Why Your Electric Bill Might Not Go Down Under Deregulation

Summary

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WSJ Your Money Briefing

Episode Title: Why Your Electric Bill Might Not Go Down Under Deregulation
Date: February 25, 2021
Host: J.R. Whelan
Guest: Scott Patterson, Wall Street Journal Investigative Reporter

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Episode Overview

This episode explores the impact of electricity market deregulation in Texas and other states, challenging the common assumption that greater competition leads to lower electricity bills for consumers. Host J.R Whelan welcomes WSJ investigative reporter Scott Patterson to examine why deregulation has often resulted in higher—not lower—electric rates, how complicated billing and consumer inertia fuel the problem, and whether “choice” in energy markets is delivering on its promises.

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Key Discussion Points & Insights

1. The Origins of Deregulation in Energy

• Background and Driven Forces (01:36–02:48)
  • Deregulation in the 1990s was promoted across multiple industries for improved efficiency.
  • Enron, based in Houston, TX, played a central role in pushing electricity deregulation, inspired by perceived benefits in deregulating natural gas.
  • Idea: Let companies buy/sell electricity and offer choices to consumers, supposedly driving down prices.
  • Quote: "Enron and other proponents of free markets traveled throughout the country visiting state legislatures, pitching this new idea that electricity should move from...vertically integrated monopoly utilities, to a place where companies could buy and sell electricity and offer it to consumers." — Scott Patterson (01:48)

2. The Reality in Texas

• Post-Deregulation Landscape (02:49–03:40)
  • About two-thirds of Texas is now served only by retail electricity providers, not traditional utilities.
  • Contrary to expectations, competition hasn’t driven down prices — in fact, many are paying more.
  • Quote: "In reality, what's happened is consumers are paying a lot more than they would have if they're in parts of the states that didn't have those retail providers." — Scott Patterson (03:28)
  • Texas residents paid $28 billion more after deregulation.

3. Why Deregulation Isn’t Lowering Prices

• Complexity & Consumer Behavior (03:48–04:32)
  • Electricity differs from other services: it’s a necessity, not a discretionary purchase.
  • Bills are complex, with hidden or easily overlooked charges. Many people set bills on autopay, ignoring incremental increases.
  • Quote: "People sign up for their...electricity provider and they just kind of ignore it. They put it on autopay, and what seems to be happening is the bills just start creeping higher and higher..." — Scott Patterson (04:07)
• Understanding the Product (04:32–05:18)
  • Even though “buyer beware” applies, most consumers find comparing plans or rates confusing.
  • Memorable moment: "You need to look up how much you're paying per kilowatt hour and then compare that to what your utility is providing. It just can be confusing. And I think a lot of people ignore it." — Scott Patterson (04:47)

4. National Perspective

• Other States Beyond Texas (05:18–05:53)
  • Deregulation happens in 14–15 states plus D.C.
  • Similar trends observed elsewhere, but Texas stands out for high costs versus regulated areas.
  • Quote: "Texas really stood out to us as being an outlier in terms of how much more people are paying compared to what they would pay to a nearby utility that doesn't have the retail competition..." — Scott Patterson (05:44)

5. Industry and Utility Response

• Industry Arguments & Marketing (05:53–06:48)
  • Utilities emphasize consumer “choice.”
  • They offer perks (e.g., Amazon gift cards, partial green energy) in exchange for often more expensive plans.
  • Quote: "They also offer a variety of perks. So, you know, you can sign up to these packages and get an Amazon gift card, or...green energy...But, you know, it is a debate." — Scott Patterson (06:14)
  • Most consumers don’t realize how much they pay for these perks, raising questions about actual value.

6. Deregulation in Other Sectors

• Comparisons and Differences (06:48–07:45)
  • Other deregulated industries: airlines, telecommunications, Wall Street trading.
  • Deregulation arguably worked better there, but electricity is fundamentally different—a required good, not a luxury or elective service.
  • Quote: "Electricity is something that people need to get to live. And it just, it's got different characteristics than most other things that consumers buy." — Scott Patterson (07:37)

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Notable Quotes & Moments

• "On paper, it sounds like a good idea. In actuality, it didn't happen, especially in Texas." — Scott Patterson (02:50)
• "People just know they need power in their house, they're going to pay whatever it takes, and they ignore it." — Scott Patterson (05:08)
• "If you take away competition, they don't have a choice. You know, people get a choice with their cable bill or telecom or what have you." — Scott Patterson (06:00)

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Important Timestamps

• 00:20–01:35 – Show introduction, Texas electricity bill crisis, guest introduction
• 01:44–02:48 – Background: Why and how deregulation started
• 02:49–03:40 – Texas’s deregulation “experiment” and its (unexpectedly) high costs
• 03:48–04:47 – Complexity of billing and consumer confusion/inertia
• 05:23–05:53 – Scope of deregulation in the U.S.
• 05:57–06:48 – Industry justification: perks and “choice”
• 06:55–07:45 – Deregulation in other sectors versus the electricity market

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Tone & Language

The dialogue maintains a straightforward, explanatory tone infused with skepticism. Both host and guest present data and anecdotes in a clear, accessible manner, emphasizing how real-world consumer experience diverges from free-market theory in the electricity sector.

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Conclusion

This episode of Your Money Briefing challenges the narrative that deregulation automatically benefits consumers through lower prices, particularly in essential services like electricity. As revealed through Texas’s example, increased “choice” did not create lower bills, and the complexity of comparing plans leaves most consumers disadvantaged.

Listeners are left questioning the efficacy of deregulation where basic necessity is involved—and reminded to scrutinize their own electricity plans, fine print and all.

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Transcript

[A]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. [e-mail] WashingtonWise.

[B]

Here's your money briefing for Thursday, February 25th. I'm J.R. whelan for the Wall Street Journal. You might have heard about some people in Texas seeing their electricity bills skyrocket following this month's frigid weather there. That's raising questions about the role of deregulation in the energy sector and how a wave of private energy companies affects the choices that consumers may or may not have.

[C]

In my conversations with people who've signed up to these plans is they don't really understand how an electricity bill works. They can be complicated. They the charges can be sort of hidden in the back.

[B]

Coming up, our investigative reporter Scott Patterson will give us a closer look at why private energy companies prices often end up higher than public utility costs. That's after the break. Millions of Texas homeowners are grappling with how they're going to pay surprise utility bills in the aftermath of this month's extreme cold, the deregulation of the energy sector in Texas and elsewhere in the US about consumer choices when a utility company is no longer under government control. Among them is our investigative reporter Scott Patterson, who's been closely following the issue, and he's with me now. Scott, thanks for taking the time to be with us.

[C]

Yeah, thanks for having me.

[B]

So can you just take us through and help us understand what's happening here? What was the goal behind deregulation and how did it change the energy sector in Texas?

[C]

Yeah. In the 1990s, there were a lot of people pushing for deregulation across a bunch of different industries. And one of those industries was natural gas. And a company at the time that had benefited from that and had been pushing for deregulation was a company called Enron based in Houston, Texas. They thought, you know, we've really benefited from deregulation and natural gas and being able to trade it more and more. So why don't we do the same thing for electricity? So Enron and other proponents of free markets traveled throughout the country visiting state legislatures, pitching this new idea that electricity should move from the current model, which was vertically integrated monopoly utilities, to place where companies could buy and sell electricity and, and offer it to consumers. And by doing that, you would lower prices for consumers down the road.

[B]

Got it. So what do we know about how

[C]

that worked out on Paper, it makes sense. If you've got multiple companies bidding to sell their services to consumers, you think the ones with the lowest price would be where consumers would go? You know, on paper, it sounds like a good idea. In actuality, it didn't happen, especially in Texas. And Texas is a really interesting case because there you have about 2/3 of the state that only has these so called retail electricity providers. There is no utility. In theory, that would be the ideal conditions. If competition would work to lower prices, that would be the best thing for consumers. But in reality, what's happened is consumers are paying a lot more than they would have if they're in parts of the states that didn't have those retail providers.

[B]

And you report that Texas residents ended up paying $28 billion more after deregulation rather than less.

[C]

It sort of worked out the exact opposite. And it's kind of hard to know exactly why. Electricity is really a different beast than, you know, telecommunications or cable, which supporters of the industry often compare it to. They say, you know, you can choose who your cell phone provider is. How come you can't choose who sends the electricity to your house? You know, it sounds good, but in reality it just doesn't seem to work that way. People sign up for their utility or their electricity provider and they just kind of ignore it. They put it on autopay, and what seems to be happening is the bills just start creeping higher and higher and they keep paying, but they don't really know that they're paying more than they really should.

[B]

Isn't there a responsibility on the part of the consumer though, to understand the agreement that they're getting into?

[C]

Yeah, there's something to be said for that. Buyer beware. In my conversations with people who've signed up to these plans is they don't really understand how an electricity bill works. They can be complicated. The charges can be sort of hidden in the back. You need to look up how much you're paying per kilowatt hour and then compare that to what your utility is providing. It just can be confusing. And I think a lot of people ignore it. And to me, that sort of highlights how electricity is different from most other products that people buy. People just know they need power in their house, they're going to pay whatever it takes, and they ignore it. They often just put it on autopay.

[B]

Now, is energy deregulation unique to Texas or is this going on in other parts of the country?

[C]

Yeah, it's going on in about 14 to 15 states for electricity, including Washington, D.C. and we've seen similar patterns of people paying more than they should if they were getting their electricity from a utility in other states. But Texas really stood out to us as being an outlier in terms of how much more people are paying compared to what they would pay to a nearby utility that doesn't have the retail competition in the state.

[B]

What do the utilities say about charging these higher prices?

[C]

The lobbying behind this industry is very powerful and influential. And they, they have a good line in the fact that people get a choice. If, if you take away competition, they don't have a choice. You, you know, people get a choice with their cable bill or telecom or what have you. And they also offer a variety of perks. So, you know, you can sign up to these packages and get an Amazon gift card, or you can get a percentage of your electricity provided through green energy. And, you know, that's not something that you normally get from a utility. So that's really what it comes down to in terms of what the industry says to justify maybe sometimes charging people a bit more. I think that maybe consumers don't realize how much they're paying to get those perks. But, you know, it is a debate

[B]

that's being had now outside of the energy sector. Where has deregulation taken place and has it played out differently?

[C]

You know, this came along with a wave of deregulation in industries in the 90s like the airline industry, telecommunications. There was even opening up a competition for, for trading on Wall street in the 90s and 2000s when we saw day trading take off. And that's just got. I think it has arguably worked for those industries. But again, it's a different sort of beast than electricity, which is something that people have to get. You don't have to go fly to Cancun. You don't have to get a telephone service. I mean, most people want to. You don't have to get cable. Electricity is something that people need to get to live. And it just, it's got different characteristics than most other things that consumers buy.

[B]

All right, that's Wall Street Journal investigative reporter Scott Patterson. Scott, thanks for coming on the show.

[C]

Thanks for having me.

[B]

And that's your money briefing. I'm J.R. whelan for the Wall Street Journal.

[A]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. But what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. [e-mail] WashingtonWise.