May 9, 2011
Cutting Texas’ Valuable Consumer Agencies Does More Harm Than Good, Won’t Address Budget Deficit, Says New Public Citizen Report
Consumer Protection Agencies Operate on Miniscule Budgets, Yet Save Consumers Billions of Dollars
AUSTIN, TX – Texas consumer agencies should not be defunded or cut by lawmakers because they have saved consumers hundreds of millions of dollars per year and axing their budgets would not address the state’s $27 billion deficit, according to a report released today by Public Citizen.
Without two of the agencies up for proposed cuts, the Office of Public Utility Counsel (OPUC) and Office of Public Insurance Counsel (OPIC), consumers can expect to see an increase in rates for insurance, energy, phones and other telecommunications, which is essentially a tax, the report said. The report calls for having continued strong, independent consumer watchdog, including expanding consumer protections at other agencies such as the Texas Commission on Environmental Quality and Railroad Commission.
“Texas can’t afford to cut these vital services,” said Andy Wilson, a policy analyst with Public Citizen’s Texas office and the author of the report. “Eliminating these consumer protections would drive up rates for insurance, energy, phones and other telecommunication, as industries would no longer have watchdogs questioning their hikes. People are using the budget crunch as a pretense to eliminate these agencies so they can help pad the bottom line for big companies.”
Cutting these valuable agencies, which already outperform many other agencies in the greatest ‘bang for the buck,’ would save the state only a few million dollars – a mere 0.005 percent of the state’s deficit, he added.
“This is a backdoor tax on every small business and family in Texas,” added Wilson. “If your property taxes go up, or the state adds another surcharge tax on your phone or electric bill, that is no different for the consumer than if their mortgage payment or electric bill goes up because companies can raise rates. Families and small businesses get squeezed either way.”
OPUC alone has saved Texas consumers more than $1 billion in the last five years, the report found. Its intervention in electrical rate cases has brought costs down by hundreds of millions of dollars every year for consumer cases it represented. Its budget, set at $1.5 million for the next two fiscal years, is negligible compared to the savings it brings consumers – an average of $133 for every dollar in its budget, the report said.
“When it comes to rate-cases, Texas consumers are getting a real bargain,” Wilson said. “Utilities will generally spend anywhere from $700,000 to $8 million on legal fees per rate case. OPUC, with its small number of employees and relatively miniscule budget, creates real value against much better funded industry advocates.”
And OPIC – which reviews insurance filings and ferrets out policies and forms that are illegal, unfair, deceptive or unclear – functions on a budget of just $1 million a year. With that, it saved consumers more than $300 million on their insurance, or $165 for every dollar spent, the report found.
“If there is to be a reform and reorganization at the state’s consumer agencies, it ought to be towards making them more robust and better able to intervene on behalf of consumers more often,” Wilson said. “Instead, many lawmakers and Gov. Rick Perry are putting these crucial consumer protections on the chopping block.”
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.