Has retail competition reduced residential electricity prices in Texas?

Abstract

We estimate the impact of introducing retail competition on retail electricity prices paid by residential consumers in Texas's two largest cities, Dallas and Houston. Using the synthetic control method to obtain the counterfactual prices, 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 counterfactual prices that would have prevailed had retail competition not been introduced, as measured by the counterfactual prices estimated using the synthetic control method.