Playing with people's lives The promises made when deregulation was pushed through were

ringing and clear - lower rates! But, as in the telecommunications deregulation the results have
not been so clear,at least so far. Did I also mention the heat wave's death toll.?

From Today's Houston Chronicle [print edition ] A sampling of electric rates from around the
state shows the stark difference between cities served by public utilities and those with
competing providers. The charge on June bills for 2,000 kilowatt hours of electrify:
City Bill Type of provider: Public Utility or Competing Provider

Austin 213.73 Public

San Antonio 186.81 Public
Corpus Cristi 363.22 Competing providers
Houston 333.44 Competing providers
Dallas 302.12 Competing providers

If you go online you find :

LINK Study results show wholesale competition in America’s electric power

markets is working.
When the subject of competition in the electric power industry is discussed in
public, often the report card on how competition has performed is told in the
context of the California energy crisis or the problems of Enron. No credible
study of wholesale competition can be done without recognizing this “elephant in
the room.” However, the real standard by which competition should be measured
encompasses all economic and non-economic factors (e.g., operating efficiencies).
Further, the economic comparison should measure today’s market prices against
the regulated prices that would have occurred, absent any competitive initiatives.

[snip]
The results of Global Energy’s analysis of the Eastern Interconnection (an area
that comprises two-thirds of the U.S. population and electricity demand, three-
quarters of the nation’s electricity control areas, and eight of the ten North
American Electric Reliability Council’s regional councils) are that wholesale
competition is working as Congress intended. The FERC regulations and
decisions in fostering the creation of regional transmission markets are working to
create effective competitive energy markets. Customers are realizing the benefits
of wholesale competition in the form of lower wholesale costs for their electric
suppliers, more options from renewable resources, better opportunities to manage
risk and wider competition from more market participants.

And you find this:

Public Utilities: Competition, Regulation and Political Actions of Consumers

USA Experience
"The Trend Toward "Competition" in The Utility Industry Has Hurt Consumers [
see this more recent take here]
The utility industry in the U.S. is in the process of change. Deregulation of
utilities is part of a political trend calling for less government oversight of
business. Citizens are told that government intervention through regulation is bad
for business and jobs. Consumer advocates have been promised more choices and
lower prices through deregulation. The message is, "competition will solve all
problems with the market."

In our experience, deregulation is not equivalent to competition. In fact,

competition-real competition, not just the theoretical opening of markets to
competition-must precede deregulation of monopoly utilities. Yet our struggle has
been against utilities which push for policies which deregulate monopolies while
erecting barriers to competition.

A good example is the telecommunications industry. Beginning in the 1980's

policies shifted toward moving away from comprehensive regulation and
monopoly markets. Consumers were told they would be better off with
competition because they will receive more choices and lower prices. Bit by bit
telecommunications services were deregulated and opened to competitors. In
1996 federal law opened all aspects of telecommunications to competition. Many
states also passed state telecommunications deregulation laws around the same
time. There was an expectation that after a "transition" period of about 3 or 4
years there would be sufficient competition in the market.

Consumers Union has studied the impact of deregulation on consumers and our
conclusion is that most residential consumers are worse off now than they were
under monopoly markets. (Our studies and reports can be found on our website,
http://www.consumersunion.org/resources/publications.htm) . Among our
findings:

· Contrary to expectations, there are virtually no competitive alternatives for

residential customers. Competition is just starting to develop for business
customers. This finding is especially problematic because most laws assume
competition will replace the need for regulation. It is clear that merely opening
markets to competitos does not ensure that competition will develop, or that it will
develop at the same pace for all types of customers.

· The consumer market has been bifurcated. We call this the "Digital Divide".
Customers who have large telecommunications expenditures, especially business
customers, have received lower prices and better service. At the same time small
consumers, who use few services and have modest expenditures, have seen higher
 monthly phone bills. This is due to new fees and surcharges added to bills to aid
the "transition to competition." In addition, costs have been shifted from
competitive to non-competitive services, and this is justified as "rate rebalancing".
Low income consumers and consumers with poor credit histories often have no
choice but high cost services, such as pre-paid phone service, which can cost as
much as three times the monthly rate of the incumbent phone company.

· The telephone monopolies are taking actions contrary to the development of

competitive markets. The "urge to merge" has been phenomenal. Rather than a
proliferation of new companies, the result of deregulation has been the merger of
large regional companies into larger national and global companies. Potential
competitors are buying each other rather than competing with each other. The
incumbent monopoly companies erect barriers to competition. Some have
challenged nearly every pro-competitive regulatory decision in court. Competitors
are too busy in court to compete in the market.

· In addition to price increases there are new problems for consumers. Consumers
are confused-they can't compare offers, and they can't determine which offer is
the best for them. We say consumers can't "compare apples to apples". There is a
growing problem with fraud. Fraudulent practices have triggered development of
an entirely new lexicon: "slamming" means to have the company providing your
service changed to another company without your knowledge or permission; and
"cramming" is the practice of adding charges to phone bills for services that were
never ordered or authorized. Since deregulation of utilities has begun, service
quality has suffered, and we have seen elimination of services."

So, what is the truth of the matter? I will leave bondad to write about the deep theory
under all this. For me the bottom line is this: Unless you are in a position to change your
utiility provider rapidly and even often, I see no advantage. The power all comes from the
same suppliers, all the new startup retailers are doing is adding a middle man.

Look again at the Consumers Union critique and its analogy to Telecommunications
deregulation. It provides a longer time frame and more data points for analysis. Consider the
story of the airlines deregulation as another case study. Lower prices are possible in each, but
they require consumers to work harder. Additionally abuses - think Enron, think cattle call
passenger service in airlines, think no direct service to "secondary" cities, think consolidation in
Tele-Communications are real and likely. Market provision of some public services is a bad idea.
I think the deregulation of energy provisions is an example.

I am not an economists, I don't pretend to understand all the issues here, but the simple hard
question I can't get past is how adding resellers means consistently lower prices for consumers.
The other headline in the Chronicle was this one:
 Heat Hits Needy Hardest: Chron.com | High energy bills keeping social services
busy
"Although residents throughout the metro area have seen spikes in their power
bills, the situation is particularly hard for senior citizens, the disabled and people
in low-income neighborhoods such as the Third Ward. Harris County Social
Services Department reported an increase in the number of people asking for
assistance with their utility bills and are seeing about 120 a day. The agency
expects to spend $1.7 million by the end of September helping those who are
unable to pay their electricity bills, a 35 percent increase from last year.

Electricity bills are 25 percent to 45 percent higher than the same time last year,
despite a dip in temperatures during June and July, which fell below historical
averages.

"What we are really seeing is the increase in what utility bills are costing," said
Ellen Seaton, HCSSD special assistance services manager. "It's insane."

Help may come today from the Texas Public Utility Commission, when it decides
whether to adopt a chill-now, pay-later plan that would call for a moratorium on
disconnections across the state and allow seniors, disabled and low-income
citizens up to six months to pay their summer bills."

You better believe that because of things like Credit Scoring the most vulnerable in our
community are the ones who will consistently have the hardest time playing the market to save
money and the hardest time getting accepted as customers by the new resellers. They , as always
, are the front liners for this deregulatory experiment. As I called it in another posting, could this
be another example of Human Sacrifice as Public Policy?

Let Representative Turner have the last word:

LINK Turner said he fears this year's rate hike is just the beginning of what could
be many more years of increases residents will have to absorb.

"I think people need to realize that this is the last year that electricity will be
regulated," Turner said. "Come January 2007, utility companies will be able to
charge whatever the market will bear."