AUSTIN – “Competition has brought substantial benefits to Texas in only a few years, both in absolute terms and relative to other states,” according to a study on the Texas electric market released today by the Texas Public Policy Foundation.
The paper, “Competition in Texas Electric Markets: What Texas Did Right & What’s Left to Do,” was written by Dr. Robert Michaels, Professor of Economics at California State University-Fullerton and a Senior Fellow at the Foundation. The paper is the third in the Foundation’s series on Texas’ transition from a regulated to a competitive electric market.
Dr. Michaels and Bill Peacock, Director of the Foundation’s Center for Economic Freedom, presented the paper’s findings at today’s hearing of the House Regulated Industries Committee. Last week, the committee passed two bills – SB 482 and SB 483 by Sen. Troy Fraser – that would substantially alter Texas’ rules of electric competition. Those bills are expected to be brought to the House floor on Tuesday, April 3rd. “There are three essential characteristics of a successful, competitive electric market: Efficient, competitive wholesale markets; benefits of retail markets available to all users; [and] long term predictability of investment climate and freedom to contract,” Dr. Michaels said. “The results of this study indicate that the Texas electric market has all of these characteristics to a degree not seen in other states.”
“Consumers have more choices among companies and rate plans than ever before,” Peacock said. “Electric prices are coming down and consumers in most markets can select rates that are below the national average. The predictable market rules have encouraged companies to build enough generating facilities in Texas to keep our lights on.”
Dr. Michaels laid out five policy recommendations for the committee, which stand in contrast to the policies that the 80th Texas Legislature has been pursuing:
(1) Maintain the current practice in Texas of providing a framework for competition without prescribing how market participants should compete with one another.
(2) Avoid unpredictable major alterations of the existing market structure that will dash expectations of future stability and ruin the climate for investment.
(3) Continue support for scheduled improvements to the wholesale market, including the Market Monitor, 2009 Day-Ahead Markets, 2009 Nodal Pricing, and Investment in Transmission Capacity.
(4) Introduce competition into non-ERCOT markets.
(5) Separate environmental and income concerns from questions of competition.
“Legislators are so focused on a few pricing decisions by companies that they’re missing the bigger picture,” Peacock said. “The electric deregulation law they passed before has created a successful and vibrant market, and no company has the ability to manipulate prices – consumers are voluntarily paying what they want to pay.”
The Texas Public Policy Foundation is a non-profit, free-market research institute based in Austin. The full study is available at http://www.texaspolicy.com/pdf/2007-03-RR07-electric3-rm.pdf.
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