paying considerably more. Many who never have switched from their longtime legacy electric utility might be paying 14 cents or more he said.
Some people have just cut the same check to the same company for so many decades theyll keep doing that Morstad said.
Achieving lower rates for Texas electricity consumers should be a shared responsibility he said. I think the consumers have the responsibility to see what prices are out there. . . . I think the legacy providers have the responsibility to not rip people off.
But Sibley the former state senator said deregulation forces retail providers to offer competitive rates and respond rapidly to consumer preferences rather than being routinely assured of a profitable return as the old legacy utilities were before deregulation.
Todays retail providers have got to be nimble theyve got to be quick and several have gone out of business because they werent he said.
jzsmith@star-telegram.com
