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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.
Fortnightly Magazine - July 15 2002

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Briesemeister contends there are similarities between the alleged manipulation of markets during the California power crisis and what occurred in Texas during its pilot phase last summer.

"To say that what happened in California had to do with only a lack of generation is to misunderstand what happened in California," she says. "The evidence that Enron purposefully manipulated the market proves that. Jamming transmission doesn't have anything to do with having enough generation or not. It's about not having enough transmission. And we don't have enough transmission in Texas."

Market Penetration

The big industrial and commercial customers were some of the biggest proponents of the Texas choice plan. They saw a chance for substantial savings on power bills. Reliant Energy Solutions, the Houston-based energy marketer to C&I customers, says its clients now are saving between 10 and 30 percent, depending on their consumption rates. "I know in our portfolio alone, that compared to what my clients were paying last year for electricity, [there] is about a billion dollars in savings right now," says Jim Ajello, president of Reliant Energy Solutions, the retail marketing affiliate of Reliant Energy HL&P, the regulated pipes and wires company.

He says about 40 percent of the large customers have chosen to switch to a new supplier. The rest decided to stay with the affiliate. "There are six to eight major competitors in this market," Ajello adds. "Pricing is very tight between the respondents. There's a great variety of ways to contract for the service. I think the industry's perspective is that it's a pretty competitive one and we can see that through the switching rates."

At Consumers Union, Briesemeister won't argue the point.

"Overall, we didn't see any pressing need to deregulate electricity," she says. "But as far as the law goes, I think the Texas law was one of the better ones. It didn't neglect customer protection as California's law did initially. Some of the provisions such as the price to beat, the length of time the price caps extend, were meant to protect small consumers."

Meanwhile, because the transition period in Illinois lasts through the end of 2006, it appears there won't be much of an incentive to get the residential market working right away, says Tom Michelman, senior professional at Xenergy, a Burlington, Mass-based consulting company. "As the transition comes to an end, then that's a different story," Michelman explains. "But that's a long way off in Illinois."

Customers of Commonwealth Edison (ComEd), which serves 70 percent of Illinois' population, are paying less than they were in 1990, a benefit created by the restructuring process in Illinois, according to ComEd's top regulatory official.

"If you take an average bill, which is less than $100, and you save 10 percent, that's $10 or less per month. Is that worth peoples' time and effort?" asks Arlene Juracek, vice president of regulatory and strategic service for Commonwealth Edison in Chicago. "And for the competitive supplier, I've heard that it takes maybe $150 to acquire a customer. Is it worth his time to go after someone