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