By Daniel Walker Guido. Texas is implementing a power deregulation plan that state officials claim will not cause the same rolling blackouts or political and economic chaos California suffered last summer after deregulating its electric utilities.
Consumer advocates are worried, because they believe residential customers will end up paying higher power bills as prices fluctuate due to deregulation. Some claim that Texas, like California, has failed to ensure that the state will not suffer from electricity shortages as demand increases. But Houston-based David Weekley Homes isn't concerned as of yet. "Texas has 10 or 20 power plants in the pipeline," says CEO David Weekley. "From all I gather, Texas is in much better shape going into deregulation than California was."
As deregulation is implemented, residents will be able to choose their energy providers. So far, few of the 4.7 million currently eligible households have switched. State officials believe people will switch, but slowly. Some still don't know about the deregulation. Though 41 new electrical resellers have hung their shingles in the state, most are competing for commercial and industrial clients, not residential users.
The Texas deregulation creates an immediate retail price reduction of 11 percent to 17 percent. The decline is partly caused by low natural gas prices. The reduction is built into the "price to beat," which is the state-mandated price per kilowatt hour that existing utilities will be allowed to charge under deregulation to keep their customers. New retailers will be allowed to undercut those prices to get customers to switch. But it could mean that many may see their bills increase a few months after making the change.
