Adam Smith is Unavailable to Take Your Complaint

August 14, 2013
Arizona Investment Council
Gary Yaquinto

I've written several times about the efforts of a few energy traders, large industrial customers and merchant power plant operators to jump start restructuring of Arizona's electricity market by enabling direct retail access (read them here, here, and here).

Never mind that in other states, experiments in engineering competitive markets for electricity have met with disastrous results (remember the 2000-2001 energy crisis in California), big price increases for residential customers, and supply constraints due to inadequate capacity investments in places like Texas.

In these cases, the invisible hand, imperfect as it is, showed an unfurled single digit aimed squarely at consumers, just as Adam Smith (1723-1790) -- the father of modern economics -- warned public officials was possible when business and industry seek changes to laws and regulations.

In contrast, the traditional utility model in place in Arizona and overseen by the ACC for 100 years has produced ample supplies of electricity delivered safely to all Arizona customers at stable prices, which are below the national average.

Today, consumers get the power they want, when they want and need it, under alternative pricing arrangements that allow them to take advantage of consumption preferences and save on their bills. The ACC ensures this happens with certainty and that customers are treated fairly by their utility.

So, a question posed by some is "can a better mousetrap be built" by establishing a new industry framework that allows competition among several providers? It's an interesting question and an interesting metaphor to use, given the trap that some residential customers in Texas have fallen into under that state's "open" electricity market.

According to a news article appearing in the Dallas Morning News earlier this week, the open market for electricity in Texas has produced an open season on bilking customers by imposing exorbitant, outrageous fees, charges, and penalties on unsuspecting consumers.

The additional charges include excessive connect and disconnect fees up to 30 times the vendor's cost for flipping the switch to connect or disconnect a customer. Some companies charge a penalty of $7 to $20 per month if a customer's usage falls below a minimum level, which can be as low as 800 kWh per month. One company imposed a 45 percent rate surcharge on customers who don't use automatic bank payments to pay the bill. Other companies assess a $5 dollar charge if payment is made to a live company agent.

In responding to these heaped-on charges that have caught consumers off-guard, a spokesperson for the Texas Public Utilities Commission calls the fees "another pebble in the pile" and that buyers need to understand the finer details of the services they contract for.

Can this possibly be the sort of "innovation" that accompanies electricity restructuring as often cited and cheered- on by the proponents of restructuring in Arizona? If so, I don't want any.

For those unfortunate customers in Texas caught in the competition trap, Adam Smith is not available to take your complaint today – or ever.

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