“Not one of the 16 states — plus the District of Columbia — that have pushed forward with deregulation since the late 1990s can call it a success. In fact, consumers in those states fared worse than residents in states that stuck with a policy of regulating their power industries. An Associated Press analysis of federal data shows consumers in the 17 deregulated areas paid an average of 30% more for power in 2006 than their counterparts in regulated states. That’s up from a 24% gap in 1990.” – USA Today, 4/21/2007
“Another year has passed, but it’s the same old story for electricity customers across Texas. Light bills in areas such as Austin and San Antonio, where service continues to be regulated, are lower. In deregulated areas (that’s most of us, Houstonians), they’re higher.” – Houston Chronicle, 1/3/2014
By any measure, electricity deregulation has failed in the states that have tried it. Here are just some of the problems other states have experienced following electricity deregulation:
When Texas decided to experiment with deregulating their electricity, families and businesses paid dramatically increased prices on their electric bills. NPR reported that, “a typical electric customer paid $3,000 in added costs over the last ten years because of deregulation… The report estimates that Texans spent $11 billion cumulatively because of higher rates.” Further, the San Antonio Express-News reported that deregulation led to blackouts across the state in a story titled, “Blackouts: Another failure of deregulation.”
A recent Public Sector Consultants report noted that electricity deregulation in Texas resulted in concerns over power shortages because reserves could drop almost 4 percent below reliability targets next year, even while electric rates are higher and more volatile in the areas of deregulation, compared to areas that are fully regulated. Texas Monthly concurs in a March 2014 story saying, “As the threat of rolling blackouts in winter and summer demonstrates, Texas isn’t producing enough electricity to meet our needs. Welcome to the wonderful world of deregulation.”
A professor of energy economics at the University of Houston was quoted as saying with regards to the failed electricity deregulation experiment in Texas, “When you rope a calf and you’ve got all four legs tied, that calf is well regulated. If one of those legs gets loose, the calf is still regulated, but it will kick the hell out of you. That’s the Texas market.”
In their “Guide to the 2011 Texas Blackouts” NPR reports, “the blackouts left business and homeowners frustrated with power companies and state energy management.”
And from the customer standpoint? There has been 800% more complaints since the state deregulated their electricity.
California’s deregulation of electricity created a statewide energy crisis that led to higher prices for families and business, rolling blackouts, price gouging, market manipulation, and home-state utilities nearly filing for bankruptcy. A national Public Television article reports year-by-year on what they dub the “California Crisis” and the significant problems that occurred. Electricity Deregulation also led to the Enron Scandal. The Guardian reported that, “in the new unregulated environment, Enron was not obliged to disclose prices or the volumes bought and sold. In the first six months of deregulation up to June 2001, 38 Stage 3 emergencies were declared. Stage 2 emergencies increased 81 per cent and Stage 1 by 21 per cent in the same period. During the same six months Enron’s revenues increased by nearly $70 billion over the previous year. Although Enron did not own power stations it was able to withhold electricity supplies through its energy auctions. It created artificial shortages to force up prices and hence, profits.”
When Illinois decided to experiment with deregulating electric rates, according to USA Today, some families saw their monthly electric bills “double and even triple.” Things got so bad, the Attorney General of Illinois had to file a federal complaint to stop price gouging and collusion according to the St. Louis Post Dispatch. A Public Sector Consultants report on Illinois noted that dissatisfaction with the results of deregulation has led to a sharply expanded role for government.
Deregulation has resulted in job losses and the possibility that Illinois will not have enough electricity to meet its needs in the future. Already, hundreds of jobs have been lost in Illinois as a result of electric deregulation. Ameren Energy Resources, the deregulated division of Ameren, laid off 210 employees from 2009-2010. Edison International shut down two Chicago plants earlier than expected, laying off the facilities’ 165 workers.
The high electric prices that prompted New Jersey to deregulate 14 years ago persist—New Jersey still has the 6th- highest electricity rates in the U.S. according to a new PSC Report on New Jersey. Frustration with the lack of needed new generation in the state and a reliance on out-of-state generation have led to new attempts at regulation in New Jersey and a battle between the state and the federal government over state energy policy.
In February of 2014, the New Jersey Star-Ledger reported that electric prices are “soaring for NJ customers who switched power suppliers.” The article notes that citizens were in shock when they got their bills. The Star-Ledger reported, “Systrum Energy had tripled the per-kilowatt-hour price it charges for electricity. His January bill was $160, a 200-percent increase. His February bill was even higher. He has now taken to shutting off lights in his home to save money. The price spike has eliminated the savings accrued since Jung left Jersey Central Power & Light, the state’s second-largest utility.”
After Arkansas deregulated their electricity, 5 of 6 utilities announced higher electricity prices for families and business – including a thirteen percent rate hike according to Arkansas Business news. The Arkansas Public Service Commission report on electricity deregulation said that, “economic development efforts may actually be hampered by a volatile retail open access program” and that, “few if any increases in service quality would be anticipated to offset the price increases.” The outlook was so bad that then Governor Mike Huckabee repealed his own law on electricity deregulation
The Associated Press reported in January of 2014 that Connecticut’s Attorney General warned electricity customers that deregulated electric providers were spiking their prices to nearly double what the two regulated utilities were charging.
In 2013 the New York Attorney General testified to the State Public Service Commission that 91.5 percent of upstate low-income consumers who had switched providers were paying higher rates than if they had stuck with the traditional utility. The Attorney General went on to say that, “low income ESCO customers paid a net premium $19.2 million more than what they would have paid NiMo for commodity supply service during this two-year period.”
In New York, out-of-state predatory energy marketers have been caught misleading consumers about lower bills. One predatory energy marketer, Just Energy Group, was fined $200,000 by New York attorney general in 2008 for deceiving customers.
In Pennsylvania, the Attorney General is investigating a slew of reports of skyrocketing electricity costs from consumers who recently switched to deregulated energy marketers. The Morning Call newspaper reported that one customer said, “this is a disgusting example of price gouging thanks to the deregulation of an essential utility.” They went on to report that one man’s February 2014 electric bill was $1,250, up from $536 in January, even though he used only slightly more power.
USA Today reported that citizens were distressed because of, “the failure of deregulation to deliver its promise of lower electricity prices. In many states, it’s had the opposite effect with sharply higher rates — 72% in Maryland…”
Maryland, home to Constellation Energy, and one of the most aggressive advocates for expanded electric deregulation, has had an extremely negative experience with deregulation. Electric prices have skyrocketed, with rate increases of 40-80%. The Baltimore Sun reported in February 2011: “The reservation fee costs each BGE household an extra $175 a year and will cost all Maryland electricity customers an extra $5 billion from 2007 to 2014.” Maryland’s Governor stated: “I intend to do everything I possibly can to get us out of the horrible situation.”
According to the Public Sector Consultants Electricity Reliability in Michigan report, “Across the state, the problems created by Michigan’s current market structure are clear—the uncertainty in planning for future reliability needs, the involvement of federal agencies, the tension between federal and state regulators, and the shifting of fixed costs to remaining residential and small business customers. Nowhere is it being demonstrated more clearly, however, than in Michigan’s Upper Peninsula. Because of Michigan’s hybrid market structure, residents and businesses in the state’s Upper Peninsula are absorbing the costs to maintain an outdated plant. These significant price hikes, along with the problems of state and federal tension and planning for future reliability needs, are evidence enough that the state needs to take concrete steps to address its energy challenges as soon as possible.” The negative consequences of electricity deregulation were also highland in this Milwaukee Journal Sentinel article titled, “In Michigan’s Upper Peninsula, customers to pay more for power plant.”