Retail Choice Rides Again: A Mixed Market in The Lone Star State
Texas wins raves from the big players for its rules and systems, but the small consumer, as in other states, sees little reason to switch.
Six months into the opening of the restructured Texas electric market, industry players are generally pleased with the results, but the jury is still out, as the state's vaunted system design has shown some cracks, and consumers still see little reason to switch their energy supplier.
It's true, of course, that Texas has won raves for putting much of the metering, switching, and data management software in the hands of ERCOT, the Electric Reliability Council of Texas, which acts as independent system operator for the Texas grid and regional market.
And Texas comes out ahead in most comparisons with Illinois, the other major state also pushing electricity competition in the post-Enron, post-California era.
Texas can count numerous retail electric providers (REPs), as alternative power suppliers are called in Texas. Those REPs are vying to sell the electricity commodity to the residential and small commercial sector, as well as to larger commercial and industrial (C&I) customers.
In Illinois, for example, you won't find the same level of praise from retail suppliers, especially those targeting the residential sector. Illinois law (S.B. 24) allowed residential customers of investor-owned utilities to buy electricity from third-party suppliers beginning on May 1, about 18 months after commercial and industrial (C&I) customers had won the same right. But by the time that May Day had rolled around, not a single third-party supplier, dubbed alternative retail electric suppliers (ARES) in Illinois, had stepped forward to sell competitive energy to residential customers. Two months later, customers were still waiting for a competitive offer.
But why should they worry? After all, those same customers won nice rate cuts under the new law. Legislators mandated a 15 percent rate cut by fall 1998, plus another 5 percent by May 2002. And the Texas restructuring law (S.B. 7) also required rate cuts. (A 6 percent rate reduction took effect Jan. 1, 2002.)
In fact, some analysts see few incentives for consumers to switch, whether in Illinois, Texas, or elsewhere. The savings, they say, come more from legislative fiat than from competition.
"You can give people choice in the legislation at the state level," explains Steve Behrens, vice president with the Utility Consulting Practice at Cap Gemini Ernst & Young U.S.
"If aggregators or electric suppliers choose not to come into your state, you can say, well, we must be doing pretty well then. If the existing utilities were run that poorly, then people would be coming in, saying that they could offer a lot better service at a level cost."
And even the Lone Star model has begun to show some tarnish. Recent news reports cite software problems in logging service and switching requests and in getting bills generated and sent to customers.
Consumer advocates now warn that the Texas system could fall prey to a California-style virus. One such voice comes from Janee Briesemeister, senior policy analyst in the Austin, Texas office of Consumers Union, a nonprofit consumer