Texas House Bill 3995 Would Hurt Consumers in the Lone Star State
Allen Johnson | Citizens Against Government Waste
April 2, 2019
It has been 20 years since the Texas legislature moved to end regulated energy rates and break up monopolies. Texas now has twice the energy production of any other state, and electric prices are among the nation’s lowest. Unfortunately, House Committee on State Affairs Chairman Dade Phelan (R-Beaumont) is attempting to set the clock back with his bill, HB 3995.
This legislation would prevent rates from being lowered even further by stifling competition for energy transmission and requiring any non-incumbent energy company to seek permission from the state before it could offer services in Texas. This bill is clearly designed to protect incumbent energy companies at the expense of consumers.
HB 3995 would not only apply to any future transmission contracts, it would overturn a competitively awarded transmission contract it if takes effect immediately, which would occur if it was passed by a supermajority of the legislature. Rather than receiving the lower prices that would be provided by the winning bidder, consumers would be stuck with the current transmission company, which lost the bid. This is plain and obvious corporate welfare. In a regulated energy market, it is extremely difficult to attract investment, because incumbent energy producers have an enormous amount of political power. Incumbent utilities often overspend by billions of dollars on their infrastructure projects, leaving ratepayers to foot the bill for unnecessary costs. However, when competition is introduced, it brings more cost discipline as companies bid against one another.
The global consulting firm Brattle Group published a study on November 13, 2018, that shows utilities could save up to $8 billion nationwide on energy transmission projects over five years by opening up transmission projects to competition. The study found that costs grew by an average of 34 percent when large utilities won bids for projects, and that costs were reduced by an average of 40 percent when an independent company won a bid.
More energy competition in Texas will lead to larger cost savings for ratepayers. It could also create more jobs as new companies enter the Texas energy market. HB 3995 would put an end to this by protecting the large incumbent utilities at taxpayers’ expense.
The provisions of HB 3995 include: “An electric utility may not directly or indirectly provide service to the public under a franchise or permit unless the utility first obtains from the commission a certificate that states that the public convenience necessity requires or will require the installation, operation, or extension of the service.” In English, this means the Texas government can deny entry to any new energy company it wishes by using the vague definition of “public convenience and necessity.”
HB 3995 has a companion bill, SB 1938, introduced by Senate Committee on Business and Commerce Chairman Kelly Hancock (R-Dallas). These corporate welfare bills are not in the best interest of taxpayers.
Rep. Phelan’s Committee on State Affairs held a hearing on the bill yesterday. Unfortunately, none of the important questions about HB 3995 were answered, and the bill should be defeated before any damage is done.