Jay Zarnikau, Ph.D., Adjunct Professor of Public Affairs at the University of Texas at Austin, will present the EEEP Seminar Series, “Has retail competition reduced residential electricity prices in Texas?” on January 22, 2025.
Abstract:
In the late 1990s, many states opted to restructure their electricity industry to introduce competition at the wholesale and retail levels. Texas designed competitive wholesale and retail markets that were far different from those developed in Pennsylvania and other states. How well has the Texas approach worked? In one recent analysis,[1] my colleagues and I estimated the impact of introducing retail competition on retail electricity prices paid by residential consumers in Texas’s two largest cities, Dallas and Houston. Using the synthetic control method to obtain counterfactual prices, we find that retail competition raised average prices by $0.0112/kWh in the transition period from 2001 to 2006 and by $0.0134/kWh during the period of unfettered competition from 2007 to 2020. However, when wholesale natural gas prices are relatively low, actual retail electricity prices in areas opened to retail competition are close to the counterfactual prices that would have prevailed had retail competition not been introduced.
[1] J. Zarnikau, K.H. Cao, H.S. Qi, C.K. Woo (2023), Has competition reduced residential electricity prices in Texas? Utilities Policy. Available at: https://www.sciencedirect.com/science/article/abs/pii/S0957178723001698