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Steffy: Worst of both worlds likely for Texas power consumers
Steffy: Worst of both worlds likely for Texas power consumers
While we’re unlikely to return to the days of monopoly utilities, regulators seem to be encouraging an oligopoly in which market power is concentrated among a few big companies.
Deregulation has been a flop for consumers, but this could actually make it worse. “Deregulation,” of course, was never an accurate term. It was a sales pitch, a way to convince the public of benefits that never materialized.
By the end of the summer, any lingering pretense of a free market is likely to have melted away.
As concerns about reliability mount, the Public Utility Commission is acting much as it would have in the old days of regulation — enacting policies to direct a specific market outcome.
If the PUC succeeds with its plan, improved reliability will come with higher prices and fewer choices for consumers — the exact opposite of the benefits promised when deregulation was introduced more than a decade ago.
“At every stage, they go further and further from competitive markets,” Robert McCullough, a Portland, Ore.-based energy analyst who follows deregulation issues, told me recently.
Last week, I wrote about “voluntary mitigation plans,” one of which has already been approved, under which the PUC will pre-emptively rule on potential market manipulation by big generating companies.
Those plans, combined with the PUC’s earlier vote to raise the price limits on the wholesale market by 50 percent, will give big generators greater potential to control the market.
Meanwhile, the higher prices that are supposed to encourage companies to build additional generation haven’t attracted any new capital.
In fact, NRG, the state’s biggest power producer, just agreed to spend $1.7 billion for Houston-based GenOn, another generating company. NRG President David Crane hailed it as “a new era of scale, scope, and market and fuel diversification in the competitive power industry,” but it’s unlikely to bring many of those benefits to Texas.
Crane, in a conference call with reporters, said the merger won’t result in new generation here.
“We stand ready at our sites to build more as soon as pricing tells us it’s time to build,” he said. “The pricing point hasn’t been there yet.”
Don’t expect it to get there anytime soon.
The PUC already has indicated it intends to double the cap on wholesale rates again next year. If you were NRG, would you be in a rush to build generation when you know you have the potential to sell power at double the current price limits next year?
As I’ve written before, the higher price caps mean more volatility in the wholesale market, which will make it more expensive for retailers — companies that sell you your electricity — to hedge against price swings.
Already, one retailer, Epcot Electric, has gone under since the higher caps took effect. (YEP Energy acquired its customers and assumed their contracts.) More may follow.
In a free market, of course, weak competitors get driven out, but in this case, the PUC is adding volatility to the market and causing a shakeout of smaller retail competitors.
Companies with deep pockets — primarily retailers backed by generators such as NRG and TXU — are better able to weather the volatile market.
We’ve seen this happen before. In early 2009, NRG bought retailer Reliant for a song after Reliant got upside down on its hedges. It was the classic offer that couldn’t be refused. NRG topped that deal by buying two other retailers: Green Mountain Energy and Energy Plus.
Even if the PUC succeeds in driving prices high enough to encourage more generation demand in a few years, the market by then will be more concentrated, less competitive and dominated by a few large players that share pricing power in both the wholesale and retail sides.
That may not be re-regulation, but it isn’t deregulation, either. It’s the worst of both.
ALL CREDITS BELONG TO PEOPLE BELOW.
Loren Steffy, loren.steffy@chron.com, is the Chronicle’s business columnist. His commentary appears Sundays, Wednesdays and Fridays. Follow him online at blog.chron.com/lorensteffy, www.facebook.com/LorenSteffypage and twitter.com/lsteffy
Obama Handshake Snubbed by Russian Delegation
WATCH
CLOSELY. IT IS QUICK BUT HE GETS THE
MESSAGE. TOO BAD THE NIGHTLY NEWS DID NOT COVER
THIS.
Watch this
10-second video, where a lineup of leading Russians
refuse to shake Obama's hand.
Did you see
this on ABC, CBS, NBC, CNN or MSNBC? I guess I
must have missed it.
This is
"hard ball", Soviet Style. After the third
handshake refusal, it becomes obvious.
The facial
expression is priceless.
I guess
we're no longer in Chicago, Toto...
Has anyone
ever seen a Head of State snubbed like this? Speaks
volumes!
|
The Year Was 1955
Texas Faces Power Shortages Possibly 10 Years Out
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www.BestPricedElectricity.com |
A new study suggests Texas may be having to deal with with power shortages for the next 10 years or so (source: The Statesman) . These power shortages would happen during peak demand periods each year. So for instance, on a very hot summer or very cold winter you can expect that would be the time when everybody's power goes out.
This worse case scenario occurs because too many people are demanding electricity at the same time. Combine this increase in demand from an expanding population and economy in Texas with EPA actions preventing coal fired power plants from being built. It isn't that Texas wants to pollute the environment, kill the elderly and poison small children.
The fact of the matter is that new coal technology allows for clean burning cheap coal to meet demand for electricity and still let everyone have affordable electricity.
It will always sound great to protect the elderly and the children and like you I want to do this as well but when the elderly and children are used in propaganda by green activists to the eventual hardship of every Texas power consumer someone needs to say something.
The Electric Reliability Council of Texas has hired an outside consultant that will be delivering a report on June 1 on how Texas can encourage the construction of new power plants.
Right now wholesale electricity prices are too low to attract investors in new electricity generation plants and you have the EPA to contend with if you mention the word, coal.
Remember at one time TXU was planning to create at least 11 new state of the art coal fired power plants and now look at the situation?
For now Texas must work to get more commercial and industrial customers to agree to interrupt their electricity usage during peak demand times in exchange for payment.
A noteworthy aspect to getting businesses to automate electricity curtailment is that in the process they sometimes create complete backup generation systems that can produce onsite electricity through natural gas and remain completely off the grid long term.
Hopefully we will see more off the grid electricity systems that are built for these individual facilities alleviating Texas electricity demand troubles.
You can learn more about commercial distributed generation systems and implementation in Texas by watching the video below.
Why are you paying too much. for ELECTRICITY?
![]() |
WWW.BestPricedElectricity.com |
The EPA causing higher prices for Texas Electricity.
Another Free Market Failure Accusation About Texas Electricity Deregulation
Is Deregulation to Blame for Lack of Sufficient Power Supply in Texas?
What Can Texans Do to Increase Power Supply?
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Rise in price of electricity will likely zap consumers
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Solar Advocates Trying To Look On bright Side
High costs, lack of support at various levels cloud its future
By PURVA PATEL
Copyright 2008 Houston Chronicle
Ralph Parrott is optimistic about the future of the solar industry in Texas.
Since he started a business selling solar systems last year, he's fielded more than 500 sales inquiries.
But he concedes the number of actual sales are much lower.
"It's tough," he said. "Solar electric is still rather expensive. Unfortunately, the state of Texas doesn't have the same level of incentives that California and several other states do."
Solar advocates say high costs, a lack of incentives and resistant homeowners associations are clouding the nascent industry's future in the state.
At stake is an opportunity for the state, already a major player in the oil and gas industry, to have a prominent role in the growing $10.6 billion global solar energy market, a May report by the state comptroller's office says.
Advocates concede solar is not the end-all solution for the state's energy needs. High costs still keep the technology inaccessible to many consumers, though opinions differ on just how long that will last, given the rapidly rising cost of conventional energy sources.
But incentives and rebate programs to help consumers realize a faster payback on their investments would help, solar advocates say.
A typical solar electric system for a home can cost between $20,000 to $29,000.
Consumers can take a federal tax credit of 30 percent of the cost of a system, up to $2,000, but the tax break expires at year-end. Federal lawmakers have introduced a bill that would extend the break beyond 2008, but Congress hasn't agreed on how to pay for it.
Some states — but not Texas — offer rebates funded by a surcharge on electric bills and cover about half the cost of solar systems.
Last year, state Rep. Garnet Coleman, D-Houston, introduced a bill that would create a similar program in Texas, but it never made it out of committee and faced opposition from the Association of Electric Companies of Texas.
Walt Baum, executive vice president of the association, said the group opposed the bill mainly because it would have put the money to fund the rebates in the same fund that helps low-income Texans pay their electric bills — a fund that previously has been diverted for other uses by the state.
"It had nothing to do with us not supporting the solar industry," Baum said. "We had committed to legislative leadership to getting the fund to where it was supposed to go."
Another try in Austin
Coleman said he plans to reintroduce the bill next year.
"To me it's a no-brainer," he said. "I think it's doable. Almost every company that's a fossil fuel energy producer is investing in the manufacture and sale of solar panels. Shell is, BP is, and so are a lot of others. They understand that they have to diversify their business offerings for a day when fossil fuels are not going to be the biggest part of their business."
Providing incentives at the local level in Texas gets complicated, although some governments do. Austin, through its city-owned Austin Energy company, and San Antonio, through its CPS Energy, are two examples.
What makes the offer of local incentives difficult is the state's deregulated system.
Retail power providers in deregulated markets, such as Houston, don't have a strong incentive to provide rebates to solar power users, said Russel Smith, executive director of the Texas Renewable Energy Industries Association.
"In a competitive market, you're trying to sell electricity in a competitive mode," he said. "So unless there's something that evens the field and gives you, as a utility, a break of some sort, you're not likely to jump on that bandwagon."
Immediate payback
More than rebates, a system that credits homeowners for electricity they produce in excess of what they use would help expand the solar market, some solar advocates say. That's because consumers would see an immediate payback on their investment.
Legislation passed by state lawmakers last year allows consumers with solar systems to connect to the state's power grid and measure production, but it doesn't explicitly require deregulated electric companies to compensate consumers for the surplus electricity they produce, nor does it say how.
Such a program could foster competition, because consumers would shop around for a retail electric provider willing to offer the best rate, according to David Smithson, a policy analyst with the Public Utility Commission.
But some solar advocates say a surplus compensation program left to the market would do little to kindle the industry's growth.
"It provides no guarantee of a return to the investor that we're asking to make an investment in the market for solar," said Tom Fitzpatrick, a consultant for Public Citizen. "So we're trying to stimulate a market to work by having taken care of everybody's interests except the investor's? That doesn't seem like the quickest way to get action."
At the very least, he said, consumers should pay a lower rate if they use any solar electricity. That's because consumers generating their own energy during the hottest hours of the day — when high demand for energy pushes up the price retail electric providers pay for the electricity they sell — indirectly save providers money.
By cutting demand, solar power users also reduce the need to build expensive power plants.
"Even if you don't sell to the grid, because you are not taking as much during the afternoon period, you are a more attractive and profitable customer," he said. "The PUC is basically saying the market needs to come forward and provide solutions for this, but we're not guaranteeing it."
Sen. Eddie Lucio Jr., D-Brownsville, introduced the legislation and said he plans to look at stronger wording during the next legislative session.
Incentives will mean nothing if homeowners aren't allowed to install the systems in the first place, said Smith, of the renewable energy trade group.
Statewide, homeowners have tussled with restrictive homewners associations that say the panels are unsightly, hurt property values or violate deed restrictions.
Thwarting restrictions
Last year, the solar industry backed Senate Bill 358 by Sen. Mike Jackson, R-La Porte, and House Bill 1651 by Rep. David Leibowitz, D-San Antonio. Both bills would have thwarted a property owners association's ability to restrict the installation of solar energy devices.
Though both bills failed to make it to a vote, both lawmakers plan to reintroduce them, staffers for both have said.
Despite all the hurdles, Parrott remains optimistic.
"We are working or waiting on the right message and environment to make the right customers come to us," he said. "Wilbur and Orville Wright failed hundreds of times, and now we all ride airplanes."
What does deregulation means to Houstonians' electricity bills
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Deregulation
For as long as most of us can remember, public utilities have been operated as regulated monopolies. In the last few years, state by state, those utilities have been, or are being, deregulated. What does that mean? Before deregulation, one company provided all aspects of your electric service–generation, sales, delivery, billing, and support. After deregulation, some or all of these components were separated. The rules differ from state to state, but generally speaking, the power plants, salesmen, retail suppliers, billing companies, and delivery companies (the ones who own the poles and wires) are no longer a single company. In some states, like Texas, those are all separate companies now.
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