OPINE: The Online Policy and Information Network on Energy

Price supports for deregulated electric companies?

2012-01-06T14:58:00.000-08:00

Last year was hot. We have to go all the way back to 1789, searching through the tree ring records, to find evidence of a drier summer. And because power plants depend upon water in order to operate properly, the high heat wreaked havoc on the transmission grid. As lake levels dropped, our risk of blackouts increased.

Next week a key committee in the Texas Senate will hold a public hearing on reliability issues and the drought. There will be plenty of expert testimony, public comments, white board charts and maybe a few reporters. A representative from ERCOT, the operator of the Texas power grid, will make a presentation. The chairwoman of the Texas Public Utility Commission also will address the senators.

If the drought is putting system reliability at risk, then what should be done about it? Some have proposed artificial price supports for wholesale energy. That is, some believe that without bigger profit margins for big electric companies, those companies won’t have sufficient financial incentives to build needed generation plants. But consumer groups are discouraging efforts to intentionally increase prices — especially when there’s no clear pay-off in terms of reliability. Any money used to enrich these deregulated generation companies ultimately comes from the pockets of ratepayers. But generation companies offer no guarantees that they’ll resolve or even address the state’s reliability concerns.

It’s a tough issue to be sure, and one that’s begun to attract welcome attention from the media. Both the Texas Observer and National Public Radio’s Impact Texas recently have weighed in, with both outlets noting that Texans are at risk for paying higher electricity prices. Reports in the Texas Tribune and the San Antonio Express-News also help to frame the debate. The hearing, to be conducted by the Committee on Business and Commerce, begins at 10 a.m. on Tuesday, January 10^th. You can find a link to the Business and Commerce Committee website here. Separately, the House State Affairs Committee also is expected to consider these issues during a meeting on Feb. 9th. Both hearings will be conducted in Austin.

-- R.A. Dyer

ERCOT Stakeholders Address High Prices in "Load Pockets," irresolvable problems

2011-10-28T13:55:00.000-07:00

Ten months after implementation, ERCOT continues to grapple with unforeseen difficulties arising from the nodal market. As you may already be aware, the nodal market began operation in December of 2010. Previously, ERCOT was operating under what is known as a “zonal market,” a less-complex form of wholesale market. The nodal market differs from the old zonal market in the way that it instructs generators to produce electricity. In the nodal system, ERCOT dispatches generation considering both the lowest total cost and the greatest relief of bottlenecks within the transmission system. The goal is to deploy the lowest-cost combination of generators that the capacity of the grid will allow.

The ERCOT stakeholder process is currently struggling with how to resolve situations in which ERCOT’s systems cannot calculate the most efficient way to relieve certain transmission bottlenecks. Early in the year, ERCOT identified that this is a particular problem in the Lower Rio Grande Valley. Due to constraints unique to this geographic area, the Lower Rio Grande Valley is plagued by persistent transmission congestion, while it has a high population and little power generation to serve it. Such an area is known as a “load pocket,” and load pockets have posed problems for other nodal system operators in the more established wholesale markets of the Northeast.

You can read more about ERCOT
in the special report from the
Texas Coalition for Affordable Power.

The problem is that, in a nodal system, load pockets can produce very high wholesale prices. The reason has to do with a special concept known as “shadow pricing.” The “shadow price” is the price of relieving the transmission bottleneck in an area. Relieving that congestion can be complicated, however. Due to the physics involved in the flow of electricity, not all power plants can relieve bottlenecks equally. In order to relieve transmission constraints, ERCOT must sometimes dispatch more generation than the actual amount by which the relevant transmission line is overloaded. The shadow price reflects the cost of deploying that additional generation to relieve the constraint. Because of shadow pricing, wholesale prices can actually exceed the highest priced offer in the market.

You will recall that ERCOT has a standard offer cap of $3,000/MWh. However, as noted above, shadow prices resulting from bottlenecks can greatly exceed the standard offer cap. As a result, ERCOT has in place another cap, called the “Shadow Price Cap,” which had been set at $5,000/MWh. When there is congestion on the grid, it is the shadow price cap that acts to limit wholesale prices.

Early this fall, ERCOT stakeholders agreed that certain bottlenecks are “irresolvable.” While the constraint in the Lower Rio Grande Valley is the only confirmed irresolvable constraint, there has been talk that there may be others in the market. In order to address this situation, ERCOT stakeholders worked through a holistic solution to impose a lower shadow price cap for irresolvable constraints. The purpose is to provide additional protections to consumers in a load pocket who would otherwise risk exposure to prolonged high prices. That solution uses a complex formula that in current market conditions would result in a shadow price cap at $2,000/MWh. In a further complexity, if a hypothetical peaking power plant in the area earns $95,000 per MW cumulatively in a given year, the shadow price cap would drop to $500/MWh. At the beginning of the following calendar year, the price would raise back up to $2,000/MWh until the hypothetical peaking power plant again earned $95,000 cumulatively over the year. The idea behind dropping the price to $500/MWh is that there is no benefit to increased payments to generators for congestion caused by constraints that are irresolvable, once generators are permitted to earn a reasonable margin.

In the past month, the South Texas Electric Cooperative (“STEC”) detailed their concerns about this solution to the ERCOT Board. While STEC agreed with a lower shadow price cap for irresolvable constraints, they expressed concern with raising the shadow price cap each year back up to $2,000/MWh. As discussed above, there is no benefit to a higher shadow price cap for irresolvable constraints because higher prices can do nothing to incentivize a solution to a problem that is not able to be solved. In other words, there is no adequate market solution for irresolvable constraints and a higher shadow price cap does not provide any benefit to consumers in these situations.

The Technical Advisory Committee (“TAC”) considered STEC’s concerns at two separate meetings. While TAC adjusted some small parts of the holistic solution, it largely left the solution intact, including the return to a $2,000/MWh shadow price cap each year even if the cap had dropped to $500/MWh the previous year. We voted against the holistic solution, because STEC’s proposed modification offered a greater level of protection for consumers in a region where regular market forces and the state of the grid have proven insufficient to meet consumers’ demand. The Board met on October 18, 2011, but declined to consider the holistic solution as recommended by TAC. STEC’s appeal of TAC’s decision will be heard before the Board in December of this year.

-- Chris Brewster

Mr. Brewster is an attorney at Lloyd Goseelink who represents cities at ERCOT. You can find out more about ERCOT and the deregulated market in The Story of ERCOT, by the Texas Coalition for Afforbable Power and the Steering Committee of Cities Served by Oncor. The link can be found here.

Electricity

2011-10-10T08:03:00.000-07:00

Texas Market Still Not Matching Pre-Dereg Levels

Here’s the good news. The most recent federal data from the United States Energy Information Administration shows that residential electricity prices in Texas have dipped below the national average. That means Texans are saving on their electric bills, at least in comparison to the rest of the nation.

Now, comes the bad news: relative to the rest of the nation, Texans received a better deal before we deregulated our electricity markets.

According to the federal data, Texans so far this year have paid electricity rates that are 2.59 percent below the national average. But in 1999, the year the state legislature adopted the retail electric deregulation law, we Texans got an even better deal — paying 7.48 percent less than the national average. The same was true in 1998, when we paid 7.38 percent less; and in 1997, when we paid 7.24 percent less.

In fact, during the entire decade prior to the adoption of the deregulation law, Texans paid residential electricity rates that were 6.4 percent lower than the national average. In the decade since deregulation took effect, Texans paid 8.72 higher than the national average.

Some may note that in Texas there exists areas both with and without deregulation, and that the state’s higher-than-necessary average prices shouldn’t be blamed on deregulation, but rather on prices paid by those living outside deregulation. According to this argument, inflated prices paid by Texans living outside deregulation have skewed calculations for average prices overall.

But here again, the federal data shows this assertion to be incorrect. Data from the US EIA shows that Texans living in areas outside deregulation paid consistently less than the national average for residential service and consistently less than Texans subject to deregulation. This is true for every year in which data exists to make a comparison. You can check out the graph, above, showing the pricing data for the years 2002-2009.

A recent analysis by the Texas Coalition for Affordable Power shows that all these high prices don’t come without consequences. The total estimated cost to the Texas consumer economy from these long years of above-the-national-average electricity prices exceeds $15 billion.

-- R.A. Dyer

Geoffrey Gay receives Glink Private Practice Local Government Attorney Award

2011-09-22T10:08:00.000-07:00

CHICAGO -- In a ceremony held September 13 at the Chicago Hilton in Chicago, Illinois, the International Municipal Lawyers Association (IMLA) awarded the Marvin J. Glink Private Practice Local Government Attorney Award at the 76th Annual Conference to Geoffrey Gay of Austin, Texas.

Award recipient Geoffrey Gay

This award was established to honor the memory of a longtime IMLA member, Marvin J. Glink. It recognizes a private practitioner who, as part of a private practice, represents a local government and who exhibits those qualities that made Marvin Glink one of the truly remarkable lawyers working on behalf of public clients. In addition to the traditional qualities of excellence in the practice of law, the award seeks to recognize a practitioner who has provided outstanding service to the public, and who possesses an exemplary reputation in the legal community, the highest of ethical standards, and who is devoted to mentoring young lawyers and educating lawyers in local government law.

Geoffrey is the Principal and Chair of the Energy and Utility Practice Group for Lloyd Gosselink Rochelle and Townsend. He is an active local government practitioner and serves as the General Counsel for the Texas Coalition for Affordable Power, the Atmos Cities Steering Committee and the Oncor Cities Steering Committee. His nominator stated, “Geoff is an unbelievably effective negotiator and creative strategist. His efforts have saved Texas cities millions of dollars annually. In addition, Geoff and his firm go the extra mile to provide the assistance necessary to help city officials become more persuasive advocates for the interests of cities and the public.”

Founded in 1935, the International Municipal Lawyers Association (IMLA) is a nonprofit, nonpartisan organization consisting of approximately 3000 local governments and attorneys throughout the United States and Canada. IMLA provides a wide range of services and programs to its membership, including comprehensive educational programs, legal research, professional publications and legal advocacy on behalf of its members in the United States Supreme Court, as well as federal and state appellate courts.

Independent Market Monitor Issues 2010 State Of The Market Report

2011-09-21T09:25:00.000-07:00

In August, the Independent Market Monitor (“IMM”) – a position intended to be a wholesale market watchdog and created by law in 2005 – issued its annual State of the Market Report for 2010. This year’s report was unusual in that it addressed the final year of operations under the old, zonal market design. Thus, the report highlighted inefficiencies and other issues with that market design that will not recur in future years, since in late 2010 the market transitioned to a nodal system.

The 2010 State of the Market Report contains comparative
data on wholesale market prices for each of ERCOT's four
zones, and ERCOT as a whole. As this table illustrates, prices
increased in all zones from 2009 to 2010. Note the extraordinary
prices of 2008 -- they resulted from very high natural gas prices
and congestion on the grid, resulting in especially high prices
in the North, South, and Houston zones.

However, the report is notable for its conclusion that wholesale energy prices increased on average in 2010, going from $34.03 per MWh in 2009 to $39.40 per MWh on a load-weighted average basis. The report attributes a 16% increase in natural gas prices for much of this increase.

Despite this general price increase, the IMM again argues that wholesale prices in ERCOT are too low, and have been sufficient to support new investment in power plants in only one the last four years. That year was 2008, a year in which, as the report admits, ERCOT suffered from high prices resulting from inefficient congestion management between the North, South, and Houston zones. The experience of that summer, in which prices neared $4,000 per MWh at times and caused the default of a number of Retail Electric Providers (“REPs”) should in no way be viewed as any kind of “success” for the market.

Additionally, the report again concludes that the ERCOT wholesale market performed competitively in 2010, with no evidence that generators were withholding power or engaging in similar manipulative behavior.

-- Chris Brewster

Fed Report: ERCOT Could Use More Authority to Protect Against Blackouts

2011-08-31T09:09:00.000-07:00

A joint federal report is the latest to examine
the February rolling outages in Texas.

Although previously rare in Texas, rolling blackouts have now occurred twice since the state deregulated its electricity markets. The most recent outage occurred on Feb. 2, when 1.3 million customers suddenly lost power. Not surprisingly, questions have been raised.

For instance, why did so many of the state’s power plants fail? During the most difficult point of the crisis, approximately one-third of the total generating fleet within ERCOT was unavailable. And did the blackouts expose problems in the wholesale energy market, where prices spiked dramatically?

A new report by the combined staff of two federal organizations attempts to answer some of those questions, while also making recommendations for reform. Released in August, the report finds no evidence of market manipulation during the blackouts and concluded that gas curtailments played little if any role. But the federal staffers also found that the ERCOT organization could use additional tools to protect against blackouts.

The organizations behind the two-inch-thick document are the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation — FERC and NERC for short. Their report joins other expert examinations of the February blackouts, including those from the Texas independent market monitor, from a federal grid reliability organization, and from a private consultant from Oregon.

Among the key findings of the latest report:

By communicating with generators and requesting them to come online earlier, ERCOT could have more promptly exposed mechanical issues experienced by generators. This could have prevented some of the failures.
The typical design of generating facilities in the southwestern United States may have contributed to large number of units shutting down. Unlike generation facilities in the colder climates, southern generating units were built so that many of their auxiliary systems are exposed to the ambient air. Frozen sensing lines, frozen equipment, frozen water lines, frozen valves, blade icing, low temperature limits, and transmission loss caused the loss of 22,805 MW of generation.
Although natural gas is an important fuel source for the state’s fleet of electric generators, natural gas curtailments did not appear to play a major role in the outages.
FERC and NERC found no evidence of market manipulation during the event. This conclusion was similar to earlier findings by the state’s independent market monitor.

FERC and NERC also issued recommendations:

ERCOT should consider rule revisions to allow it to reject scheduled outages by generating units.
ERCOT should increase its extreme-weather requirements for generation reserves. ERCOT also should have the ability to direct generating units to initiate operational warming prior to forecasted cold weather.
ERCOT should have the ability to verify a generators’ preparedness for cold weather, including the units’ operating limits and potential fuel needs.
Generators should take steps to ensure they are prepared for severe cold weather events, including designing temperature parameters for existing units, using heat tracing equipment to inspect the units, and maintaining the unit’s thermal insulation. States in the Southwest should examine whether they need rules to compel generators to submit winterization plans.
State legislatures should adopt minimum uniform standards for the winterization of natural gas production and processing facilities. Regulatory authorities also should determine whether critical natural gas facilities should be exempted from rolling blackouts.

The NERC and FERC staff compiled their data by conducting site visits with various entities involved in the outages. Staffers also toured facilities and conducted interviews with operations personnel and company executives. You can read their report here.

-- Daniel Gonzales and R.A. Dyer

Mothballed Plants to Ease Blackout Worries

2011-08-17T08:59:00.000-07:00

ERCOT is taking steps to help gaurd against blackouts during the ongoing heat wave.Responding to record high electricity demand and the scorching heat, the state’s grid operator this week arranged for four mothballed generating units to temporarily come back online to guard against blackouts.

Operated by NRG Energy and Garland Power & Light, the old gas-fired units will be available through October. The Electric Reliability Council of Texas, the organization that manages the grid, said the gas plant operators will be paid to defray their fixed costs and fuel expenses.

“We don’t know if, or how much, these units will be needed, but if needed, the cost will be minor when divided by the 23 million consumers in the region and when compared to the much higher costs and problems from statewide rolling blackouts which these units will help avoid,” said ERCOT CEO Trip Doggett.

PUC Chairman Nelson has called for ERCOT to consider all options to protect grid reliability.Besides improving reliability, the move also could ease pressure in the state’s wholesale spot market for energy, where prices have spiked during the heat wave to $3,000 per megawatt/hour. That equates to about $30 per kilowatt/hour — or more than 600 times the lowest electric rates in the state’s retail market.

Spot market prices do not directly impact home utility bills but can indirectly impact them over time. Doggett said the NRG and Garland units will not displace operational units already bidding into the spot market. Nonetheless, it’s likely the added capacity will ease pricing pressure, especially as other units go down for unplanned maintenance.

In a letter last week, PUC Chairman Donna Nelson called upon ERCOT to take action to reduce the possibility of blackouts. “Look at all available options,” she wrote.

Ray Schwertner, Garland Power & Electric’s Utility Director, said his organization stood ready to help. “As a member of ERCOT, we want to be responsive to their needs, as well as the needs of the citizens of Texas,” he said.

PUC punts on rule opposed by consumers

2010-12-20T13:26:00.000-08:00

One-way Ratemaking would lead to One-Way Rate Hikes

The Texas Public Utility Commission has pressed the pause button on new rules that would have made it much easier for electric utilities to hike rates.

A favorite of utility lobbyists, the proposed rules would have opened the door to quick hikes associated with the poles and wires that connect the transmission system to individual homes and businesses. Consumer groups have been united in their opposition.

Some Commission watchers had predicted the rules would get the go-ahead this month. But then in an unexpected change of course, the Commissioners on Dec. 16th instead indicated they would wait for direction from the Texas Legislature, which convenes in January.

Commissioner Anderson

In explaining the decision, Public Utility Commissioner Kenneth Anderson said he had talked with several legislators who indicated they “wanted to take a crack” at considering the rule. “We should set this aside until June, to give the Legislature time to look at it,” he said.

Numerous interested parties — including the office of the Texas Attorney General — have argued at the PUC that the agency lacks the statutory authority to enact the rules. And while Commission Anderson stated he had not heard much opposition, multiple consumer groups nonetheless have warned that the rules would lead to rate hikes — even during periods when electric utilities don’t need extra money because overall profits are on the rise, or when the utilities’ overall expenditures are going down.

The rules are technically known as the “Distribution Cost Recovery Factor” (or “DCRF”) rules, although the electric utility industry euphemistically refers to them as “streamlined” ratemaking. Consumers call it “one-way” ratemaking because under the rules, rate adjustments likely will flow only in one direction: up.

Consumers also note that the alleged benefits of the regulatory gimmick have never been demonstrated. For instance the office of the Attorney General Greg Abbott, who has sided with Texas consumers in the case, notes in a regulatory filing that advocates of the rule have failed to produce any analysis showing it creates litigation savings.

-- R.A. Dyer

Will the the state's $640 million electricity market overhaul bankrupt businesses?

2010-09-30T08:09:00.000-07:00

Will some electric providers go belly-up after ERCOT switches over to a complicated new system in December? It’s a possibility says Austin-based energy expert Chris Brewster.

Speaking this week during the Gulf Coast Power Association’s fall conference, Brewster, a principal at the Lloyd Gosselink law firm, noted that some retail electric providers may have a difficult time managing around the risks of the new market design known as “nodal.” The new system, which will dramatically change how the state’s wholesale electricity spot market operates, goes live on December 1.

Chris Brewster

If some REPs don’t default outright, they may attempt to push unexpected costs down onto their customers, said Brewster. He predicted the reaction to the new nodal system may be similar to what occurred in 2008, when several mismanaged REPs attempted to pass unexpected transmission costs onto customers even though they had fixed-rate contracts. Brewster noted that several components of the new nodal system, including the so called “day-ahead market,” do not have analogous counterparts under the state’s current zonal system.

Brewster represents consumer interests at ERCOT, also known as the Electric Reliability Council of Texas. The organization plays a key role in the Texas electricity market, as it has responsibility both for managing congestion on transmission lines and for overseeing some wholesale power transactions.

With the new nodal system, ERCOT will change how it performs both functions. Under the existing system, ERCOT oversees the electricity market it in four broad zones of the state. With the new nodal system, ERCOT will manage it at thousands of separate geographical points, or nodes.

Although supported by large generation companies, independent reports have shown that nodal systems in other states have not lowered electricity prices or eliminated the manipulation of electricity markets. Moreover, the nodal transition in Texas is years behind schedule and so far over budget that it will cost more than twice as much as a similar system in California. It's now budgetted to cost around $640 million, after initial cost estimates of less than $100 million.

You can read more details of Brewster’s comments in an article by Elizabeth Souder, of the Dallas Morning News.

-- R.A. Dyer

Over-budget Nodal System In the News

2010-09-07T12:11:00.000-07:00

In December Texas is expected to shift over from its already complicated system for managing the wholesale electricity market to one that’s even more complicated. If the new system works the way it’s supposed to work, computers will spit out distinct prices for wholesale energy sold at thousands of separate locations all across the state. These prices eventually will trickle down into home electric bills.

When this new “nodal” system for managing the electric grid goes live, it will be one of the most expensive and complex of its kind ever created in America.

Copelin

What’s unclear, however, is whether consumers will ever benefit.

Two of the state's largest daily newspapers explore that question and others in articles over the Labor Day weekend about the proposed nodal system. The articles outline the troubling implementation delays, the cost overruns and the lax oversight.

Patel

Industry supporters say the new system will bring new efficiencies to the wholesale electricity market. But Geoffrey Gay, a Lloyd Gosselink attorney who represents cities in utility issues, told the Austin American-Statesman it also could open the door to a new sort of market manipulation. "The guys who can deal with the complexity are not you and me . … It's companies with computer models,” Gay told Statesman reporter Laylan Copelin.

Another troubling issue is the price tag. When first proposed, the nodal system was supposed cost less than $100 million. But as Purva Patel of the Houston Chronicle notes, it’s now expected to exceed $500 million. Texas consumers will end up footing that bill.

Eventful Week for the Power Grid: nuke shutdown, price spikes, new usage record

2010-08-25T15:14:00.000-07:00

The South Texas Project: "human error" apparently caused the partial shutdown of the nuclear reactor on Friday.

It’s been an eventful few days for the Texas power grid. Since last week, prices have spiked in the wholesale electricity market, one of the units of a major nuclear plant tripped off due to “human error,” and Texans broke another record for energy usage. Given the comparatively high electric prices already paid by Texans and concerns over continuing problems with the deregulated market, the developments merit examination.

Here they are, in no particular order:

*On Monday, wholesale electricity that more typically sells for less than $30 per megawatt-hour spiked to more than $2,000. That’s an increase of more than 7,000 percent. Prices also spiked several times to the $1,000 level. A price spike for $2,200 is especially startling, given that the regulatory cap is set at $2,250. That is, the wholesale prices legally could not have gone much higher. In most other jurisdictions the caps are set no higher than $1,000 per megawatt hour.

*According to the organization that manages the power grid, the Electric Reliabiilty Council of Texas, a new record for statewide power use was set on Monday. It was the fourth new usage record in as many weeks. ERCOT reported that the new record was broken at about 4 p.m., when demand spiked to 65,715 megawatts. The usage spike came just as the spot market price was spiking to $2,200 — probably not a coincidence.

*Unit 1 of the South Texas Project apparently tripped off on Friday. The event, first reported in a trade journal SNL Power Daily, was apparently caused by human error. “The NRC said in its Aug. 23 event report that the unit experienced an automatic reactor trip that was caused by an inadvertent turbine signal initiated during testing,” reported SNL's Jay Hodgkins, citing the U.S. Nuclear Regulatory Commission. The publication reported that power was restored by Monday. It’s unclear whether the outage contributed to the price spikes, although that seems likely.

*In response to the loss of a major unit on Friday, ERCOT activated the first stage of its emergency response procedure to prevent blackouts. That means that some industrial consumers that previously agreed to have interruptible service lost their power. It was the third time this year that ERCOT has gone to that stage of its emergency response procedures. The major unit that went down was probably the nuke (as referenced in the SNL Energy article) although ERCOT won’t say for sure. That's because such a disclosure would violate ERCOT's rules for competitive information.

The developments are unsettling, especially given that wholesale prices tend to trickle down to residential consumers. A dysfunctional wholesale market can lead to higher home lighting bills. Already Texans pay more than consumers in Oklahoma, Louisiana and Arkansas. Prices also remain higher than the national average. Prior to deregulation, Texans paid below the national average.

-- R.A. Dyer

Of debt and ring-fencing: EFH in Default

2010-08-19T15:57:00.000-07:00

Souder

This just in: The Dallas Morning News reports that the debt rating for Oncor’s parent company, Energy Future Holdings, has been downgraded by all three debt rating agencies. Reporter Elizabeth Souder notes in a blog post that EFH has offered to exchange old notes maturing in 2017 for new notes maturing in 2020 — but that the company is paying debt holders less than 80 cents on the dollar.

“In response to these exchange offers, two agencies, Moody's and Standard and Poor's, downgraded the Company to default because EFH didn't pay the entire loans back,” explained Souder. “Both agencies said the default ratings are temporary. Another agency, Fitch Ratings, cut its rating to CCC from B-.”

You can find a link to her blog post here.

In response to the downgrades, Oncor issued a press release “reiterating its separateness” from EFH’s shaky debt situation. EFH is the majority owner of Oncor, which is the regulated transmission and distribution company that serves the Dallas-Fort Worth area. It appears the press release was intended to dispel fears that EFH’s deteriorating financial situation could threaten Oncor and its ratepayers.

Under the terms of Energy Future Holdings’ 2007 buyout of TXU, there were legally binding “ring-fencing” agreements put in place that are intended to separate and protect Oncor’s ratepayers from the risk created by EFH’s massive debt. As a consequence, EFH’s debt cannot be transferred to Oncor, nor can Oncor have any obligation to support that debt, according to the press release. It also notes that Oncor and its assets are legally separate from EFH, and that EFH’s debt holders cannot initiate any bankruptcy, reorganization, insolvency, liquidation or any like proceeding against Oncor.

The situation merits close attention. Citing the massive amount of debt involved, consumer groups previously have questioned whether EFH’s buyout of the state’s largest electric company was in the public interest. Questions also have been raised about whether “holes” in the ring fence have led to higher-than-necessary rates for Oncor’s ratepayers.

You can check out a copy of the Oncor press release here.

PUC sets new energy efficiency rules

2010-08-10T07:14:00.000-07:00

State programs intended to increase energy efficiency — but which also stand to increase consumer bills — will operate under new rules as a result of recent action by the Texas Public Utility Commission.

The PUC last year began the process of revamping its rules for its ongoing Energy Efficiency Implementation Program. Under this program, utilities are required to spend money to encourage energy efficiency at the consumer level. For instance, the program provides funding to encourage the marketing of energy-saving appliances. The rules also establish utility goals for reducing overall energy demand and utilities that meet or exceed their goals become eligible for performance bonuses. But the Energy Efficiency Implementation Program can end up increasing electricity bills because both the cost of administering the program and the cost of the bonuses are recoverable by the utility in rates passed on to the consumer.

Rule changes initially proposed by Commission staff and supported by utilities and environmental groups raised the energy efficiency goals dramatically, with a corresponding increase in the program cost cap and available bonuses. The Steering Committee of Cities Served by Oncor, a coalition of municipalities represented by the Lloyd Gosselink law firm, urged the Commission to consider the cost effectiveness of those proposed changes — and the PUC commissioners echoed those concerns.

The rules ultimately adopted by the PUC commissioners on July 30 attempt to strike a balance between the interest of promoting energy efficiency and the interests of ratepayers. For instance, the Commission agreed that the proposed goals will be raised in the future, although they will be raised at a much lower rate than originally proposed. The performance bonus also will remain at current levels, although the administrative cost cap has been raised to account for the raised goals.

Additionally, the Commission imposed a cost cap for both residential and non-residential customers. For the 2011 and 2012 program years the cost cap will be $1.30 per month for residential customers, or .0001 cents per kilowatt/hour — whichever is higher. The cap increases again in 2013. The Commission also instituted cost protections relating to the method by which the cost cap and the bonuses are calculated. For example, under the new rules the cost of the bonuses are to be included in the cost cap for utilities.

The rules will go into effect December 1.

-- Eileen McPhee

Energy Efficiency at the PUC

2010-07-06T14:53:00.000-07:00

Energy efficiency was the topic of the day at the Public Utility Commission during a workshop held in Austin on June 30. The agency is considering changes to the state’s energy efficiency program, which requires transmission and distribution utilities to provide customers with incentives to be more energy efficient.

Here’s a bit of background on the issue: the state’s transmission and distribution utilities do not administer energy efficiency programs for free, but rather are permitted to recover the costs from ratepayers. Additionally, utilities that exceed their demand reduction goals are eligible to receive a bonus. The bonuses awarded to utilities can range anywhere from $5 million to $10 million.

Oncor, a transmission and distribution utility, offered a presentation on the estimated cost of meeting the proposed demand reduction goals. Frontier Associates and Good Company, both consulting firms, gave presentations on the benefits of meeting demand reduction goals and the cost effectiveness of Texas’ energy efficiency program. Representatives from the State Energy Conservation Office and the Texas Department of Housing and Community Affairs reported on federal money being spent within the state on energy efficiency measures, such as weatherization. Finally, the Retail Electric Provider Coalition offered a presentation on the potential cost impact of the proposed amendments to consumers.

Written comments have been previously filed in this project and can be found here. The Commission is expected to make a decision on the rules in July or early August.

-- Eileen McPhee

New Report: Deregulated Generation Companies Profit During Recession

2010-06-21T16:16:00.000-07:00

Electric deregulation was supposed to benefit consumers — that was the promise during the 1990s when several states adopted the market system. But according to a new report, some of the biggest winners last year were the major generation companies.

Released by the American Public Power Association, the May 2010 study finds that generation companies operating under deregulation in the Northeast earned healthy profits in 2009 — despite facing the nation’s worst economic crisis since the Great Depression.

The APPA report also concluded that generation companies under deregulation made much more money than generation companies still subject to regulation. Given the relatively high earnings, it's not surprising that deregulated generation companies oppose any return to regulation. One company warned that if “market deregulation is reversed or discontinued, our business prospects and financial condition could be materially adversely affected.”

Texas implemented electric retail competition in 2002 after authorizing electric deregulation in 1999. Since 2002, rates have remained consistently above the national average Prior to adoption of the deregulation law, rates in Texas were consistently below the national average. Rates in Texas also have increased by a far greater extent than they have in neighboring regulated states such as Louisiana an d Oklahoma.

The APPA is a trade group associated with public electric companies such as municipally owned utilities. You can read the organization’s full report here.

CREZ Update: Lines could impact 12 counties

2010-06-17T12:06:00.000-07:00

A transmission line project proposed just this week for the Amarillo area is already stirring controversy, according to a news story in the Amarillo Globe-News. Writer Kevin Welch reports in the newspaper's June 17th edition on the application by Sharyland Utilities to build lines from southern Carson County to southeast Deaf Smith County. The utility has proposed the route shown above, although that route could change as more landowners express their views at the Texas Public Utility Commission.

"In all the cases we've been involved in, in none of them have the commissioners chosen the preferred route," Lloyd Gosselink attorney Georgia Crump told the newspaper. "They're trying to weigh all the criteria. It's not a science, it's an art." Among Crump's clients is a property owner with lines passing north of Palo Duro Canyon State Park.

Sharyland's application was among three filed by utilities this week for major transmission projects. The lines included in the applications will transmit power from wind generators in West Texas and the Panhandle, and are associated with the state's Competitive Renewable Energy Zone program, or "CREZ" for short.

The transmission lines proposed by Sharyland could impact property owners in Armstrong, Carson, Deaf Smith, Oldham, Potter and Randall counties. Separately, Oncor filed an application for lines that could impact landowners in Tarrant, Wise and Parker Counties. A third company filed an application for a transmission project near Abilene, with lines that could impact Kent, Dickens and Scurry counties.

With the filings this week, a procedural clock begins at the PUC under which the agency has 180 days to conduct hearings, consider testimony and render decisions.

Power Line Dispute in the Hill Country

2010-06-04T14:59:00.000-07:00

A massive transmission line proposed for Central Texas is causing big headaches for the mayor of Kerrville, who fears it could harm his community's economic development.

Speaking to KENS Channel 5 in San Antonio, Mayor David Wampler said his community could lose a half billion dollars because of the line.

“The City of Kerrville has spent about $14 million in infrastructure improvements to bring utilities and roads to areas that would be affected by this line,” he said.

State Rep. Harvey Hilderbran also expressed concern. In letters written to the Public Utility Commission and the Lower Colorado River Authority, Hilderbran called for a change in the proposed route. “We want that line to move away from the Kerrville corridor,” he said.

The PUC already has given the green-light to several transmission projects associated with so-called "Competitive Renewable Energy Zones." The CREZ lines will criss-cross West Texas, the Panhandle and Central Texas -- and potentially harm scenic views and lower property values along the way.

It's possible for affected landowners to block individual routes, but only if they intervene in a complicated legal process at the Public Utility Commission. More information about CREZ and the proposed transmission lines can be found at the PUC website.

Proposed PUC Rules Draw Fire

2010-05-18T07:59:00.000-07:00

Unfair and anticompetitive. That’s how some members of the public and consumer advocates have characterized proposed rules that would keep Texans from getting electric service if they owe an outstanding balance to a previous electric provider.

These complaints and others were aired during a May 17th public hearing in Austin regarding proposed changes to the Public Utility Commission’s rules for electricity service disconnections. The changes would modify eligibility requirements for deferred payment plans and other low-income customer protections. They also modify the disconnection notice requirements as they pertain to customers with life-threatening medical conditions. Finally, the proposed rules contain the controversial switch-hold provisions intended to keep customers from changing retail providers without first paying any balance they owe to their previous provider.

Various groups offered comments on the proposed rules. Some participants requested removal of language that would prevent customers with battery backups for medical devices from qualifying for special protection. Participants also said that seriously ill and disabled customers should never face disconnections. Participants overwhelmingly weighed in against the switch-hold portion of the proposed rules.

Various parties also filed written comments, which can be found here and here. Additional comments are due Friday, May 21.

-- Eileen McPhee

Electric Disconnection Rules Pending at PUC

2010-04-27T16:16:00.000-07:00

On April 16, the Public Utility Commission proposed amendments to its electric service disconnection rules. The amendments would modify the eligibility requirements for deferred payment plans and other low-income customer protections. The amendments also modify the disconnection notice requirements as they pertain to customers with life-threatening medical conditions. Finally, the amendments contain a proposed switch-hold rule intended to prevent customers from changing retail providers without first paying any balance they owe to their previous provider.

The proposed amendments, drafted by Commission staff, are part of an ongoing effort by the agency to clarify various billing issues that are important both to retail electric providers and consumers. The Commission is accepting public comments on the proposed amendments, although comments must be submitted by May 6. Interested parties can also submit replies to those comments by May 21. The agency’s three Commissioners are expected to adopt a final version of the rules sometime early this summer.

To read the proposed amendments, click here.

--Eileen McPhee

Regulatory experts needed for Afghanistan, Iraq

2010-04-07T08:50:00.000-07:00

Never thought your knowledge of tariff methodologies and docketing systems would lead to exciting adventure? Think again.

In an email blast to American utility officials and consultants, the National Association of Regulatory Commissioners signals that the war-torn countries of Afghanistan and Iraq need help establishing electric regulatory agencies. Explains Erin Skootsky, director of NARUC's international programs: "Afghanistan is planning to create a regulatory agency, pending passage of legislation (and) Iraq plans to create a Department of Regulation at the Ministry of Electricity following passage of an electricity regulatory law.”

Skootsky notes that her organization “has been approached” about potentially assisting with in-country technical training programs and workshops. She said the training would be short-term — one week for NARUC member volunteers and 1-3 weeks for consultants — and focused on the foundations of regulation, management of a regulatory agency, tariff methodologies, licensing issues, docketing systems and consumer protection. There’s no indication from Ms. Skootsky’s email about which government or organization, specifically, solicited NARUC’s assistance.

Other details? According to preliminary security information cited by Ms. Skootsky, participants would be lodged at United States government facilities or guest houses and not in independent hotels. "Project security would inspect all locations prior to meetings and provide local ground transportation," writes Ms. Skootsky, adding that "country clearance and other security arrangements will be quite extensive."

For those interested, replies should be sent to Ms. Skootsky by April 12, 2010. Her email address is eskootsky@naruc.org.

-- R.A. Dyer

Meter Tampering: A Thorny Issue

2010-02-11T12:39:00.000-08:00

The Pub lic Utility C ommission is currently considering new rules relating to a very important and thorny issue: meter tampering. That is, on occasion a private individual may improperly disconnect, rewire or otherwise alter an electric meter in such a way as to reduce its usage measurements.

It's an important issue for electric companies because meter tampering can result in a loss of revenue. As such, some companies want the PUC to grant them wider discretion to backbill customers with tampered meters.

And with the advent of advanced meters, such backbilling has become a much easier proposition for utilities. But it's also true that a back-billed customer may have had nothing to do with the tampering — in fact, that customer may have moved onto the property after the tampering occurred, or the meter may have malfuctioned for unrelated reasons. That's why this issue is so thorny for home consumers.

A related issue involves so-called “switch-holds,” which would prohibit customers from changing retail electric providers until that customer has paid for charges relating to alleged meter tampering. Also, the Texas Apartment Association is seeking notification of meter tampering on rental properties. This presents privacy concerns for residents, especially residents who may have moved in after the tampering occured.

Comments from interested parties have been filed at the Commission, which will likely soon make a decision. You can read some of the comments here.

-- Eileen McPhee

EPA Greenhouse Gases Endangerment Finding

2010-01-28T08:07:00.000-08:00

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

2010-01-27T08:46:00.000-08:00

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

2010-01-26T09:23:00.001-08:00

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

2010-01-21T15:42:00.001-08:00

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

2010-01-14T15:19:00.000-08:00

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

2010-01-11T10:11:00.001-08:00

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

Wind farms to pick up some reliability costs

2009-12-08T09:04:00.001-08:00

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

2009-12-01T09:11:00.001-08:00

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

2009-11-20T12:53:00.001-08:00

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

2009-11-19T11:26:00.000-08:00

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?

2009-11-18T10:22:00.000-08:00

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

2009-09-14T07:02:00.000-07:00

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

2009-09-04T15:17:00.000-07:00

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

2009-09-01T15:17:00.000-07:00

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

2009-09-01T14:21:00.000-07:00

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

2009-08-24T15:37:00.000-07:00

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

2009-08-12T12:05:00.000-07:00

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?

2009-08-07T11:37:00.000-07:00

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

2009-08-03T11:59:00.001-07:00

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

2009-07-23T12:12:00.001-07:00

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

2009-07-17T12:46:00.000-07:00

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

2009-07-16T12:59:00.000-07:00

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

2009-06-25T09:00:00.000-07:00

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

2009-06-18T07:52:00.000-07:00

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

2009-06-05T12:41:00.001-07:00

“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?

2009-05-28T10:45:00.000-07:00

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

2009-05-27T10:35:00.000-07:00

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

2009-05-26T11:58:00.000-07:00

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

2009-05-22T08:45:00.000-07:00

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

2009-05-20T09:03:00.000-07:00

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

2009-05-15T12:02:00.000-07:00

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

2009-05-08T05:16:00.001-07:00

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?

2009-05-04T08:45:00.000-07:00

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?

2009-05-04T07:42:00.000-07:00

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?

2009-04-29T15:17:00.001-07:00

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

2009-04-29T15:11:00.000-07:00

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

2009-04-22T12:05:00.000-07:00

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

2009-04-22T12:01:00.000-07:00

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