Texas electricity complaints skyrocketed after deregulation: study

July 27, 2011
Juliana Brint

Complaints against Texas electricity companies have increased by more than 800% since deregulation, according to a Texas Coalition for Affordable Power study.

Before deregulation, the Texas Public Utility Commission received an average of 1,316 electricity-related complaints per year, according to the study. After deregulation in 2002, the annual average jumped to 12,013.

The study released Monday covered fiscal year 1998 - when the PUC first began collecting complaint data - through fiscal year 2010. Because the PUC discarded pre-2003 data under its documentation retention policy, according to the coalition, researchers had to reconstruct that data from news articles and graphs in PUC reports.

According to the study, PUC data showed that the three retail providers with the most complaints were PenStar Power, DPI Energy and Mega Energy.

R.A. Dyer, the policy analyst at coalition who conducted the study, said he believes the increase in complaints is tied to the confusion created by deregulation.

"[Under deregulation] there's been a lot of confusion and a little bit of chaos," Dyer said. "We've seen a lot of retail providers offering fairly complex deals."

The study showed that the most common complaints were related to billing. Dyer said the coalition - which buys electricity for municipalities in the deregulated market - supports reforms that would make the market more transparent, such as requiring retail providers to offer standard deals that would allow customers to more easily compare prices.

"The fact that customers have choice in the market can certainly be a very positive thing," Dyer said. "But it's important also...that folks are not overwhelmed with confusing deals."

Tyson Slocum, director of energy programs at Public Citizen, a Washington-based citizens' advocacy group, said he believes the increase in complaints is indicative of the failure of deregulation to deliver the lower prices its advocates promised.

"There've been some clearly documented cases of inadequate information and consumer protections for households for some of the contracts folks are entering into," Slocum said. "We really have to start to question whether deregulation is an experiment that deserves to continue."

However, John Fainter, president and CEO of the Association of Electric Companies of Texas, said the increase in complaints is not necessarily a condemnation of deregulation. Fainter said he believes the increase is due to customers adjusting to a new market structure, some spikes in natural gas prices, the introduction of new technology like smart meters and an easier process for filing complaints thanks to the Internet.

"Before you had to write letters or go through an extended telephone chase," Fainter said. "Now you can go online and make an inquiry or file a complaint. The ease of doing that is naturally going to change things."

But Dyer said he does not believe an increase in the ease of communication explains the data.

"I don't understand how you can make that claim given that the complaints jumped incredibly dramatically as soon as we deregulated," Dyer said.

According to the study, there were about 2,062 electricity complaints made in fiscal year 2001. The total increased to 8,547 in fiscal year 2002, the first year of deregulation, and 17,250 in fiscal year 2003.

Slocum said that if the increase was in fact due to better communication systems, PUCs across the country should have registered similar increases in complaints.

"I would be surprised if the same kind of explosive growth in complaints is being replicated across the country," Slocum said.

The coalition did not include any data about trends in complaints in other states in its report, but Dyer said the group's research on this issue will continue.

Fainter said another important element lacking from the coalition's report is an analysis of what percentage of complaints were dealt with through enforcement action.

"The overwhelming majority of cases are resolved without any kind of enforcement," Fainter said. "Just because someone files a complaint...doesn't necessarily mean there wasn't a favorable resolution."

Fainter added that he expects to see a decrease in complaints over time as customers become more familiar with the deregulated market.

"I think some of that [increase in complaints] comes with the opening of a new market and setting forth a new system," Fainter said. "Yes, there may have been some confusion, but there are a lot of people in the market. We continue to be very positive about the competitive market."

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