Texas, U.S.A. — (METERING.COM) — October 9, 2006 – Competition in the electric retail market in Texas – the 11th largest power market in the world – began in 2002. Since then some 85% of the state’s C&I customer base have changed electricity supplier at least once; only 25% of residential consumers have switched, however.
But this is changing, with close to half of those who have switched having done so in 2005 and the first part of 2006. Most of those who have stayed with their former monopoly utility are on the ‘price to beat’ rate, which is high – Texans are paying close to 15 cents per kW, compared with the average American rate of 10 cents per kW.
The price to beat (PTB) was set by the utility companies, based on the cost of natural gas, and was approved by the regulator. The intention was to reduce the rates paid by small customers during the deregulatory transition period, and to limit the market power of the former utility incumbent suppliers. The PTB system in Texas was designed to extend reduced prices to retail consumers without being low enough to discourage potential generators from entering the market.
The PTB can only be set by the former monopolies, and they can only do so twice a year. When last year’s hurricanes sent the natural gas price soaring, the utilities increased the price to beat – but although gas prices have since dropped, there is no incentive for a reduction in the PTB, and regulators say they are unable to interfere.
All this may change on January 1, 2007, however, when the PTB falls away and retailers are able to set their own rates. Supporters of deregulation hope that rates will come down as consumers move to lower-cost suppliers.