Deregulation Aimed to Lower Home-Power Bills. For Many, It Didn't.
Twenty years ago, a new breed of energy companies promised consumers that deregulation of the electricity industry would cut their power bills. The opposite happened. U.S. consumers who signed up with retail energy companies that emerged from deregulation paid $19.2 billion more than they would have if they’d stuck with incumbent utilities from 2010 through 2019, a Wall Street Journal analysis of U.S. Energy Information Administration data found.
Retail energy companies buy electricity from generators—power-plant operators, wind farms, solar-power firms—and sell it to consumers, usually over the local utilities’ wires. Giving consumers a choice between their old utilities and new rivals, the argument for deregulation went, would create competitive pricing. But in nearly every state, they have charged more than their incumbent utilities in each of the five years from 2015 through 2019, the Journal analysis found. The Journal’s analysis of power prices in 13 states and the District of Columbia excluded other states where retail companies supplied less than 1% of residential electricity in 2019.
Consumers on retail plans paid $1.9 billion extra in Pennsylvania and $1.7 billion in New York during the 10-year period examined by the Journal. In 2019, consumers paid $3.1 billion more in D.C. and the 13 states together, the biggest single-year difference ever over what they would have paid their utilities. On average across D.C. and the states, retail electricity cost 14% more than utility power in 2019, an all-time high. In Texas, where retail-electricity deregulation has gone furthest, residential consumers who signed up with retailers paid $12.6 billion more in the 10 years through 2019 than if they had paid utilities’ rates, according to the Journal’s analysis.
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Many customers aren’t experts at reading the fine print in contracts that let retailers raise rates in ways they don’t expect, consumer advocates say. In most deregulated states, retailers’ customers get their power bills from the incumbent utility, rather than directly from the retail provider, leaving the perception for some consumers that the regulated provider is still overseeing the contract.
Watchdog groups, state attorneys general offices and state consumer advocates have complained about the retail power industry’s sales practices for years, saying some use low teaser rates to attract consumers who don't understand that rates could go up eventually or illegally switch people to their service without consent. Big retail companies such as NRG Energy Inc. concede there has been bad behavior by some competitors and say they are working to improve the industry’s reputation, such as efforts to make customer bills more transparent. Some retailers have targeted the elderly as well as poor and often heavily minority neighborhoods where electricity bills account for larger shares of income.
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https://www.wsj.com/articles/electricity-deregulation-utility-retail-energy-bills-11615213623 (subscription)
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