The first step in solving a problem is admitting you have a problem

New item: Lawmakers debate how to help electric consumers. Sort of.

Anticipating a long, hot summer with record-high electric rates, members of the House Regulated Industries Committee on Monday said Texans are right to expect some sort of relief.

"Rates are up dramatically since 2002. They are unacceptable," said Chairman Phil King, R-Weatherford.

But the way forward was unclear as lawmakers and regulators expressed reluctance to impose new regulations on the competitive market, despite recent wholesale power market spikes that helped put four electric retailers out of business.

Actually, the way forward is crystal clear, if the goal is to actually help consumers.

What makes the Texas experiment with deregulation especially interesting is that a "control group" has survived--the municipal utilities and rural electric cooperatives. Nobody disputes that higher electric rates are partly due to the near-tripling in cost of natural gas, the fuel for 46 percent of Texas power generation. But the rates of still-regulated city-owned utilities and electric cooperatives, which also use natural gas power plants, are substantially cheaper almost across the board. A ratepayer in Austin--who must buy power from the city-owned Austin Energy--spends a little less than $95 each month for 1,000 kwh of electricity. In San Antonio, it's about $72. Austin and San Antonio have the advantage of owning their own power plants, but the statewide average bill for customers served by municipally owned utilities is a little over $100 and is $97 for cooperatives, according to the PUC.

The cheapest service plan--one negotiated by the City of Houston--in the entire deregulated market is about 35 percent more expensive. What accounts for this difference? "[T]he energy being sold in the deregulated service areas didn't cost any more to produce than in the regulated areas," says [Carol Biedrzycki, executive director of Texas Ratepayers' Organization to Save Electricity, or Texas ROSE]. "The difference is in the way the pricing is established." In the deregulated market, economists and industry experts say, expensive natural gas-fueled plants generally act on the "margin" to set the wholesale price that retail power companies must pay for all power generation. Even though it's currently much less expensive to create electricity from coal and nuclear generators, costly natural gas plants control the market price.

"[O]wners of nuclear and coal plants have no incentive to charge anything less than the gas-based market price [to retailers]," as the Association of Electric Companies of Texas explained in a presentation to lawmakers recently.

That was from 2006. Here's the Chronicle in 2007 (blogged about here), from their sidebar comparing prices:

Electric rates per kilowatt hour are typically higher in deregulated parts of Texas than in electric cooperatives and cities like Austin and San Antonio with municipal utilities.

Regulated

• Austin: 9.32 cents
• San Antonio: 8.62 cents
• Entergy-Texas (Woodlands/Beaumont): 11.33 cents
• Pedernales Electric Cooperative: 10.67 cents

Unregulated

Houston: Range 11.1 - 14.5 cents; average 12.65 cents

Dallas-Fort Worth: Range 10.7 -14.3 cents; average 12.18 cents

September prices, based on 1,000 kilowatt hours monthly use, including fees. Unregulated prices are for 12-month fixed plans. Lower rates are available on month-to-month plans.

Source: Public Utility Commission, utilities

Pretty much speaks for itself, doesn't it? And it would make for an obvious way forward if the goal were lowering rates. But if the goal is butt-covering for not having taken the obvious action to lower rates when the Lege was last in session, then I agree that the way forward isn't so clear. I hope we're at least clear about that.

Posted by Charles Kuffner on June 25, 2008 to Budget ballyhoo