Consumers need to help make electricity deregulation work in Texas.

Many recent articles have questioned why electricity rates are so high in Texas and about how much money Reliant and TXU are making from deregulation.

Back when the hurricanes Rita and Katrina came through and caused a major disturbance to our natural gas production in late 2004, natural gas prices rose significantly – thus increasing the price of electricity. Prices have come down since then, but the affiliate providers have not lowered their rates. Many newspapers have written articles about this recently – asking why TXU and Reliant haven’t lowered their rates to reflect today’s natural gas rates. Well, the answer is that the affiliate providers, such as TXU and Reliant, agreed with the Public Utility Commission of Texas not to raise rates immediately and to phase in their rate increases over time, so that people could recover and not be shocked by such a high rate increase at one time. By doing this, the affiliate electric providers lost a significant amount of money in their retail divisions during this time while prices were actually higher than what they were charging their customers. Now I’m certainly not saying they haven’t fully recovered these loses, because they probably have. The fact is – they are public companies and are judged by the bottom-line just as other large corporations.

I believe the real answer lies with the consumers of electricity in Texas. Why haven’t more people switched to a lower electric plan? Even the affiliate providers offer their customers lower rates. If more people switched providers don’t you think that TXU and Reliant would lower their rates…YES! Consumers need to take some of the blame here. Less than half of consumers of electricity in deregulated areas of Texas have actually switched from the default rate they are charged from their affiliate provider.

If you are looking on Travelocity for a flight and one is $15 cheaper than the other – which do you choose? Do you buy a car at sticker price? NO – If 2 gas stations are side by side, but one says $2.29 and the other says $2.19 do you go to the one for $2.29 – NO! You buy the cheaper one, or you negotiate your price. Deregulation will drive competition – but people have to help.

Remember when it cost a small fortune to make a long distance call? Many younger people probably don’t. Why was that? What did the government do about it? They broke up the regulated monopoly. Telecom was deregulated thus creating competition, infrastructure enhancements and improvements and now long-distance rates are virtually non-existent. I’m certainly not saying that electricity rates will become non-existent, but I am saying the industry will make improvements to infrastructure, produce better services and products, but competition for all intents and purposes is what will ultimately drive down electricity prices. That will have to come from the consumers. More and more consumers switching providers is what will ultimately drive down rates.