Commentary

Repealing 1998 utility deregulation law will protect consumers

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One of the hottest issues this legislative session is likely to impact monthly electric bills for years and years to come. 

This is particularly true for low-income customers, those already struggling mightily, to pay their utility bills.

House Bill 2101 seeks to repeal a state law from 1998 allowing utility deregulation. Should the legislation be signed into law – a path that we fully support – protections enacted through the Arizona Corporation Commission and Salt River Project would ensure that consumers are safeguarded from unscrupulous predators who manipulate the system for their own benefit.

However, based on the experience of other states, if the legislation isn’t enacted we can expect outside energy providers to set up shop here. AARP lobbyist Brendon Blake told Arizona lawmakers earlier this year that this could be problematic since “no matter how many protections you put in place for consumers, it’s not enough” as these “competitive” markets are known for predatory practices.

Those predatory practices take the form of, among other tactics, misrepresenting actual rates, offering gift cards to vulnerable consumers to sign up for hidden high-price plans, and even bait-and-switch strategies.

In fact, there are no examples of a state that has moved forward with electric competition where consumer fraud hasn’t been a significant problem. In particular, those seeking to defraud typically target senior citizens, low-income consumers, and individuals for whom English isn’t their native language. 

According to a Wall Street Journal analysis of data from the federal Energy Information Administration, after Texas deregulated nearly 20 years ago, “deregulated Texas residential consumers paid $28 billion more for their power … than they would have paid at the rates charged to the customers of the state’s traditional utilities.” 

And there are states that have already moved back from deregulation to regulated markets.

In 2019, the Daily Energy Insider reported that the “Connecticut Consumer Counsel announced an effort to end deregulation in the state, citing predatory practices by third-party electric suppliers. Simply put, retail electric deregulation is a failed experiment for residential customers,” said Consumer Counsel Elin Swanson Katz. “Not only has it cost electric consumers more money but it has also failed to bring meaningful innovation into the electric market.”

A year earlier in neighboring Massachusetts, Attorney General Maura Healey “released a report about the possibilities of opening up the state’s retail energy market and found that Massachusetts residential consumers paid competitive electric suppliers $76.2 million more than they would have paid for electricity from their utility between July 2017 and June 2018.”

The experience across the country when additional companies have entered the energy market points to consumers encountering higher – not lower – rates over time. Additionally, new entities entering the Arizona market may not be required to offer rate plans, such as time-of-use plans, that can save ratepayers money on their monthly electric bills while easing strain on the electrical grid. 

Arizona’s utilities and their oversight processes aren’t perfect. However, organizations and individuals have played a vital role in shaping policies to ensure consumers are protected. Arizona lawmakers should protect consumers and pass House Bill 2101.

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Diane E. Brown
Diane E. Brown

Diane E. Brown is the Executive Director of the Arizona Public Interest Research Group (Arizona PIRG). Arizona PIRG is a statewide public interest advocacy organization.

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Cynthia Zwick
Cynthia Zwick

Cynthia Zwick is the Executive Director of Wildfire: Igniting Community Action to End Poverty in Arizona.

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