With customer choice forcing Texas electric companies to compete for customers' business, Texas electric rates have gone from above the national average before competition, to below the national average. However, that's not the story that's typically reported by the media, because the federal Energy Information Administration is using flawed data which underestimates the significant decline in Texas power prices since the start of competition, according to a new study by the Texas Public Policy Foundation (TPPF).
"Most competitive prices are considerably lower than what is reported in the federal government’s data," said Bill Peacock, Director of the Foundation’s Center for Economic Freedom. "In fact, the average competitive price is below the national average, and consumers who exercise their choice can easily find rates that are lower than in our neighboring states."
TPPF found that the average electric rate offered by electric companies in the competitive regions of Texas in December 2009 was 11.01 cents/kWh, while consumers could choose offers as low as 8.52 cents/kWh. However, the federal Energy Information Administration (EIA) reported that Texas consumers paid an average of 12.26 cents/kWh in October 2009 (the most recent month of data).
For 2009, the EIA data shows a national average price of 12.06 cents/kWh. According to EIA, the average Texas rate is 12.26 cents/kWh, but in reality, the average Texas rate in parts of the state open to competition is actually lower -- only 11.01 cents/kWh. Texas energy prices are thus below the national average in areas where Texans can choose their energy provider.
Why does the EIA data show a higher Texas electric rate? There are a few reasons, but one of the biggest reasons is the EIA blends rates from parts of the state open to competition with higher-priced rates at some of the monopoly utilities and cooperatives, some of which, as previously noted, have higher rates than competitive areas.
Not only are competitive Texas electric power rates lower than the national average, but competition has actually reversed Texas' relative position versus the national average. For instance, in 2001 just before competition started, the regulated average energy price in the parts of the state that would later be opened to customer choice was 15.8% higher than the national average, at 9.98 cents/kWh versus the national average of 8.62 cents/kWh. Today, however, the average competitive price (11.01 cents/kWh) is 8.71% below the national average, while the average of the 15 lowest Texas offers (9.27 cents/kWh) is 23.13% below the national average.
The data shows that, over the past nine years, competition has kept Texas electric rates in check, resulting in Texas rates rising more slowly than the national average, and turning Texas from a state which had above average power prices to below average power prices.
Texas' competitive electric rates also compare favorably with several neighboring states, as the average price of the 15 lowest offers in Texas is lower than the average price in New Mexico, Oklahoma, and Arkansas. Furthermore, Texas power prices are lower -- significantly in many cases -- than the average price in the other four of the five largest states, such as New York (19.17 cents/kWh) and California (14.08 cents/kWh).
"Perhaps the lower price of electricity in Texas is one reason it has recently moved past New York and California as the home to the most Fortune 500 companies," Peacock said.