Retail electricity deregulation mostly benefits companies at the expense of consumers

 Just before the recent weather related debacle in Texas ("Talk and lying versus doing: The electricity crisis in Texas is produced by state regulatory failure" and "Cold wave: the Texas power debacle disproportionately impacts the less well off"), I was surprised to read a story about how many low income households in Baltimore were paying extremely high electricity rates as a result of deregulation ("Why the Poor in Baltimore Face Such Crushing ‘Energy Burdens’," Inside Climate News), which I meant to write about.

From the article:

Nationwide, low-income individuals like Jenkins—defined as those making less than 200 percent of the federal poverty level, or $25,760 per year before taxes in 2021—can put anywhere from 10 to 20 percent of their earnings toward energy costs and sometimes far more, according to a recent report by the American Council for an Energy-Efficient Economy, a Washington, D.C.-based think tank. 

This exceedingly common, but often overlooked, reality can perpetuate cycles of poverty and lead to personal or familial ruin. 

By contrast the average household spends just 3.1 percent of its income on energy, although that ratio ranges widely depending on geographic location and the type of fuel used, the ACEEE study found. Researchers typically consider anything over 6 percent to be an unaffordable energy burden regardless of income. The report also found that energy burdens in Baltimore can be especially heavy, as 25 percent of low-income residents there spent more than 21.7 percent of their 2017 income on energy.

Apparently, through various deceptive marketing programs, and sometimes short term inducements, people end up switching to higher priced providers ("Maryland Thought Deregulating Utilities Would Lower Rates. It’s Cost the State’s Residents Hundreds of Millions of Dollars.," Inside Climate News)

In our household, I'm the person who deals with energy choice, and I was proud of the great rate we got in DC, 7.5 cents/kwH (from a BG&E subsidiary, which happens to be owned by the same company), which is a couple cents cheaper than the standard rate.

I never understood how people could be deceived, so long as they knew the base rate from the utility distributer, in DC's case that is PEPCo, and it usually ran from 8.9 cents to 9.4 cents.  

Now it's even lower, less than 7 cents/kwH, with a slight upcharge during the winter months, according to the comparison information compiled by the DC Public Service Commission, the utility regulator.

Many resellers offer a short term lower rate, but don't commit to the lower rate for the entire contract period.  Therefore, don't pick them.

The reality as a recent WSJ article disclosed ("Deregulation Aimed to Lower Home-Power Bills. For Many, It Didn’t"), is that most consumers pay more for electricity (and natural gas) as a result of deregulation, rather than save money.  We shouldn't be surprised.  Deregulation is mostly for the benefit of business, not consumers.

And like in Baltimore, low information consumers, often minorities, bore the brunt of the higher costs.  From the article:

From 2010 to 2019, retail electricity providers in 13 states and the District of Columbia charged $19.2 billion more than what regulated utilities would have.

A quick review of the DC PSC information finds only one or two companies from more than one dozen that offer rates comparable to PEPCO's base rate.  Although some offer a greater percentage of renewable energy sources, at a higher cost, and some people may be willing to pay a higher rate, because of their concerns about climate change.

There is an op-ed in the Baltimore Sun by former Governor Parris Glendening, saying utility deregulation had been a mistake ("Energy deregulation was a mistake in Maryland").

WRT Texas, interestingly, a Dallas Morning News consumer columnist, Dave Lieber, writing "The Watchdog" feature, had pointed out the serious problems with the way that Texas' electricity market was set up and managed for years, to no avail.

-- "No surprise Texas’ electricity system is a national laughingstock. Only customers cared, until now"

When I first came to DC in the late 1980s, and worked for a consumer group, back then many newspapers had reporters assigned to a "consumer beat," and they covered issues like these regularly.  Now very few newspapers provide this kind of oversight on a regular basis.

Although as Dave Lieber proved, even with attention, many businesses fail to change their practices.

Another example, Warren Buffett's predatory finance operation for mobile homes ("The Mobile-Home Trap," Seattle Times).