Without Customer Choice, Municipal Utilities Seen as Cash Cows for Pet Projects; Offer Poor Customer Service

Without electric competition disciplining electric rates, municipal electric utilities in Texas -- like CPS Energy in San Antonio and Austin Energy -- have become cash cows to fund pet city projects, rather than delivering customers the lowest electric rates.

San Antonio and Austin are among the few parts of Texas that do not allow customers to choose their electric provider.  Instead, the city-owned utility acts as a monopoly.

This can burden customers' pocketbooks when utility rates become a revenue source for non-utility and unrelated functions; and because customers don't have a choice in their electricity provider, they can't do anything about it.

The latest example is at CPS Energy, where News 4 San Antonio reports that City Manager Sheryl Sculley, "is looking into adding a $1 per month fee to CPS Energy bills to help make up for budget shortfalls in the Parks and Recreation Department."

News 4 notes that this is a separate rate hike request from the one CPS Energy is requesting (discussed further below).

Imagine if a competitive retail electric provider in Dallas or Houston tried to increase its electric rates to build a park on its corporate campus.  Customers would immediately switch away to lower-priced competitors, voting with their feet.  But that can't happen at places like San Antonio and Austin where customers don't have a choice in their electric provider.

As SaveOnEnergy.com® has previously noted, the use of Austin Energy bills to fund non-utility Austin city operations has led to controversy, because some Austin Energy ratepayers live outside of the city's boundaries (as the utility's service area extends beyond the city limits).  These customers' utility bills are being used to fund projects that don't even benefit them, but under the Austin Energy monopoly, they can't choose another electricity provider.

As noted above, CPS Energy electric rates -- where there is no competition -- are expected to keep increasing.  According to an op-ed in Express-News, CPS Energy will go to City Council in October to request a 4.75 percent rate increase for 2014.  Worse, the op-ed notes that, "CPS plans to come back every two years seeking increases of 5.25 percent and 4.5 percent for a total increase of 14.5 percent through 2019."

Separately, KSAT-12 reports about billing problems and poor customer service at monopoly CPS Energy, including months of complaints about the utility's estimated billing practice.

"Some customers went months without getting a bill, then suddenly received a large bill to cover those months of service," which CPS officials attributed to quality issues with contract meter readers and an associated backlog.

CPS Energy doesn't have to worry about satisfying customers, however, because it has no risk of losing them -- it's the only game in town.  In contrast, in Dallas and Houston, where customers can shop among competing energy providers, electricity providers can be "fired" by their customers if they don't offer high quality service or if they fail to take care of their customers.  That's why, as SaveOnEnergy.com noted last week, Texas electric customers who have a choice in their electricity provider are more satisfied than customers stuck with a monopoly utility.