Competition works: Texans paying less for electricity

The business of electricity is complex, but for Texas consumers eligible to shop around in the competitive retail market, the data is clear: competition is saving you money.

Retail offers in Texas’ competitive electric market are among the lowest prices available nationwide.

The chart above shows the latest U.S. Energy Information Administration data on average statewide electric prices, from August 2011, plus historical information from AECT on offers available from Power to Choose. Note the bar in red. It shows that the average price in Texas, regardless of provider, is below the national average. But note the orange bars, which show the lowest offered fixed-price and variable offers available in competitive areas. Customers who shopped and selected those plans have prices that are among the lowest in the nation.

Electric prices have multiple underlying factors.

Of course, there are countless underlying factors that affect electric prices, such as regional economic growth, electric grid boundaries and investment in new power plants and environmental improvements. In fact, prior to the opening of the competitive market, many municipally-owned utilities and rural electric cooperatives had electric rates well below those of, say, Houston or Dallas. This makes it necessary to more closely examine the factors behind prices, as well as pricing trends.

Within ERCOT, electric prices are affected greatly by changes in natural gas prices—a marked contrast to the rest of the nation, which is more dependent on coal. During 2008 and 2009 when natural gas prices began to fall, competitive forces—in the form of hundreds of available offers—helped push retail prices downward more quickly than they would have fallen under a still-regulated market. Competition also works when input prices rise by creating pressure for retailers to hold on to customers through competitive prices, better service and other benefits.

And it’s been working. Since 2007, nationwide prices outside Texas have risen by 21 percent, while, within the state, prices have fallen by six percent. Over the same period, the average lowest competitive price has fallen by 34 percent.

In the competitive market, one of the most effective ways to lower electric bills is to shop around.

Visiting the state-sponsored website www.PowerToChoose.org helps consumers find dozens of options in the market; consumers may also start by contacting their current retail electric provider, which may have different pricing plans to better suit their needs. Consumers have the opportunity to enjoy the benefits of lower prices, which is a welcome relief during difficult economic times.

The past 10 years have seen incredible changes in the Texas electric industry. Our state’s comprehensive adoption of technology and innovation has changed the way power is generated, distributed and consumed, while maintaining our tradition of effectively serving customers. To stay up on activities of the electric industry, please bookmark us at AECT.net, follow us on Facebook and Twitter.

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