Garland residents may be breathing a sigh of relief this summer as reports of glitches, delays, low participation and otherwise rough-going plague Texas' struggle to build, test and implement an electricity market deregulated for retail competition. Problems in preparing for deregulation have included a pilot program delayed two months due to computer snafus, a surprise spike in wholesale electricity costs, skeptical consumers refusing to change electrical providers, and sharp criticism over provisions to protect electricity customers that may do more harm than good.
Customers of Garland Power & Light, a community- owned utility exempt under Texas' soon-to-be-effective deregulation law, will be protected from the impact of electric deregulation. All of Texas' community-owned and cooperative electric utilities have opted out of deregulation retail markets for now. Shell Energy backs out of Texas market as pilot program creates delays When the Electric Reliability Council of Texas devised the deregulation pilot program, originally scheduled to begin June 1, they intended for it to be a test period. The pilot would work out any kinks in a new system where retail electric providers and generation companies buy and sell electricity on a wholesale market for resale to electricity customers.
Up to five percent of Texas residents could participate. But the agency was forced to postpone the pilot program three times - totaling two months - while it worked out problems with its own computer systems responsible for switching customers over to new providers. Now retail electric providers, promised they would be able to start operating on June 1, will wait until the end of October while their customers' service is slowly switched.
Combined with lackluster interest from the market (less than two percent of Texans have chosen new providers), continued delays have in part prompted Shell Energy Services, LLC to withdraw from the Texas Electric Choice program, while other companies are starting to question their own participation. Shell believes that ERCOT should make substantial progress in reducing the backlog for customer switching transactions, as well as in switching transaction success rates, before opening the retail program to participation by larger numbers of Texas consumers.
Shell states that much of the data that the company and other retail electricity providers are missing is not just a day or two late, but has been delayed by weeks or months. They claim that some of their (Shell's) customers cannot be identified, much less billed on a timely and accurate basis, or have their power scheduled correctly. Price spikes recall California problems One of the fundamental features of electric deregulation - letting consumers choose their electricity company - has a flip side.
Electric generation companies must provide standby power capacity ready to sell on the wholesale market to retail providers whenever their customers create the demand. Prices rocketed skyward when the pilot program switched on July 31. Generators were able to charge a whopping $1,000 per megawatt-hour -- compared to $50 per MWH the previous day. Such wild price increases are a major factor in the crippling rate increases suffered by California electricity consumers. Though ERCOT explains the price spike as a first-day human error that created the false impression of a generation shortage, others say it could happen again. Texas-based power generation brokers are often blamed for California's deregulation failures. These same companies provide generation in their home state and will influence the market here after Jan. 1.
System to protect consumers may hurt more than it helps. Safeguards in place under the deregulation law that are intended to protect vulnerable ratepayers will do just the opposite say Texas consumer advocates. Meanwhile, the Consumer Federation of America has published a study that charges electric-industry deregulation is a “costly failure” in the United States. Rate payers who can't pay their electric bills, as well as consumers whose electricity provider goes out of business, will be automatically switched to the “provider of last resort,” a designated backup provider that acts like a consumer safety net.
And while a retail electric provider cannot disconnect a customer for non-payment of bills, they can send that person to the last-resort company. That company can disconnect the customer after a certain amount of time. Unfortunately, the utilities handling provider of last resort service in Texas are doing so at rates that are “shockingly high,” reports Austin-based Consumers Union. People who've already had trouble handling their bills, along with those whose electricity companies go out of business, could end up paying those rates, reports the Union. The effect will also be to worsen the problems of financially troubled Texans, also warns the Texas Legal Services Center, which aids low-income people.
The agency believes the last-resort service will dig those already having trouble paying their bills deeper into debt. The CFA study points out that in states where the industry has been restructured, consumers are generally paying much higher prices and getting less reliable service than in states that kept utilities as regulated monopolies that own their own power plants.
The group urges states to drop or slow down deregulation plans until federal officials overhaul electric industry oversight.
