As Texans dealt with the serious consequences of last month’s energy crisis, the policy debate to determine what went wrong is underway in Texas and across much of the nation.
As the Texas Tribune reported, grandmothers slept in their cars, and millions of others were left in the cold and dark. Texans — and the rest of the country — deserve answers.
From Gov. Abbott to Sen. Cruz to national television commentators, the rush to vilify and cast blame was immediate. Visible and relatively new, the fault was placed quickly on wind power.
There are major problems with that conclusion. Natural gas and coal represent 75% of Texas energy production, while wind represents only 24%. Preliminary evaluations clearly indicate that wind power sources were far less disrupted by the extreme weather than natural gas.
If the use of wind power is not the cause of such disruption and pain, then what is? The answer is the state’s 1999 decision to deregulate the electric utility market and open up a wholesale market for electricity generation.
Take it from me: I was in charge when Maryland deregulated our energy market over two decades ago. It was a mistake.
At the time, deregulation proponents touted benefits such as increased reliability and stability of service, but Marylanders experienced the opposite.
Since the decision, Maryland legislators have been working to put the genie back in the bottle after deregulation led to price increases of 50 — 75%, deceptive marketing practices and a lack of regulation to hold wholesalers accountable.
Providing reliable service and increasing renewable sources of electricity are two of today’s most important energy goals. They should not be mutually exclusive. That’s where effective, consumer-focused regulation must play a critical role.
In deregulated states, like Maryland, lawmakers and regulators lose their ability to keep power generators in check. This means that the state is no longer able to ensure that third-party providers of electricity are doing right by their customers, instead those decisions are left to market forces. Maryland regulators can still exercise control over parts of the system including the poles and wires that make up the energy grid, and ensure prudent investments are made into the power distribution network. But those protections alone are not enough with a rapidly changing climate. Traditional utility regulation protects consumers and the environment by including the state in decision making about the energy mix it wants and how and where those facilities are built.
While avoiding blackouts should be job one of our energy companies and regulators, one of the biggest dangers of deregulated markets is the impact to those who can least afford volatile price swings. During the height of the Texas power outages and grid spikes, wholesale electricity prices rose by more than 10,000%, meaning that prices rose from $50 per megawatt hour to $9,000 per megawatt hour. Severe weather events in highly deregulated markets like Texas create the opportunity for some smaller energy providers to engage in a form of predatory power provision.
We had similar experiences, although of a lesser magnitude, in Maryland. In the interest of deregulation, we removed reasonable consumer protections. This resulted in major price hikes that hit our elderly and low-income populations, as well as communities of color, the hardest. For example, as a result of the lack of oversight, third-party sellers would prey on low-income individuals visiting the Maryland Energy Assistance office, offering short-term low rates and locking them into high price increases down the line. Effectively, these third parties would subsidize the higher price through low-income ratepayers who needed to keep money in their pockets the most. This is just one example of the many harms caused by deregulation.
The Abell Foundation reported that during their three-year study period (2014-2017) Maryland Households relying on third-party providers collectively paid about $250 million more than if they had stayed with their original providers. Major rate increases for the poor, elderly and minority communities were found in Southern Maryland and Baltimore City.
As families and businesses in Texas finally got their heat back, it’s important to remember that the state’s long-term situation is not unique. In fact, much of America’s energy grid is in need of modernization and significant capital investment. But there’s no question that this terrible situation in Texas (and the deregulation mistakes made in my beloved state) offer serious lessons for policymakers in Maryland and nationwide.
Based on everything that happened in Texas and other states during that horrific winter storm it is hard to believe that some legislators and interest groups are now trying to move us closer to the extreme style of electric market deregulation that exists in Texas. We have seen the consequences of that approach. We do not want Marylanders to suffer the same fate.
Free market competition is often the engine that drives much of America’s economic greatness. But when it comes to a market as complicated and essential as electricity, government regulators and state lawmakers must cooperate through sound policies that prioritize consumers and the environment.
The final goal must be a system with reliable, continuous service, fair, equitable consumer regulations and an expanding renewable power source.
Parris N. Glendening (pglendening@smartgrowthamerica.org) was Maryland’s governor from 1995 to 2003.
