TXU bets against deregulation and loses
Texas puts up more transmission lines along Route 90. (John Cummings, CC-BY-SA 3.0)
TXU was once the only game in town for energy here and throughout much of Texas. They had all the advantages when Texas deregulated electricity. They, or, more specifically, their owner, Energy Future Holdings, just filed for bankruptcy. Why?
In the deregulated Texas market, electricity prices are strongly related to those of natural gas. That fact, essentially, made the buyout of Energy Future Holdings a towering bet on the price of natural gas.
But instead of rising, natural gas prices fell. And kept falling. That led to billions of dollars in losses at the company.
In essence, they bet against deregulation helping consumers, and lost big.
When we first came out to work on our house last year, I was amazed at how easy it was to set up electricity. We had it purchased and then timed it to start the day we arrived. It’s almost as if having to compete for our business meant they had to work to convince us!
Compare this to California, where the power companies were re-regulated to give more power to the state to control every aspect of power delivery by forcing us to buy power through exchanges. Prices skyrocketed until the law was repealed. But California still has monopolies, and the cost of electricity is still ridiculously high. My last bill here in Texas was for 813 kWh; my total bill was $90. The same amount in San Diego would cost $255 according to SDG&E.
And that Texas bill includes being able to pay for my bill with an auto-deduction from my credit card.1
If I wanted to pay more, I could. If I wanted to pay less, I could. The plan I chose gave me the level of confidence I wanted and the ease of use I wanted combined with the price I was willing to pay for it. I did not choose TXU: I looked at it, and their prices seemed to be higher while offering fewer options with poorer-quality account management. It looked, in other words, like what a government monopoly might do when it doesn’t understand that the market has changed.
In response to Texas 2014: News and Stuff about Texas and the Austin-Round Rock Metropolitan Area in 2014.
Although, given the high cost of power in California already, the extra $1.50 to pay by credit card in San Diego isn’t much of a penalty. Bounce Energy, presumably because they find the payment method more reliable and/or efficient than monthly billing, actually discounts energy costs if you choose to auto-pay by credit card.
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- Big Texas Utility Files for Bankruptcy: Julie Creswell and Michael J. De La Merced at The New York Times
- “In the deregulated Texas market, electricity prices are strongly related to those of natural gas. That fact, essentially, made the buyout of Energy Future Holdings a towering bet on the price of natural gas.” (Memeorandum thread)
- Bounce Energy
- I currently purchase electricity through Bounce Energy; note that this is a referral link, which means that if you choose Bounce Energy after following it, I get a cut, too.
- Energy Future Holdings at Wikipedia
- “In 1996, TXU merged with the parent company of Lone Star Gas, allowing TXU to become the largest provider of electricity and natural gas in the state of Texas, a maneuver which set the stage for deregulation. In 2002, the state of Texas deregulated the Texas electric market, and TXU lost its monopoly on retail electric sales in northern Texas.”
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