Commercial Prices in Texas

Commercial customers have fared better than residential customers under Texas electric deregulation.

By R.A. Dyer

Individual Texas residential consumers buying electricity from competitive power providers historically have paid more than Texans buying power from providers exempt from competition. Our friends at the Texas Coalition for Affordable Power have documented this historic price disparity over the years and found a small residential gap between deregulated and non-deregulated prices as recently as 2017.

You can read that report here.

Recently they went back through the data, but instead with an eye for commercial rates. This is of particular interest to TCCFUI because this is the category of utility rates typically paid by municipal customers. TCAP examined commercial rates for most of the history of electric deregulation in Texas, which began after the adoption Senate Bill 7 two decades ago.

The chart at the top of this post summarizes those findings. It shows average annual commercial rates inside deregulated Texas, in areas of Texas outside deregulation and nationwide. The analysis begins in 2002 — the year the state’s deregulated retail electric market opened — and ends in 2017, which was the last year for which data exists to conduct the analysis.

The Texas Coalition for Affordable Power releases a new price analysis each year.

What they found is that similar to the experience of Texas residential customers, commercial customers in Texas paid comparatively higher prices under deregulation for much of the market’s history. As shown in the chart above, average commercial rates during the first decade of deregulation were higher, on average, than corresponding rates in areas of Texas exempt from deregulation.

But the trend began changing around 2008. In 2009, commercial rates in deregulated areas of Texas dropped below commercial rates nationwide. By 2012, average Texas deregulated commercial rates dropped below corresponding rates in deregulation-exempt areas of Texas.

Under the state’s retail electric deregulation law, consumers living in about 85 percent of Texas have a choice of electric providers. Consumers in the remaining 15 percent of Texas do not have similar options, and instead must purchase electricity from a single deregulation-exempt provider in their area.

This bifurcated system — with some Texans receiving service in deregulated areas, and others receiving service in areas exempt from deregulation — provides a unique opportunity to compare prices. TCAP compares these prices each year and posts its findings on its website.

Their analysis also shows that on average, electricity prices for commercial customers in deregulated Texas were 17.6 percent lower in 2017 than corresponding prices in deregulation-exempt areas of Texas. By contrast, Texas residential customers under deregulation paid about 1.9 percent more, on average, during 2017, as compared to residential customers in deregulation-exempt areas.

TCAP retrieved data for their analysis from the United States Energy Information Administration. You can read more here.

— R.A. Dyer