Is electricity deregulation finally working? NO! But rates are significantly lower this month than it was one year ago.The lowest rate for a 12 month contract is by Amigo Energy at 10.7. (might want to check out their reputation) The highest rate is 14.6 by First Choice (ditto). Reliant is at 14.0 and TXU is at 13.5. Last year the rates were much higher:
Consumers can lock into to a relatively "low" rate for an extended term, avoiding any fluctuation in profits. Topping the charts for the highest fixed rates is First Choice Power at 22.8 cents for 12 months, and US Energy Savings Corp has the lowest fixed rate at 16.1 cents but a 5 year commitment is required with penalties for early termination.Does this mean electricity deregulation is finally becoming competitive? No. The lowest rates are still over 25% higher than pre-deregulation rates and there is much more that proves the failure of this Ken Lay experiment.
More on this later today.
13 comments:
I think the main reason electricity rates are lower today than one year ago is that natural gas prices have dropped. Right now it is about $3.8o per Mcf and a year ago it was over $10 per Mcf. The percentage of electricity in Texas generated using natural gas is between 40% and 45% (it varies). So as the inputs get cheaper, the price of the output will be cheaper. Has nothing to do with competition, just as you said.
And yet rates are 25% higher than before deregulation, that is if you can get the 10.6 rate.
And the prices on the raw materials used to generate the electricity are where, relative to pre-deregulation days? About 25% higher, if you take a look.
Imagine that -- the prices of raw materials go up and so do the prices of the finished product.
Unless, of course, government is the supplier of the product -- in which case they raise taxes to cover the loss.
Yet another republican trying to crack a smile while bending over.
Talk about being a surrender monkey.
It's hard to compare prices over time unless you control for the price of natural gas (and coal, uranium, and rainfall levels, which affects how much hydropower can be supplied). One could do this by running a regression where price was the dependent variable with the prices (and rainfall level) as independent variables.
But you don't have to try that hard--we only need to look at regulated prices within the state compared to deregulated prices existing at the same time. Which John has done many times.
I believe that (well regulated) competition can work to lower prices, but the way it was designed in Texas clearly hasn't worked for utilities. John has demonstrated this many many times.
The only problem is that John hasn't demonstrated this many times -- he hasn't demonstrated it once. On the other hand, he has demonstrated that tax-supported utilities can sell their electricity at sub-market rates because the government entity that owns them can make up the losses via taxation.
And interestingly enough, NEITHER of the other two commenters actually tried to answer the point I made before -- that the cost of the raw materials have increased roughly 25%.
Just continue to bend over and grin. You deserve what you are getting.
"On the other hand, he has demonstrated that tax-supported utilities can sell their electricity at sub-market rates because the government entity that owns them can make up the losses via taxation."
Yep. In addition, municipal utilities don't pay taxes and they're able to raise capital with tax-free bonds.
and your point is?
In other words, your comparisons of private-sector companies to publicly owned utilities like San Antonio are specious.
Good grief -- does that really need to be spelled out for a supposedly educated individual like yourself?
But then again, maybe you skipped those economics classes -- and never bothered with a business class.
"and your point is?"
The point is that comparing the prices offered by municipal utilities and private utilities is dishonest.
Municipal utilities are subsidized by the taxpayers. The rates they charge do not cover the costs of doing business.
matt,
no one is talking about anything else but the local electricity rates in the Houston area.
You are the only one talking about anything else.
So when rates go up, it's proof that deregulation is bad. And when rates go down, it's proof that deregulation is bad.
That's some system of logic you've built around yourself, Cobarruvias.
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