Texas Electric Choice: The Power is Yours. Use It.

Lynne Kiesling

I declare our conference on the experience of electricity restructuring in Texas on Friday at AEI a success! In regulatory policy analysis we usually don’t do a good job of telling the stories of successful institutional change, so I thought it was really important to highlight the Texas experience so that other regulatory organizations could learn from their experience.

The Dallas Morning News had an article Saturday reporting on some of the remarks from the conference, including my comment that residential customers were inertial and slow to switch away from their incumbent retailer, even when natural gas and coal prices rose in 2004 and 2005. I think this consumer inertia is a fruitful area for research: what institutional design features are important for enabling markets to evolve while countering that inertia? You can’t grab consumers by the throat and force them to shop; you also can’t allow their inertia to stifle the development of decentralized market processes that benefit so many other consumers as well as innovative producers. So the institutional design challenge is to reduce the information costs and switching costs that create the inertia. I think the Texas PUC did a lot of that and achieved a lot of success, especially if you evaluate their electricity experience relative to telecom competition.

On a more personal note, due to the generosity of Parviz Adib (of APX and formerly of the Texas PUC), I’ve now got a new, highly-treasured possession:

tx choice pin

The power is ours.


One thought on “Texas Electric Choice: The Power is Yours. Use It.

  1. Lynne, congratulations on the conference and thanks for introducing yourself during the lunch break!

    I particularly enjoyed the afternoon panel with you, Andy Kleit, Steve Puller, and Tim Brennan. In addition to your comments about the ‘inertial customer’ conundrum, I was struck by Steve Puller’s discussion of the wholesale market, and the degree to which large generators exercise market power versus small firms behaving in (surprisingly) unsophisticated ways. This seemed like another riddle for regulators, in terms of how to encourage the most efficient competitive wholesale market possible.

    All best,
    Daniel

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