The recent rolling blackouts in Texas, as well as a report by the Texas Coalition for Affordable Power (TCAP) have focused the Legislature’s attention on ERCOT. However, a closer look at the facts behind the claims being brought against the market, and ERCOT specifically, shows that the market is working, and working well.
The TCAP report argues that electricity prices in Texas have led to a “massive drain on the consumer economy.” However, this argument assumes that prices are higher under deregulation. In our Sunset Report on the Texas Public Utility Commission, we noted that prices in Texas are lower now than under a regulated market. In fact, average competitive prices today are almost 10% below average 2001 regulated prices, and the lowest average price is over 30% lower. One thing that could increase the price of electricity is the push for renewable energy. Renewable energy subsidies and energy efficiency mandates could add $2.65 billion annually to electricity bills by 2020.
The TCAP report also claims that wholesale generators can engage in anti-competitive activities, and when they do so, there is little penalty – and no restitution – assessed. They even list “hockey-stick” bidding as an example. However, the Texas Legislature created the Independent Market Monitor in 2005 to help ensure competitiveness in the ERCOT wholesale market. The Market Monitor investi-gates market activities and makes proposals for market rule changes. There have been no claims of market manipulation since 2005, and even those charges were settled with no finding of fault. The Market Monitor has found the market increasing in competitiveness each year, and has not noted any problems during the recent cold spell.
The market is competitive. The most recent report from the Market Monitor shows “very competitive market outcomes” with the region getting more competitive annually. A glance at the power to choose website shows just how much more competitive our marketplace is now under deregulation than before. The average Texan in the ERCOT region can choose from 138 residential plans offered by 29 providers.
Increasing market regulation-like giving the PUC the ability to order restitution as some are proposing-would be a classic case of creating a solution in search of a problem. And ultimately make the market less competitive.
Although the market is working, there are several policy changes that would make the market even more competitive. Although we go into more detail in our Sunset Report, here are some suggestions: