Has retail competition reduced residential electricity prices in Texas?

Abstract A review of 19 extant studies reveals mixed effects of retail competition effect on retail electricity prices in various jurisdictions in the United States. This conflicting evidence is largely due to the differences in these studies’ market locations, pre-competition conditions, data types, estimation methods and features of the restructuring plan. Contributing to the debate on the impacts of electricity market reform on retail prices, we estimate the impact from the introduction of retail competition on retail electricity prices paid by residential consumers in Texas in two cities opened to retail competition. We find that retail competition raised average prices by $0.0112/kWh ($11.2/MWh) in the transition period from 2001 to 2006 and by $0.0134/kWh ($13.4/MWh) during the period of unfettered competition from 2007 to 2020. However, when the US wholesale natural gas prices are relatively low, actual retail electricity prices in areas opened to retail competition are close to the prices that would have prevailed had retail competition not been introduced, as measured by the counterfactual prices estimated using the synthetic control method. JEL Codes: L51, L94, Z18, Q48