The massive rate hike looming for customers at Austin Energy, which SaveOnEnergy.com first told you about this fall, is "Exhibit A" in how customers are better off when they can choose their electricity provider, and a reminder of how bad things were under the monopoly utility system which existed in all of Texas prior to 2002.
SaveOnEnergy.com noted in September that Austin Energy's rate case would force some customers to subsidize lower electric rates for other customers. This doesn't happen when customers can shop for their electric provider, as customers can choose a new provider if any electric company is making them subsidize another customer's rates. SaveOnEnergy.com also recently noted that electric rates at Austin Energy are higher than rates in parts of Texas open to electric choice -- and that's before the impending massive 23% Austin Energy rate hike for residential customers.
But that's only a fraction of the problems facing customers at Austin Energy, who have no choice and must buy their electricity from the city-owned monopoly utility.
For starters, Austin Energy's electric rates pay for more than just electricity -- they're used for a variety of pet projects by city politicians. This means Austin's electric rates are higher than they need to be, but customers can't avoid this over-charging by switching to a lower-priced competitor like they can do in Dallas or Houston where customers have choice.
The Austin American-Statesman noted that, "Many Austin Energy customers might not know it, but they pay for much more. New streetlights. The city's economic development office. Research into sickle cell anemia. And a green-living expo, among at least $130 million in spending last year that has little or nothing to do with electricity, according to some city officials and civic activists."
This is even worse for customers who live in Austin Energy's service area but not within the city limits of Austin. These customers are forced to pay higher electric rates to Austin Energy, but since they live outside of the city, receive no benefits from any electricity revenue Austin Energy funnels into the city's coffers.
A website dedicated to protesting the Austin Energy rate hike says that $100-$150 million annually is diverted from Austin Energy and put into the general funds of the city. This same site noted that over 50,000 customers who live in the monopoly Austin Energy service area aren't eligible to vote for City Council.
If a customer feels they're being overcharged in Dallas, Houston, Corpus Christi, or another part of the state where Texans have a choice in their energy provider, they can "fire" their current provider and switch to one of over 30 competing electric suppliers offering low rates to win the customer's business. But in areas of the state still closed to competition, like Austin, customers have no recourse, and cannot avoid paying higher electric rates, even when unjustified.