A pilot effort by six Texas communities to bring lower electricity rates to residents received a lukewarm response from electricity providers, demonstrating how deregulation and current state law is not benefiting all Texans.
More than 1600 households in Cisco, Comanche, Dublin, Eastland, Hamilton and Snyder registered last fall to participate in the People’s Electricity Program (PEP). Program officials sought to obtain lower, bulk purchase electricity pricing for these residents but were unable to secure an attractive offer from an electric provider.
“Providers simply refused to take part in the program or saw no reason to offer rates lower than those already available,” said Geoffrey Gay, legal counsel for the Cities Aggregation Power Project (CAPP), an organization of more than 100 Texas cities that supported the effort. “Ironically, there is a fire sale on power in the western part of the state at the moment for large users, but residents in these small towns have essentially been ignored by the power providers who are not inclined to reduce their published prices for a bundle of 1,600 residential accounts.”
The program provides an ideal case study of how the state’s recently deregulated retail electricity market is leaving some Texas citizens, especially those living in small and rural communities, out in the cold. Electricity providers simply have no incentive to go into these areas and aggressively pursue new customers with offers of lower, more competitive electricity rates.
In some instances, the costs of acquiring new customers in small communities may not be cost-effective for power companies, which can often recruit more new accounts by focusing marketing efforts in larger cities.
One effect of this disinterest by retail electricity providers is the fact that a majority of the people who registered for PEP have never negotiated new contracts for electricity service since the state’s electricity market deregulated in 2002. Meanwhile, retail electricity prices in Texas under the deregulated market have soared more than 57 percent, according to a study by the Institute of Public Utilities at Michigan State University.
City leaders of the six Texas communities participating in PEP had hoped to find another way to provide residents relief from high electricity prices. Unfortunately, their options were limited. Under current Texas law, a city can pool its citizens’ electricity needs and negotiate for bulk-rate pricing only if each citizen chooses to take part. A city is precluded from becoming a Retail Electric Provider or negotiating a power contract for all of its citizens.
“The overwhelming response received by the People’s Electricity Program shows that Texas consumers are tired of paying unreasonable electricity rates and will sign up for a program that helps them save money on their utility bills,” Gay said. "Choice among providers isn't any good if prices are too high."
One way to boost program participation enough to possibly attract the attention of power providers would be for a city to pool the electricity demand of all of its residents and then give residents the option of opting out of the program, he said. However, this practice is not permitted under current Texas law.