Back in September, SaveOnEnergy.com told you about electric rate hikes at Austin Energy, and how customers couldn't avoid the higher rates because they didn't have a choice in their electric provider, as most Texans do. Now, customers at El Paso Electric -- another Texas utility which does not offer customer choice -- are facing higher rates, and customers are fed up with the monopoly system.
Rates at El Paso Electric are among the highest in Texas. According to data from the Public Utility Commission, the average residential bill at El Paso Electric for a customer using 1,000 kilowatt-hours (kWh) per month was $122.15 for September. That works out to a per kWh rate of 12.2 cents.
In contrast, customers in Dallas and Houston who can choose their electricity provider can find fixed electric rates for as low as 8-9 cents per kWh. In other words, areas of Texas with customer choice are producing rates 25-30% lower than the "regulated" rates at El Paso.
Noting the lower rates in parts of Texas open to electric competition, El Paso City Rep. Courtney Niland is fighting the El Paso Electric rates, and said that the utility has not been able to justify the higher rates.
According to ABC 7, Niland has chastised El Paso Electric for its monopoly status and attendant high rates. "[Y]ou and I both know that if you had competition and you had to get competitive, you'd do it," Niland told El Paso Electric executives at a recent council meeting.
In other parts of Texas with electric choice, customers fed up with high rates can just switch to a cheaper electric provider. Not so at El Paso.
Niland also noted that members of El Paso Electric's board of directors live in places like Washington, DC; Los Angeles, New York, and Greenwich -- all areas which have competitive electric rates -- but yet the utility won't institute such competitive rates in its own territory.
Critics of competition often claim that regulated rates will be lower, because regulators can set the level of rates. But Niland showed that regulation is no guarantee against excessive rates.
For example, Niland noted that El Paso Electric had a 13.8% return on equity, while the level for the return on equity intended by regulators is in the 10-10.5% range. The higher return on equity, or higher profits, resulted from warmer than expected weather, and essentially means that El Paso Electric rates were set at levels higher than they needed to be to provide El Paso Electric with a just and reasonable return.
With electric choice and competition, customers can vote with their feet and choose lower priced electric suppliers if one provider is charging too much money in order to maintain higher profits. But under a regulated monopoly, there is no recourse for customers, and politicians face an uphill battle in trying to lower rates.