Deregulation of energy in Texas is already benefiting businesses

Chuck Johnson
Special To Houston Business Journal

While far from perfect, the competitive energy marketplace is already beginning to pay off, especially in the commercial and industrial sectors.

". a dramatic growth in competitively supplied electricity in the U. S. last year" is reported by Burlington, Maine-based Xenergy's Bruce Humphrey in The Electricity Daily. Pro-market initiatives in several states, including Texas, have helped advance competition.

"The difficulties experienced in California and the Enron debacle have given electric restructuring a black eye," according to Humphrey. "The reality is that customers in states that have well-designed markets are benefiting, particularly business customers, and suppliers to those customers are benefiting as well."

Texas is leading the switch to competitively supplied electricity, accounting for 11,000 megawatts of the total 36,000 mg being competitively provided nationally. And continued growth in the number of customers and amount of demand served at market-based prices, is expected.

Reducing costs

Tangible benefits already enjoyed by business customers in deregulation's first year are proof that the competitive electricity marketplace is definitely a step in the right direction.

"After switching more than 70 dry cleaning stores to a new retail electric provider (REP), our cost of electricity was reduced by almost 30 percent from the rates we paid before deregulation," says Ross Stewart, vice president of Houston-based Pilgrim Cleaners, which is

among nearly 1 million businesses in Texas that have switched providers from their former utility to a different REP.

Not all business customers will see their energy costs reduced as dramatically as Pilgrim Cleaners, but the competitive marketplace will enable most companies to reduce their energy spending at least a little.

The direct savings from deregulated electricity are already amounting to millions of dollars, notes Ralph Sheffield, president of the Texas Restaurant Association, which offers its members the ability to aggregate their electric purchasing and get even greater savings than they could independently.

"We're always challenged in our business to find ways to significantly reduce costs to offset other rising costs that are unavoidable, like insurance. Finding a way to cut our energy spending helps us manage costs to increase our return to shareholders," says TRA member Drew Dennard, chief financial officer of Houston-based Mexican Restaurants Inc., which operates Casa Ole, Monterey's Little Mexico, Tortuga's Coastal Cantina and La Senorita restaurants. Texas Wings, Texas operator of Hooter's, another TRA member, reports saving several hundred thousand dollars annually under a new electricity contract.