Deregulation Produces Lower Business Electric Costs
Before you can truly understand the deregulation issues in Texas, its important know that the state is ranked 11th in the world when it comes to its consumption. There has always been a debate between state politicians as to what the best approach would be to the rising energy costs. The only thing they could come up with was a deregulation law.
The law allowed most power customers in Texas to choose their own electricity service provider from a number of REPs or Retail Electric Providers in their area. Initially, the new law was extremely popular and customers couldn’t wait to take advantage of better plans that would offer them lower rates. The numbers are actually quite astounding. From 2002, more than 85% of commercial customers in Texas have switched their providers at least once, while about 40% of residential customers in deregulated areas have switched.
The new business startup was crazy considering any way you turned, there was a new company coming out of the woodwork. The competition was so fluent; the idea was that there would be much lower prices. The good news was this was offered through both residential and commercial areas.
Oddly though, prices began to rise once deregulation was embraced by customers. It was so detrimental to the public, the electricity costs increased by over 40% in a three-year span between 2002 and 2004. The end result was residential homeowners and commercial business feeling treated as a result.
Proponents of deregulation tried desperately to explain the situation. They claimed that electricity prices were increasing because energy costs for natural gas, an important power plant fuel, had reached an all time high. In fact, in the same period that electricity prices had gone up by 40 percent, natural gas prices had gone up by more than 60 percent, which means that deregulation actually ended up saving customers money.
Economist also lent credence to the claims of deregulation supporters when they maintained that increased competition would eventually lower prices as soon as energy prices stabilized. Customers remained skeptical. They felt as if they had been sold a false bill of good and that the politicians and legislators had not fulfilled their end of the bargain.
In the end, the economists and supporters were right. As soon as the cost of natural gas stabilized and later declined, electricity bills in Texas fell across the state. In fact, from the summer of 2008 to the winter of 2009, power prices in Texas declined by nearly 30 percent.
Unfortunately the debate continues, and others are expressing their concerns about these benefits only happening because of the recession mixed in with the current natural gas costs. The truth is, the further into the recession we go, the lower the prices will go.
It’s an up and down battle that will continue to be monitored throughout. However, for businesses owners it has become a huge help. Since many of them have to cut prices during these economic times, the lower electricity costs have kept their businesses afloat. Definitely an advantage for commercial companies anyways.
About the author: Jerry Dyess has been in the Electricity business for the past 7 years and has published many articles on Business Electric news.
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