EPA Greenhouse Gases Endangerment Finding

On December 7, 2009, EPA finalized its long-expected finding that greenhouse gases (“GHG”) endanger human health and cause and contribute to air pollution. Although the findings, issued in response to the U.S. Supreme Court’s decision in Massachusetts v. EPA (2007), do not in themselves create any regulation of GHGs, they are necessary for the EPA to begin regulating GHGs, and in fact, obligate the EPA to regulate them under the Clean Air Act.

The findings set the stage for regulations of GHG emissions from vehicles and stationary sources, for lawsuits challenging the findings, for lawsuits seeking to require EPA to regulate GHG emissions, and for lawsuits collaterally attacking permits that do not address GHG emissions whether issued by EPA or state agencies.

In response, U.S. Senator Lisa Murkowski of Alaska (that's her picture, above) has announced plans to introduce a resolution in Congress to disapprove the endangerment finding. If the resolution is approved by both the House and the Senate, and ultimately signed by the President, the EPA’s endangerment finding would be nullified and EPA would be unable to regulate GHGs. However, in the absence of legislation addressing GHGs it is considered unlikely that the President would sign the resolution.

A Tale of Two Cities: Houston and San Antonio

Here’s a bit more bad news about prices under the state’s flawed deregulated system. According to recent figures from the Public Utility Commission web site, residents in the state's largest city under deregulation (Houston) continue paying far more for electricity than residents living in the largest city outside deregulation (San Antonio).

Specifically, the PUC figures show that as of December 2009 (the latest data available) a home consumer in San Antonio would spend $77.38 for 1,000 KW/H of power. A consumer using the exact same amount of juice in Houston -- even a consumer with the very lowest rate available -- would spend $86, or more than 11.1 percent more. And, of course, most rates in Houston are far higher.

Likewise, a recent survey from a commercial website, Whitefence.com, lists Houston as having the second highest electricity prices among the cities it surveyed in the entire nation.

Many proponents of the flawed deregulated system continue making apples-to-oranges comparisons between lowest-cost offers under deregulation and average rates outside deregulation. But as these figures show, even those comparisons often don't hold water.

-- R.A. Dyer

Consumer workshop scheduled for Houston

May 15th – mark it on your calendar. That’s the date of a public workshop scheduled in Houston devoted specifically to consumer rights under the state’s electric deregulation law. Sponsored by state Rep. Sylvester Turner, the first annual “Consumer Rights Electricity Workshop” will provide a forum to discuss products, pricing, social services and cost-cutting measures. Turner’s office also promises discussions “on consumer rights, (on) how to effectively advocate for policy changes, and … of important electricity issues the state will face in the 2011 legislative session.”

When it comes to electricity issues, the 2011 session should be a contentious one. That’s because both the Public Utility Commission and the Electric Reliability Council of Texas, which operates the power grid, are now both under special legislative review. At the same time, residential electricity consumers continue to pay rates above the national average after enjoying a long history of below-average rates before deregulation.

Rep. Turner’s consumer workshop is tentatively scheduled for 9 a.m. to 3 p.m. at the CWA Union Hall in Houston. The address is 1730 Jefferson Street. For more information contact Cory Henrickson in Rep. Turner's office. His email address is cory.henrickson@house.state.tx.us.

-- R.A. Dyer

Third Court of Appeals: Split Decision for Consumers on Stranded Costs

In a split decision for consumers, the state’s Third Court of Appeals this month has ruled that certain utility interest payments should not be used to increase the calculation of stranded costs in Texas, but also that certain federal tax benefits for utilities should not reduce them. The ruling, which was issued Jan. 15 by the court, is in response to a case brought by consumer groups relating to the allocation of stranded costs above $5 billion.

Recall that stranded costs are meant to represent the difference between the book value of a company’s assets and the price that would be paid by someone buying the assets on the open market. Think of a company that pays $1 billion to build a nuclear power plant under regulation, but then can only sell it for $500 million in a deregulated market. In this oversimplified example, the $500 million difference would be the “stranded cost” of the nuclear power plant.

The Texas deregulation law allowed utilities to seek reimbursements for stranded costs as part of the transition to deregulation. During a series of separate ruling over the years, the Public Utility Commission has found that CenterPoint, Texas Central Company and Texas-New Mexico Power were owed around $6 billion in combined stranded costs.

The Texas deregulation law included special allocation provisions for stranded costs if they were found to exceed $5 billion statewide. The case before the Third Court of Appeals relates to what proportion of those costs above $5 billion should be allocated to industrial customers for payment, and what proportion should be allocated to residential and commercial customers. The court largely upheld the PUC’s previous rulings with regards to these issues.

Other specifics about the decision this month: the Third Court held that the Public Utility Commission was correct to order a retroactive reconciliation of stranded costs already collected, and that it was appropriate to apply a 5% interest rate for the securitization of stranded costs. The case was brought by the Office of Public Utility Counsel (which represents commercial and residential consumers) and a trade group known as Texas Industrial Energy Consumers. It remains unclear whether either party will appeal to the Texas Supreme Court.

-- R.A. Dyer

District judge sides with electricity consumers

The Texas Public Utility Commission failed to explicitly consider costs to electric consumers when it awarded billions of dollars in transmission construction projects last year, a state district judge has determined.

The finding, part of a case that could impact how much Texans end up paying as a result of the Competitive Renewable Energy Zone process, was included in a recent letter from state District judge Stephen Yelenosky to lawyers for the City of Garland and the Texas Attorney General’s office.

Garland has claimed in a lawsuit that the PUC failed to consider the potential benefits to electric consumers when it rejected the city’s utility proposal to build some of the CREZ lines. Judge Yelenosky, in a Dec. 21 letter, signaled that he tends to agree. The judge (that's a picture of him at the left) is expected to issue an order in the case on Jan. 15.

Because it is municipally owned, the Garland utility does not pay various taxes common to commercial ventures and can borrow money at a lower cost. Garland has argued that such advantages would lead to lower costs for consumers had it been selected to participate in the transmission projects.

But in its decision to award the projects to Oncor, Sharyland and other transmission developers, the PUC appears not to have explicitly considered what’s most cost-effective for electric customers, Yelenosky stated in his letter.

Attorneys representing the PUC suggested that “customers” be read as the “people of Texas,” wrote the judge. But state law clearly requires the PUC to consider what’s most beneficial and cost-effective to “electric customers” and that “neither the PUC, nor this court, can ignore statutory language or choose to give it a definition it does not have,” he wrote.

Yelenosky also noted that the PUC overstepped its statutory authority in other ways. “The PUC relied upon factors that are not relevant to providing transmission capacity in a manner most beneficial and cost-effective to electric customers and based its decision on underlying findings that lack substantial evidence,” he stated.

The city of Garland, through its municipally-owned utility, already operates more than 130 miles of transmission lines, which serve not only their own customers but also residents in Dallas. Garland is one of 13 transmission operators certified to operate in ERCOT.

The PUC came under similar criticism that it was failing to look out for consumers in its CREZ deliberations when commissioners signaled to transmission developers last year that they should not seek economic stimulus assistance from the Obama Administration. Such assistance could have shaved tens of millions of dollars from the cost of CREZ construction, according to some estimates.

Current estimates put the CREZ price tag at about $4 per month for residential customers. The lines are expected to be up and running by 2013.

Generators seek proposal to hike prices

A proposal designed not to limit the price of electricity – but to actually increase it during certain periods — could face Public Utility Commission scrutiny in 2010, according to some market watchers.

Extremely costly to consumers, the proposal would create a process whereby generators would receive payments for their wholesale power that would be substantially higher than prices dictated by the market. The process would kick in during periods when wholesale power on the ERCOT grid is running in relatively short supply.

Cities and other consumer representatives have argued against the policy, and it was rejected during proceedings earlier this year at ERCOT. But it retains support both from electric generators and by the Independent Market Monitor of the ERCOT market, leading many to believe that the PUC will take up the issue again this year.

The IMM and industry groups say the price supports are needed to encourage the further development of generation in Texas. Cities and consumer groups have noted the fundamental inconsistency of price supports within the context of the state’s deregulated market, a market supposedly based upon the premise that competitive forces should dictate prices.

Cities also note the extreme cost of the proposal — up to approximately $750 million per year, by some estimates. The expense would obliterate any supposed savings industry advocates have claimed will come from the nodal market redesign, or from improved ERCOT operations. The proposal also would put further upward pressure on retail prices — that is, the electricity prices customers actually pay — which have remained consistently above the national average ever since the state’s transition to deregulation.

-- R.A. Dyer