Wind farms to pick up some reliability costs

A contentious new measure that will require wind generators to install devices that help control voltage levels on the grid has been approved by the ERCOT Board of Directors.

The devices produce what is known as "reactive" power, which is different from the “real” power used to light homes and businesses. But while not actually consumed by end-users, reactive power must always be present on the grid in order to maintain voltage levels and reliability. Another characteristic of reactive power is that it does not transport well, which means it must be produced near where it is needed.

Unlike traditional generators and even wires companies, very few wind farms are equipped with full reactive power capabilities. As a result, other parties end up making up the difference. When regulated wires utilities (like Oncor, for example) provide these devices, the cost gets shifted to all their customers in the form of higher transmission rates. Since reactive power cannot be transported effectively, the wires companies are the only market participants with the ability to place reactive devices in close proximity to wind farms.

Protocol Revision Request (“PRR”) 830 — which was adopted during the November ERCOT board meeting — requires that wind generators provide full reactive capability on par with requirements for traditional generators. Cities Served by Oncor supported the measure, arguing that it fairly allocated a portion of the cost of maintaining the integrity of the grid to wind generators. Wind developers opposed the PRR, and a coalition of such generators is widely expected to appeal to the PUC.

ERCOT faces "special purpose review" in 2010

ERCOT, for the first time in its nearly 40-year history, faces review by the Sunset Advisory Commission. Consumer groups, industry representatives and other stakeholders are expected to provide input for the review, which will then become the basis of legislation that could lead to dramatic changes for the organization.
Created in 1977, the Sunset Advisory Commission is a legislative body charged with reducing waste in state government by assessing the continued effectiveness and necessity of agencies. It is made up of five members appointed by the speaker of the Texas House of Representatives and five members appointed by the lieutenant governor, who presides over the Senate. The chair of the Sunset Advisory Commission is state Sen. Glen Hegar, Jr., of Katy.

ERCOT has already submitted a self-evaluation report to the Sunset Commission staff, which is expected to issue its preliminary findings in mid-April. The public will then get a chance to comment on those findings during a public hearing in May, and the Commission will amend the report and take a final vote in July. This final report (which will include changes ordered by the Sunset Advisory Commission) will form the basis of legislation that is expected to be filed for the 82nd Texas Legislature that convenes in January, 2011.

That the Sunset Advisory Commission is even reviewing ERCOT is unusual. Traditionally the Sunset Commission evaluates only state agencies, such as the Public Utility Commission — and not quasi-governmental non-profit corporations, such as ERCOT. But state Rep. Burt Solomons, chair of the House State Affairs Committee, pushed to include the ERCOT review in legislation adopted during a brief special session in 2009. Solomons had expressed displeasure with some of ERCOT’s spending practices — specifically citing the over-budget nodal transition — and also said that conducting a Sunset-style review in 2010 made sense, given that the PUC and the Office of Public Utility Counsel also were undergoing the Sunset process.

Typically, state agencies come up for Sunset review once every 12 years and agencies under such review are automatically abolished unless the Texas Legislature adopts legislation to continue them. But because ERCOT is not a state agency, lawmakers will not need to pass a new bill to maintain its existence. Another distinction between the ERCOT “special purpose review” and more typical Sunset reviews is that the cost of the ERCOT evaluation will be paid for by ERCOT itself — and therefore passed onto electric ratepayers. With other Sunset evaluations the cost is paid by tax dollars.

Besides Chairman Hegar, the other lieutenant governor appointees to the Commission include Sen. Juan “Chuy” Hinojosa of McAllen, Sen. Joan Huffman of Lake Jackson, Sen. Robert Nichols of Jacksonville, Sen. John Whitmire of Houston and public member Charles McMahen. Sens. Huffman, Nichols and Whitmire and public member McMahen were newly appointed by Lt. Gov. David Dewhurst in October. On Nov. 9 House Speaker Joe Straus appointed Rep. Dennis Bonnen of Angleton to serve as vice chairman for the Commission. He also appointed as new members Rep. Rafael Anchia of Dallas, Rep. Bryon Cook of Corsicana, and public member Lamont Jefferson. House members serving existing terms are Reps. Linda Harper-Brown of Irving and Carl Isett of Lubbock.

-- R.A. Dyer

PUC adopts customer protection rules relating to HB 1822

The Public Utility Commission adopted rules Friday for the implementation of House Bill 1822, a consumer protection bill from the 2009 legislative session. Sponsored by state Rep. Burt Solomons, HB 1822 calls for establishing definitions of terms commonly used on utility bills. It also requires that retail electric providers (REPs) print on bills the end date of multi-month contracts.

This second requirement emerged as a contentious flash point during negotiations at the PUC. Some retail electric providers expressed discomfort with the specific end-date requirement, arguing instead for the option to print on bills a more general description of the contract end date. PUC staff and consumer groups argued that HB 1822 included a specific mandate requiring that REPs print the exact termination date, and that using a less specific description only would add to customer confusion.

The three PUC commissioners on Friday agreed to give REPs the option of either printing a specific termination date, or of using a more general description of the end date. However, those REPs opting for the broader description also face a new requirement that they waive early termination penalties for up to 60 days before a contract expires, as opposed to the 14 days currently in rules.

The PUC also appeared to agree with some consumer recommendations relating to the use of common billing terms. REPs had requested flexibility to choose between different terms such as "surcharge," "fee" or "factor" to describe the same billing element. REPs also wanted the option of using either "base charge" or "customer charge" to describe the same element.

Consumer groups argued that the PUC should settle on a single term for each billing element -- and that all REPs should then be required to stick to the uniform term. The rules adopted Friday generally follow that recommendation.

The PUC set an April 1 implementation date for the new rules.

-- R.A. Dyer

Coalition: deregulated prices remain higher

Average electric rates paid in deregulated states are 55 percent higher than average rates in regulated ones — and that gap is widening, according to a coalition of public interest groups calling this month for congressional action.

In a joint statement released in Washington, the American Public Power Association, Public Citizen and other groups said that Congress and the Federal Energy Regulatory Commission should investigate how high electricity prices impact low-income consumers. It said that while customers in all states feel the pinch from high electricity prices, it’s been those in deregulated states who get the worst deals.

“While consumers continue to struggle to pay their electricity bills, the deregulated markets serving about two-thirds of the country continue to create opportunities for excessive profits for a handful of companies that own generating plants,” the coalition noted in its Nov. 3 release.

Besides the APPA and Public Citizen, the group includes the National Consumer Law Center, The Utility Reform Network, the Public Utility Law Project of New York and the Virginia Citizens Consumer Counsel. The groups cited survey data showing the percentage of low-income households forced to sacrifice food in order to pay for electricity had increased by 70 percent since 2003, and the percentage of low income consumers foregoing medical or dental care in order to pay for utility bills had more than doubled.

In Texas, average residential rates remained below the national average for a decade or more before deregulation, and then have remained above the national average after competition. Recent reports also show that even the lowest cost offers in deregulated areas of Texas can’t match regulated rates elsewhere.

-- R.A. Dyer

Penalizing customers for exercising their power to choose?

One of the few pro-electric consumer bills to emerge from the 2009 Legislative session was House Bill 1822, by state Rep. Burt Solomons. The legislation called for the establishment of common terms on utility bills and also included an important requirement that retail electric providers always print on bills the end date of multi-month contracts. This second requirement (it was part of an amendment by state Sen. Wendy Davis of Fort Worth) was to meant to reduce consumer headaches when it comes to the length of term contracts and the assessment of early termination penalties.

The Public Utility Commission is now considering how best to implement HB 1822 and has taken up recommendations from several parties. Some retail electric providers have expressed discomfort with the specific end-date provision of HB 1822, arguing instead for permission to print a more general description of the termination date. Consumer groups have argued that this would contradict the clear, black-letter language of HB 1822. PUC staff members also have argued against this REP recommendation.

A second important point of discussion involves penalties for early termination of contracts. PUC staff has argued (and consumer groups agree) that once customers receive notification that their fixed-rate contracts are about to expire, that those customers should not also be dinged with early termination penalties if they switch providers. This would address an inconsistentcy in timing requirements in PUC rules. That is, under current rules, REPs must send out notices of contract expiration 30-60 days in advance, but can still charge early termination penalties up until 14 days before the end of a contract.

That means that under current rules, REPs can punish fixed-rate customers who, upon receiving notice that their contract is about to expire, immediately sign up with a competitor. Conversely REPs can waive early termination penalties for those customers who, upon receiving notification that their contract is about expire, agree instead to lock in another long-term deal with the original REP.

Either way, this increases customer “stickiness” in the Texas electricity market. Consumer groups believe this disconnect between the timing of contract expiration notices and the timing of penalties reduces the ability of customers to exercise their power to choose, thereby lessening the downward pressure on prices that can come from competitive forces.

The PUC is expected to take up rules for HB 1822 during a meeting on Friday.

-- R.A. Dyer

Tip for Consumers: Check the complaint data first

Looking to switch electric service? Lots of folks already know the www.powertochoose.com website is a good place to start when you’re comparing prices. What’s less known is that the website also includes useful data about customer complaint rates.

Here’s how it works. Every six months a new report card gets posted on the website that ranks retail electric providers using a dot system. One dot is good, signifying “lowest complaint rate.” Five dots is bad, signifying “highest complaint rate.” REPs receive dots based on a ratio of complaints filed against them versus the number of customers they serve. Hence a small REP with many complaints should get a worse ranking (more dots) than a large REP with the same number of complaints.

At the powertochoose.com website you can find both the most current complaint scorecard, plus many older ones. The website also includes raw data so consumers can get a sense for the specific sorts of complaints filed against individual REPs. For instance, one REP may get plenty of slamming complaints, while another might be tops for billing problems.

These are great tools, especially given that some of the same companies appear to get listed month after month as having the worst complaint records. This might suggest that consumers might think twice before signing up with such companies — even if those companies offer relatively low-cost rate plans.

And remember it’s always a good idea to compare both prices and the complaint data before deciding on a retail electric provider. Also read the fine print. Plenty of REPs charge extra fees that might not be immediately apparent otherwise.

-- R.A. Dyer

PUC data: electric prices still too high under dereg

Prices go up and prices go down, but under the state's flawed deregulation law, one fact of life appears to have remained constant: Texans pay too much.

Consider that customers in TXU's service territory pay more today than they would have paid in March of 2000, which was prior to deregulation, but when the price of natural gas was slightly higher. Even customers on the least expensive rate plan in North Texas still pay more today than they would have paid before deregulation, according to publicly available data.

Check out the math yourself. According to data from the Public Utility Commission, TXU customers in March 2000 paid 7.326 cents per kw/h. That's for household use of 1,000 kw/h each month. A quick look at the www.powertochoose.com website indicates that the lowest available price in the same service territory on Sept. 4, 2009 is 8.9 cents per kw/h. The average of offered rates on the same day is 10.9 cents.

These numbers show that the lowest rate available today is still 21.5 percent HIGHER than the last regulated rate at a time when natural gas prices were similar. (Natural gas is used to fuel many power plants and is linked to electricity costs.) More shocking still: the average of offers under deregulation in what was TXU's service territory is 48.8 percent HIGHER than it was under regulation. Either way, the deregulated prices don't measure up.

But perhaps that is not so surprising, given that electricity rates in Texas remained below the national average for many years prior to the Texas deregulation law, but have remained consistently above the national average after deregulation.

-- R.A. Dyer

SWEPCO seeks big rate increase

Tens of thousands of consumers living in north and east Texas would end up paying 20 percent more for electricity under a proposed rate hike by AEP Southwestern Electric Power Company.

The company (which is more commonly known as SWEPCO) filed its request before the Texas Public Utility Commission on August 28. PUC approval would mean that even customers using as little as 1,000 kilowatt-hours per month would see electric bills go up by $16 beginning in the spring.

The hike would generate an extra $82 million per year for SWEPCO — including an extra $31.6 million for ongoing power plant construction — according to the filing. Also included is an additional $43.31 million for the company to serve its retail customers and an additional $6.9 million resulting from the termination of two merger related credits.

Oncor Electric, the north Texas transmission and distribution utility, also recently pushed to substantially hike its customers’ rates. But after municipalities and others mounted a defense at the PUC, regulators cut the requested hike by more than half.

SWEPCO serves about 180,000 customers in the eastern and northern regions of the state. It also serves Louisiana and Arkansas.

-- R.A. Dyer

New reports show Texans pay more for electricity, but less satisfied with service

Consumers in Houston and Dallas continue paying some of the highest electric bills in the nation, according to a new survey by an online comparison shopping firm.

The company, Whitefence.com, reports on its website that Houstonians paid average electric bills of $215.68 in July 2009. That’s higher than what residential electric customers paid in every other American city surveyed that month by the company. Dallas, the only other Texas city listed, had the third highest bills.

And neither are the high bills simply a function of the hot Texas summers, according to the survey data. For instance, residents in sweltering hot Las Vegas and Phoenix still paid much less for electricity than residents in Houston and Dallas. Residents in Houston and Dallas also paid more for electricity than did residents in all the other surveyed cities during the relatively cool months of February and March.

“These survey results confirm what Texans in deregulated areas of the state have known for a long time — that they continue paying too much for power,” said Geoffrey Gay, general counsel for a coalition of municipal electric consumers. Gay noted that Texans paid electric rates below the national average before electric deregulation, but since deregulation have consistently paid above the national average.

A separate report from J.D. Power and Associates also shows that Texans are less satisfied with their residential electric services than they were just one year ago. “Driving this overall decline is decreased satisfaction with pricing,” J. D. Power said in the report, which was released Aug. 20th.

The well known marketing firm collected for its analysis customer data as it relates to pricing, billing, communications and customer service. It found that customer satisfaction had dropped “notably” since 2008.

-- R.A. Dyer

The 4-1-1 on Emergency Interruptible Load

The Emergency Interruptible Load Service (“EILS”) program pays participants including political subdivisions to be available to reduce demand in emergency load situations — that is, when energy is running perilously short on the grid. This is not a peak-load reduction program but rather serves as an emergency response to prevent rolling blackouts. Emergency situations have historically occurred infrequently in Texas, but may potentially occur at anytime, and in fact, may be more likely in “shoulder” months in which high demand is not anticipated and so generation is off-line for scheduled maintenance.

The EILS program is part of ERCOT’s multi-step strategy for handling these potentially serious shortage situations. Under ERCOT’s Level 1 emergency response, the organization dispatches all available generation, issues a media appeal, and attempts to acquire maximum available power across the direct current (DC) ties that connect ERCOT with adjacent grids. Under its Level 2A emergency response, ERCOT deploys Load Acting as a Resource (“LaaRs”), which is another form of interruptible service. EILS, ERCOT’s Level 2B emergency response, is triggered when the grid frequency drops to 60 Hz. (Dropping to frequencies much less than 60 Hz can pose a threat to grid stability.) When grid frequency goes below 59.8 Hz, ERCOT deploys its Level 3 emergency response, which is to shed firm load via rolling blackouts.

In order to be eligible to bid into the EILS program, a load resource must have at least 1 MW of load that can be curtailed with ten-minute notice at any time during the committed hours. ERCOT has divided the day into four periods for the purposes of the EILS program, which allows resources to bid for a specific time frame. The load resource must have 15-minute interval metering or other statistically valid samples of its load that are acceptable to ERCOT. The load resource must be represented by a Qualified Scheduling Entity (“QSE”), (the QSE must have operations capable of receiving verbal commands 24/7.) In the event of the program being deployed, ERCOT will notify the QSE starting the ten-minute period, and the QSE must notify the load resource. The resource must keep its committed load offline until it is released by ERCOT. After ERCOT has released a resource, it is required to return to service within ten hours.

There is no minimum clearing price in the EILS program. Load resources bid for a specific MW (must be at least 1 MW) for a specific time period (one of the four daily periods) for each contract period (three per year). If accepted, the resource receives payment for being available to curtail its load regardless of whether it is called upon to do so. The resource does not receive additional payment if it is called upon to curtail.

-- Pat Jackson

Texans Continue Paying Too Much for Electricity

Although some electric retailers have cut prices in recent weeks, Texas consumers continue paying too much for power, according to an analysis of federal data.

The Energy Information Administration, a federal agency that collects information about the electric industries in the 50 states and the District of Columbia, reports that average prices in Texas have remained consistently higher than average prices in adjacent Louisiana and Oklahoma. The agency also reports that prices have gone up in Texas over a recent 12-month period, while they have gone down in Louisiana and Oklahoma.

Like Texas, both Oklahoma and Louisiana rely on natural gas to fuel many of their generating plants. As the commodity price of natural gas has declined to a seven-year low in recent months, the average price of electricity also has declined. But the recent EIA numbers show that Texans continue paying too much:

*Average prices in Texas have gone UP during the last 12-month period for which the federal agency has collected data. For the 12-month period that ended in April 2009, Texas prices increased by more than 5 percent, according to the federal agency.

*By contrast, average prices have gone down in Louisiana and Oklahoma over that same 12-month period. In Louisiana average residential prices decreased by 11.63 percent. In Oklahoma they decreased by 2.1 percent.

*Texans, on average, pay nearly 50 percent more for electricity than residents in those two states, according to the most recent federal data. The agency lists the average residential price of electricity in Texas at 13.02 per kw/h, while it lists the average prices in Oklahoma and Louisiana at 8.82 and 8.73 respectively.

*The average price of electricity in Texas is also higher than the average nationwide price of 11.59 cents, according to the federal agency. For many years more before passage of the state’s electric deregulation law, Texans paid rates below the national average.

While the recent price cuts announced by some Texas retailers are not reflected in the most recent federal data, it's logical to assume that the declines are no greater than those in regulated states with a similar dependence on natural gas. That's because separate reviews of federal data have consistently shown that Texans typically pay more for electricity than customers in regulated states with a similar dependence on natural gas. Moreover, electric companies operating in a regulated environment are not permitted to earn any profit off the commodity price of natural gas.

-- R.A. Dyer

Chicken Problems for the Texas Wind Industry?

In case you missed it, the Associated Press has an interesting story this week about a small bird that’s leading to big headaches for the wind industry. Known as the “lesser prairie chicken,” the bird is apparently very close to being listed as threatened or endangered by the federal government.

The result? According to Heather Whitlaw, Texas Parks and Wildlife Department biologist: “Anybody who puts anything on our landscape would be evaluated in one form or another.”

The AP reports that federal recommendations from 2004 discouraging the construction of turbines within five miles of prairie chicken breeding grounds have gone largely unheeded by the industry. Instead a wind energy trade group has asked for the scientific basis of the five-mile limit, according to the AP.

The Texas Public Utility Commission last year authorized the construction of billions of dollars of new transmission lines to serve wind generators throughout Texas. Some of these lines will connect to the Panhandle, which the AP identifies as lesser prairie chicken territory. No word on how a federal designation for the tiny bird will impact the state’s expensive transmission line initiative.

The Oncor Rate Case: Shifting a $90 million tax burden onto Texas residents

Oncor customers could see their rates go up by about $130 million annually, according to an analysis of several preliminary decisions rendered by the Texas Public Utility Commission in the utility’s pending rate case.

The analysis also shows that as a consequence of just one PUC decision, the burden of paying about $90 million in corporate taxes would get shifted onto Oncor’s captive ratepayers. That single decision represents nearly two-thirds of the annual rate increase, according to the analysis.

“By shifting this tax burden onto Oncor’s customers, the PUC will be increasing the cost of electricity for millions of Texas residents,” said Geoffrey Gay, general counsel of the Steering Committee of Cities Served by Oncor that developed the analysis. He said evidence developed in the case shows that Oncor customers should be getting a rate cut, not a rate hike.

The Steering Committee of Cities Served by Oncor is a coalition of about 100 municipalities and political subdivisions that represents consumer interests before the PUC. The Steering Committee analyzed the potential effects of rate case decisions rendered by the PUC during a meeting on July 30th.

The regulated monopoly wants permission to hike rates by about $253.4 million annually. By contrast most other parties in the case — including the PUC’s own staff — have concluded that the company already collects too much and should instead lower rates. The Steering Committee estimates Oncor’s overearnings at about $175.4 million annually.

Oncor has about 7 million customers in Texas. It is the state’s largest transmission and distribution utility. Because it provides transmission services, all of its customers — regardless of their retail electric provider — would have to pay the higher rates.

The PUC’s three commissioners could render an official decision in the rate case later this month.

-- R.A. Dyer

Keep The Lights On -- New Energy and Consumer Blog

Check out this promising new consumer and energy blog, Keep The Lights On, which you can find here. Although this blog is just getting under way, it already includes plenty of useful tips for comparing electric prices, filing complaints, and reviewing the fine-print detail in electric bills. The blogger behind the keyboard is Cory Henrickson, a legislative staffer working in the office of state Rep. Sylvester Turner.

In one of his first posts, Henrickson analyzes PUC rules governing level-payment plans. “The rule mandates that a retail electric provider must offer a customer an average or level billing plan if a customer so desires — the ONLY qualification one must meet is that they are current on their bills,” he writes.

In another, Henrickson reviews retail electric provider contracts -- including one that permits a nearly $10 surcharge on customers who conserve energy. "The devil is in the details," writes Henrickson.

Henrickson’s boss, state Rep. Turner, is a member of the House State Affairs Committee, which has legislative responsibility for electric utility issues. Turner also has been advocating recently for new customer protection rules at the PUC.

-- R.A. Dyer

Seeking Emergency Protections: Round 2

Shrugging off an earlier rejection by the agency, state Rep. Sylvester Turner and the AARP have filed a revised petition before the Public Utility Commission calling for the creation of new protections for elderly and infirm electric customers during the hottest days of summer.

The petition calls for the temporary suspension of cancellation fees for customers who seek to save money by switching electric providers. The new petition also calls upon electric retailers to notify customers about the availability of rate discounts. The petition was filed July 17 and signed by Turner, AARP and several other consumer groups.

The PUC on July 2 rejected an earlier proposal by the same coalition that would have banned electric disconnections when the heat index was forecast to reach 105 degrees Fahrenheit or higher. In issuing that earlier rejection, the commissioners said those who face summertime disconnections because they pay too much for electricity should switch providers. The commissioners also noted that low-income customers can get rate discounts through the LITE UP Texas program.

But in a July 17 letter accompanying the new petition, Turner said customers who want to switch providers face substantial obstacles. “Termination fees of several hundred dollars effectively prevent customers from switching,” he wrote. Turner also said that several hundred thousand Texans who are eligible for the LITE UP program likely do not receive assistance from it.

“Since the July 2, 2009 Open Meeting, ERCOT has experienced record high electricity usage,” wrote Turner. “Of course that is due to the extreme and persistent heat we are experiencing. The prior record usage day was in 2006, the last time the Commission took action to prevent dangerous electricity disconnections. More reports of heat related illnesses and death continue to come in. The Public Utility Commission has significant latitude in crafting solutions to dangerous electricity disconnections during the summertime. I urge you to do so.”

The next PUC open meeting is July 30th.

-- R.A. Dyer

Windfall profits under Cap and Trade

Texas consumers may end up paying another billion dollars each year as a consequence of federal cap-and-trade legislation according to a new report.

Sponsored by a coalition of utility commissioners and consumer groups, the report also warns of higher "unproductive" costs from the legislation because a single price sets all spot prices in deregulated wholesale markets. That means there could be an uptick in price for power from all sorts of generators -- even those that emit little or no greenhouse gases -- according to the report.

"In deregulated markets, it is likely that any allowance allocation will result in consumer-funded windfall profits for certain generating plant owners, at least in the early years," noted the study, drafted on behalf of the National Association of Regulatory Utility Commissioners, the American Public Power Association and other groups.

The report added that granting free cap-and-trade credits would increase windfall profits in both regulated and deregulated markets. A provision for granting free allowances to transmission companies was ushered into the House version of the bill at the urging of utility lobbyists, according to media accounts.

The incremental cost to consumers in the ERCOT region could run anywhere from $848 million to $3.3 billion per year, depending on the final language of the legislation. The report's authors stressed, however, that it is not their position that greenhouse gas legislation is prohibitively expensive, nor that its costs would likely exceed its benefits.

An earlier analysis conducted by ERCOT noted that a typical monthly electric bill could increase by $27 as a consequence of proposed climate change legislation.

-- R.A. Dyer

Call for Emergency Disconnection Rules

State Rep. Sylvester Turner has called upon Texas regulators to adopt emergency rules that would protect electric customers against disconnections during the dog days of summer.

In a petition filed before the Texas Public Utility Commission, the Houston lawmaker has proposed a ban on electricity disconnections in any area in which the heat index is forecast to hit 105 degrees Fahrenheit or higher.

The move comes just as Texas cities begin to wilt under sweltering high temperatures. In Houston, for example, the high was 101 degrees on Wednesday – but with 40 percent relative humidity. According to a National Weather Service table, that would place the heat index in the Bayou City at between 109 and 114 degrees.

The petition calls upon the PUC to set up rules that would require electric companies to keep the power flowing during the hottest months, but also to set up payment plans for customers who fall behind on their bills. The proposed rules are modeled on legislation that Turner and others unsuccessfully attempted to pass during the 81st Legislative Session, which ended June 1.

“Summer is here and record temperatures are being set across the State -- we can not afford to take this dire situation lightly,” said Rep. Turner. “That is why I filed the petition so quickly and that is why I strongly urge the Commissioners at the PUC to set an emergency meeting and take up the issue immediately.”

AARP Texas and several other consumer groups have joined the petition. “While AARP continues to urge the Texas Legislature to fix the problem permanently, we ask the PUC to do the responsible thing and protect the lives and health of many citizens who are at increased risk this summer,” said AARP state director Bob Jackson.

The PUC likely will consider Turner’s petition during its July 2nd meeting.

-- R.A. Dyer

CREZ, Community and Rights of Way

The preservation of community values, recreational areas, and the environment are just three of the factors that the Texas Public Utility Commission must consider as it adopts routing plans for the hundreds of miles of new transmission lines going up in West Texas and the Panhandle.

The lines themselves will be massive: they're the 345 KV variety with poles that stand over 115 feet tall and right of way that can extend 150-180 feet. The lines could end up cutting through ranch land, residential subdivisions and city property. They're contemplated for numerous areas around West Texas, Central Texas and North Texas -- including areas around Killeen, Kempner, Holliday, Sweetwater, Roscoe and Snyder.

It's all part of the Competitive Renewable Energy Zone process that calls for $5-6 billion in new transmission investment to encourage wind energy development. When complete, the CREZ lines will substantially increase transmission connections to parts of the state where the wind blows the heaviest.

But the process is complicated and it's important to know your rights. First the Commission must decide on specific routes, including the designation of priority projects. Transmission service providers like Oncor must also conduct routing studies and conduct public meetings in affected areas. Local residents concerned about the new lines can inquire about the public meetings and can also intervene at the Public Utility Commission.

According to PUC rules, "the line shall be routed to the extent reasonable to moderate the impact on the affected community and landowners unless grid reliability and security dictate otherwise." The PUC must consider historical and aesthetic values, environmental integrity and whether the routes parallel existing compatible rights-of-way.

Some information can be found at the PUC website, under Docket No. 36801. A word of warning: this stuff can be complicated.


-- Lambeth Townsend

Oncor's White Elephant

“Bagging a white elephant” -- that’s how the Dallas Morning News characterized moves by Oncor to purchase nearly 900,000 automated meters now considered to be obsolete because they fail to meet state guidelines.

In his June 5th front page article, reporter Steve McGonigle chronicled how Oncor wants its customers to pay $93 million for the meters – even though most of the company’s customers never received them. He also notes that experts advising the Texas Public Utility Commission have found that much of the company's expenditures in this regard were imprudent.

“These costs should be borne by Oncor, not by ratepayers,” PUC staff attorney Patrick Peters III asserted in a document obtained by the Morning News.

Oncor’s request for more money for obsolete meters comes on top of the $2.21 monthly surcharge the company recently began collecting for hundreds of thousands of separate advanced meters. These new meters became necessary when it became clear that the first generation meters did not meet state guidelines.

The newspaper also quoted local resident Joel Morgan, a disabled auto parts salesman from Rockwall, who said in a letter to the Public Utility Commission that he and his wife have no interest in paying for automated meters – obsolete or not.

“Please keep us in mind when these BIG BOYS with the DEEP POCKETS come to you asking for permission to stick it to us again and again and again,” he wrote

KHOU-TV: Houstonians Paying Too Much for Power?

More than $1 billion -- that's how much Houstonians pay in excess electricity costs each year under deregulation, according to a recent segment on KHOU-TV in Houston. Reporter Dave Fehling noted that residents in San Antonio and Austin -- two cities that remain outside deregulation -- pay far less for electricity.

How much less? According to the analysis in Fehling's report, electricity that sells for $102 in San Antonio and Austin goes for about $159 in Houston. Do the math and that equals $1.2 billion in extra costs for Houstonians every year, according to the report.

"These people make a profit off the citizens of Houston by doing nothing," Houston homeowner Patsy Young told the reporter, referencing the high cost of electricity in her city because of flaws in the deregulated system.

The KHOU-TV report also noted that proposed opt-out aggregation programs offered the promise of savings, but that they have been opposed by the electric industry. Under opt-out aggregation, cities could purchase electricity in bulk on behalf of their citizens.

You can see the KHOU-TV report here.
-- R.A. Dyer

Complaint Against Your Retail Electric Provider or Wires Company? Two Pitfalls to Avoid

Many problems can arise between a consumer and his Retail Electric Provider, or between the consumer and the local wires company. In recent years, consumers have filed complaints at the Public Utility Commission alleging a variety of REP or utility misconduct, including overbilling, bad meter reads, changing the price during what is supposed to be a fixed-price contract, and withholding billing information from the consumer. Depending on the circumstances of each dispute, a complaint at the PUC can be an effective way to address these sorts of problems. However, many PUC complaints fall prey to two errors at the very beginning, both of which can derail the case and prolong it while the consumer remedies them.

Possible Pitfall #1: Not presenting your complaint to the city in which you reside. If your complaint is at least in part against your local wires company (as in the case of incorrect meter reads), you may be required to file a complaint with your city before pursuing PUC action.

Possible Pitfall #2: Not presenting your complaint to PUC staff for informal resolution. Complaints are often required to go through the PUC's informal process before the customer may file a formal complaint. If the customer files a formal complaint without using the informal process first, the PUC's Staff may object.

Closely following the required procedures is key to the PUC's complaint process. Avoiding these two initial pitfalls can help smooth the way for your complaint and present your case in the best possible light.

-- Chris Brewster

Surcharges, Surcharges and more Surcharges

There’s been plenty of extra costs and surcharges loaded onto consumer electric bills as the result of various legislative actions. Here’s a partial list of bills adopted during the last several sessions – and the potential impact on Texas electric ratepayers.


* Senate Bill 20, adopted during special session in 2005, mandated the creation of Competitive Renewable Energy Zones to mark the site of future transmission lines to serve wind generators. The cost of new construction from this legislation could amount to at least $5 billion to $8 billion, according to recent estimates. That amounts to between $227 and $363 per customer served by ERCOT.

* House Bill 2129, also adopted in 2005, opened the door to "advanced meter surcharges." Monthly surcharges ordered this year under that bill will increase bills by $2.21 per residential customer served by Oncor, and by $3.05-$3.24 for customers of CenterPoint. Those charges will last for 11 years. That’s a total cost to residential ratepayers of $961.5 million for CenterPoint, and $1 billion for Oncor.

* Senate Bill 769, adopted earlier during the current legislative session, will increase bills for typical CenterPoint customers to between $2.50 to $3 per month for the next 11 to 14 years. In the case of Entergy customers (in the Galveston area), it would increase bills by an estimated $5.25 per month for the next 15 years. That’s a total of $677.8 million for CenterPoint and $577 million for Entergy. Gov. Perry signed the bill April 16. It was touted as a Hurricane Ike recovery bill, although it leaves the door open to more surcharges for future weather events throughout Texas.

* Senate Bill No. 541, which remains pending in the current session, mandates the installation of 1,500 megawatts of non-wind renewable generation. The Texas Association of Manufacturers estimates that this legislation could increase consumer bills by between $2 and $3 per month.

*Senate Bill 545, which remains pending in the current session, provides for the creation of a distributive and wholesale solar generation incentive program. Toward that end, it also authorizes the establishment of a new nonbypassable fee -- although the amount of that fee has not yet been determined.

* The ongoing creation of the nodal market at ERCOT will likely lead to higher prices every month for consumers in many areas of Texas. The implementation alone costs about $640 million -- or about $30 per every Texan served by ERCOT.

-- R.A. Dyer

Dallas Morning News: Adopt CSSB 1772

The “last, best hope” for those who care about electricity prices. That’s how The Dallas Morning News described Senate Bill 1772 in an editorial May 22. The newspaper urged House lawmakers to quickly take up the bill and vote it out before time runs out on the 81st Texas Legislature.

“A chance remains to discourage market manipulation by passing CSSB 1772,” the newspaper opined. “The proposal comes just months after a Public Utility Commission decision to let the company formerly known as TXU off relatively easy for manipulating the wholesale power market. The legislation would take a tougher approach and would allow the PUC to order that refunds be given to affected parties.”

In late 2008 Luminant – formerly TXU – paid a $15 million penalty for alleged abuses in the wholesale market. The PUC had originally recommended penalties of more than $200 million, and the PUC’s own investigation found evidence that the company had profited by nearly $20 million.

Regulators also found that the company’s improper actions had cost market players at least $57 million, although the PUC said it was powerless to order refunds. CSSB 1772 would specify the PUC can order refunds in such cases, and thereby add another disincentive against improper market manipulation. The bill was recently voted out of the House State Affairs committee and awaits action by the full House.

The session ends June 1.

-- R.A. Dyer

ERCOT: Climate Legislation=Higher Prices

A typical monthly electric bill could increase by $27 as a consequence of proposed climate change legislation in Washington, according to a new analysis by ERCOT.

Released May 12, the report projects the cost of reducing carbon emissions back down to 2005 levels by 2013. It included assumptions for future natural gas prices, the level of new wind generation construction and increases in carbon allowance costs.

The report did not account for "scarcity pricing" -- that is, the price spikes that frequently occur in an important segment of the wholesale market when supply runs tight -- and so may have underestimated some costs. However, the report also may have overstated other costs -- such as the price of carbon allowances -- and did not properly account for energy efficiency efforts, according to environmental groups.

If carbon allowance costs rise to between $40 to $50 per ton, the cost of wholesale power would increase by $10 billion -- and a typical consumer bill would go up by $27, according to the report. Under different scenarios, bills presumably would increase by twice that much or by as little as $17 or $22, according to the report.

The report was conducted at the request of PUC chairman Barry Smitherman. Quoted in The Dallas Morning News, Smitherman said: "I'm more concerned about climate change legislation than I am about climate change."


-- R.A. Dyer

ERCOT error impacts new nodal budget

At the ERCOT Board of Directors meeting in April, ERCOT leadership admitted that it made an error in calculating its newly approved approximately $644 million nodal implementation budget. According to ERCOT, it missed approximately $4 million in necessary spending in December 2008 when it was formulating the budget.

At the April Meeting, the Board’s discussion swirled around whether to access the controversial $58 million contingency fund. Public Utility Commission member Donna Nelson and others spoke out vehemently against breaking into the contingency fund this soon after the budget was passed. After a contentious discussion, the Board declined to permit ERCOT to do so. Instead, the Board directed ERCOT to carry the error as a line item within the current budget.

-- Pat Jackson

ERCOT and FERC

Ignoring the old adage about good fences making good neighbors, FERC chairman Jon Wellinghoff recently began urging ERCOT to increase its interconnections with neighboring grids.

Speaking during a teleconference from Chicago, Wellinghoff said that creating more interconnections would facilitate the use of renewable energy nationwide.

“If Texas could be more strongly interconnected to the Midwest, for
example, they could integrate even more wind into the system,” Wellinghoff said.

Texas has largely avoided getting overly linked with the nation’s two other grid systems -- the Western Interconnect and the Eastern Interconnect. Connecting with the two other grids would bring ERCOT under the jurisdiction of FERC, a situation that has been strongly opposed by many in the Lone Star State.

But Wellinghoff suggested that perhaps ERCOT could be granted an exemption to FERC rules.

“I do believe that a national renewable portfolio standard is a necessary and desirable step, but only a first step,” Wellinghoff said, according to May 6 report in Platts. “We simply cannot incrementally develop these renewables without building up the entire grid into a strong grid system.”


-- R.A. Dyer

Free Allowances under the Climate Bill?

Revisions are being proposed to the Waxman Markey Draft Climate and Energy Bill as the bill makes its way through committee in the U.S. House. This bill, among other things, would create the first mandatory nation-wide green house gas (GHG) cap and trade program in the U.S. Whether the compromises being made in committee will be enough to create an alliance strong enough to get the bill passed this session remains to be seen.

One of the most important discussion points still being worked on is how allowances, potentially worth millions of dollars, will be distributed to those regulated under the bill. President Obama has consistently taken the position that all allowances should be auctioned off, and has included money from those auctions in his budgets. Utility companies testified that 40% of the allowances should be distributed free of cost to the regulated industries. Free distribution of any large portion of the allowances would significantly reduce the cost of the remaining allowances, thereby reducing the impact on the overall economy, but making business as usual more probable and slowing the effect of the bill on nationwide climate emissions.

The EPA has forecasted that carbon will sell for $13-$17 by 2015.

-- Jeff Reed

What Nuclear Renaissance?

Despite all the recent hype about nuclear power, a new renaissance in the industry may not be in America's future.

At least, that's how many have interpreted recent statements by new FERC chairman Jon Wellinghoff, who created quite a stir in the industry with his assertion that price considerations could make nuclear power unnecessary.

In Texas alone, power companies and investors have announced tentative plans for eight new nuclear generators. But Wellinghoff, quoted in The New York Times, said: "I think [new nuclear expansion] is kind of a theoretical question, because I don't see anybody building these things, I don't see anybody having one under construction."

Building nuclear plants is cost-prohibitive, he said, adding that the last price he saw was more than $7,000 a kilowatt -- more expensive than solar energy. "Until costs get to some reasonable cost, I don't think anybody's going to [talk] that seriously," he said.

-- Clarence Johnson

Do we need more nukes?

Should a green energy strategy include new nuclear generation? Several applications for licenses for new nuclear plants in Texas are pending at the Nuclear Regulatory Commission. Luminant (formerly TXU Generation) has forecasted that the cost of new nuclear units will be $2,500 to $6,000 per kW. That compares to a Texas-specific study of likely costs for renewables made last year that predicts wind, geothermal, fuel cell and solar projects can each be constructed in a kW cost range of $1,900 to $4,000. Add the uncertain future cost of long term storage of nuclear waste and the nuclear green light may turn red.

However, the question of whether Texas should proceed with more nuclear power should not simply be a question of future cost. We need to consider whether the financial commitment of billions of dollars in new transmission to tap millions of dollars spent on West Texas wind generation would become wasted if we proceed with more nukes. Nuclear generation is designed to run 24 hours a day, not simply at times of high demand. Why would there be any need for off-peak power from wind turbines if we add a couple more large scale nuke plants to the grid? Having committed to a wind generation agenda several years ago, should not Texas policymakers encourage generation options that complement that strategy rather than undermine it?

Furthermore, the billions of dollars being spent on West Texas transmission will not facilitate the transmission of nuclear energy. The most likely placement of new nukes will be where nukes currently reside -- at Comanche Peak and the South Texas Project. A critical ingredient for nuclear power generation is water, and lots of it. Water is scarce in West Texas and becoming scarce throughout the state. Forty percent of all the fresh water in the state is devoted to electric power generation from fossil fuels. Can we afford to devote more fresh water for a nuclear generation agenda?

-- Geoffrey Gay

The Quick Effects of Senate Bill 769

Senate Bill 769 – the first major piece of legislation from the 81st Legislature signed into law by Gov. Rick Perry – allows electric utilities to gain more rapid recovery of storm restoration costs through the use of securitization. Although promoted as a way to address recovery costs associated with Hurricane Ike, it’s written in a much broader fashion and so can be used by utilities to recover costs associated with a wide array of major "weather related events" in the future.

While the legislature wanted to insure grid reliability and expedited cost recovery, the rush to get this authorization of piecemeal ratemaking to the Governor resulted in utilities obtaining the right to estimate certain costs and continue to earn a return on hundreds of millions of dollars of abandoned and useless assets until their next comprehensive rate case. The Governor signed the bill on April 16 and already CenterPoint Energy and Entergy Texas have filed applications seeking Ike cost rate surcharges of $677.8 million and $577.5 million respectively.

Hurricane Ike made landfall in September of 2008 and carved a wide path of destruction through Texas. In the end, Ike was the third costliest U.S. hurricane of all time.

-- Pat Jackson

EPA Issues Proposed GHG Finding

It’s been slightly more than two years since the United States Supreme Court ruled in Massachusetts v. EPA that greenhouse gas emissions were pollutants under the Clean Air Act. In a delayed response (it took a change in Administrations) the EPA issued its long awaited Proposed Endangerment Finding for Greenhouse Gases (GHGs) under the Clean Air Act last Friday.

Whether the proposed finding will lead to regulation of GHGs as pollutants under the Clean Air Act isn’t clear. The other possibility being considered in Washington is the Waxman-Markey Bill which was released in discussion draft form in late March. The Waxman-Markey Bill would establish a cap-and-trade program for GHGs and specifically prevents the EPA from using the Clean Air Act to regulate greenhouse gases. The Obama Administration is said to prefer cap-and-trade legislation to EPA rulemaking and likely is using the threat of EPA regulation as leverage to get Congress to act.

Any EPA rule will have to undergo a comment period, and the betting is that no matter what rule they come up with, someone won’t like it.

If this endangerment finding does result in a EPA rule to regulate GHG emissions under the Clean Air Act, lawsuits are likely to quickly follow. If it spurs forward cap-and-trade legislation, who gets capped and who can trade carbon credits will greatly impact an entity’s costs and revenues depending upon which side of that dividing line it falls on.

--Paul Gosselink

Greenhouse Emissions National Reporting Rule

The EPA took the first step toward establishing cap and trade legislation or a GHG regulation on March 10, 2009 by proposing the first comprehensive national system for reporting emissions of carbon dioxide and other GHGs produced by major sources in the United States. This rule was published in the Federal Register on April 10, 2009 and comments must be filed by June 9, 2009.

The rule is designed to establish an inventory of all GHG emissions in the U.S. In other words, in order to figure out what needs to be capped and at what level it needs to be capped the government needs to know what is out there.

This rule will affect approximately 13,000 stationary sources or approximately 85% of all such sources in the U.S.. The rule will require that the following types of facilities will have to report:

1. A facility which will emit greater than 25,000 metric tons of GHGs (huge catchall category)
2. Suppliers of fossil fuels
3. Manufacturers of motor vehicles

Because power producers are unpopular and their emissions are easy to quantify, they are the most likely industry to be capped in the first phase of a cap-and-trade program. The reporting rule would provide the background information to set a cap and to distribute allowances to the power producers, probably on a mega-watt capacity basis (where the amount of GHGs that each power company would be allowed to release would be based on the amount of electricity that it can generate). In later phases, this same information would be used to determine how much the other kinds of facilities could release.

An interesting aspect to the rule is that it will require reporting to begin in the year 2011 for emissions that occur in the year 2010. This means that a final rule will need to be passed in the next eight months – an unusually fast pace for federal rulemaking.

--Paul Gosselink