Public Utility Commish Says We Don't Need To Make It Rain Cash To Keep the Lights On

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Regulators are absolutely desperate to keep us away from that white-knuckle precipice of rolling blackouts we so perilously toed last summer. And they're willing to try anything to entice electric generators to build more power plants and bring existing plants out of mothballs in the meantime.

The main idea is to pay them more by raising the price ceiling on electricity, which is currently $3,000 per megawatt-hour. Thursday, the Public Utility Commission of Texas, electricity's regulatory body, tentatively approved two rules that would do just that. The first would triple the price ceiling by 2015. But the second rule could take effect as early as August 1, raising the ceiling to $4,500. Commissioner Kenneth Anderson doesn't think that's such a good idea. So Unfair Park caught up with him to ask why he thinks raising the wholesale price of electricity this summer isn't necessary, and why it might even have some unintended consequences for the rest of us.

For starters, barring an even more hellacious summer than last year's, we should be OK. Enough generators are bringing units back into service to provide the amount of power we need to make sure we can cover peak demand times this summer.

"(The other commissioners) are taking a conservative approach in terms of reliability," Anderson says. "My personal perspective is with weather predictions -- and I understand my colleagues' view on this, because anybody who bets money on Texas weather is bound to lose -- my view is that ERCOT already received formal notices for a significant amount of generation coming out of mothball. That puts the reserve margin over 14 percent." (ERCOT -- the Electric Reliability Council of Texas -- oversees the state's electric grid.)

At Thursday's hearing, Anderson said raising the price this summer would accomplish at least one thing for sure: Given the spread between cheap natural gas and jacked-up wholesale prices, gas-fired generators will need "Mack trucks" to haul all the cash they're going to rake in when air conditioners test the Texas grid.

But there's another side-effect in the commission's prescription for blackout prevention. Normally, you sign a contract with a retail electricity provider to sell you power at a fixed rate. Commission rule changes like this one, however, might allow them to raise electricity rates to reflect the new price ceiling. Anderson believes many providers will just eat the difference, but some of them are sure to pass it along to the customer.

"My colleagues' view is that we need to make sure we have every unit out of mothball that can come out as the more important consideration," Anderson said. "I lived through (the February 2011 rolling blackout) and last summer, and there were days when I wore my fingernails down. I believe we're in a better spot than we were last summer, and we've got units coming out as of yesterday's open meeting. We've got 1,300 megawatts of generation coming out this summer.

"I believe more will."


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12 comments
Paul
Paul

These numbers are for 2010 average residential electricity rates in cents per kWHr:

AR  8.86LA  8.98OK  9.14TX  11.60NM 10.52

 http://www.eia.gov/electricity...

BTW, I believe that OK derives more of its electricity from nat gas than TX does.

richard schumacher
richard schumacher

Will voters eventually connect Republican legislature and governor to PUC appointments and getting screwed by electricity utilities?  Or are they infinitely stupid? 

C John Wilder
C John Wilder

This is all a scam to help Goldman Sachs and KKR save their disastrous investment in Energy Future Holdings, formerly TXU. It is a true shame that the state officials at the PUC and the clowns in the legislature can't be criminally charged for helping this New York scum fleece  the Texas customers

Mister_Mean
Mister_Mean

This seems to me like a scam between the Public Utility Commission of Texas, the legislature, and the power companies. Remember Enron?    How about pulling them all out and flogging them for their gross mismanagement?   Ohhhhh we can’t do THAT.  After all they are SPECIAL in that they are elected, appointed by, or special private investors.    Deregulation has been and continues to be a failure foisted on us by our Republican state government.

MushMouth1
MushMouth1

Extortion - It's not just for the Mafia anymore

Danny
Danny

How the heck are higher prices going to somehow increase supply?  The electric companies have already decided what output they need to maximize profit.

Wouldn't higher prices just decrease demand and, if anything, induce the suppliers to decrease the supply?

This makes absolutely no sense.

primi timpano
primi timpano

Does the PUC include the cost of debt in determining rates?  My understanding is that the private companies are in trouble because they are highly levered with expensive junk debt.  Nobody is talking about all the cash they made when electricity was priced against expensive Nat gas but the utilities were using cheap coal to fire the plants.  Now that they have been whipsawed by low natural gas prices--which should equate to lower rates, not higher ones--they want to change the rules.  Seems what they really need is a reorganization that fixes their balance sheets.

Paul
Paul

But aren't electricity prices in Texas set by the price of natural gas?

So why haven't prices dropped?

james
james

"Public Utility Commish Says We Don't Need To Make It Rain Cash To Keep the Lights On"..................." price ceiling on electricity, which is currently $3,000 per megawatt-hour. Thursday, the Public Utility Commission of Texas, electricity's regulatory body, tentatively approved two rules that would do just that. The first would triple the price ceiling by 2015. But the second rule could take effect as early as August 1, raising the ceiling to $4,500"???..........................what's to be confused about? big rich fuckin' companies overcharge the shit out of us, spend our $$$ livin' like the filthy rich, then when they haven't spent shit to keep things running or ...god forbid...modernize or improve...they figure to unmothball old dirty burnin' generators that burn dirty ol' gas that's 'real cheap'  (tell that to atmos) so they get to charge us A FUCKIN' THIRD MORE $$$ on the hottest days so the rich git richer for filthin' up the environment worse. meanwhile, our new 'smart meters' will earn the big filthy rich companies kazillions of $$$ by lettin' them victimize the poor least able to help themselves, with nameless faceless foreigners from indonesia or someplace shaking them down for reconnect fees and additional deposits when they get behind on the deliberately inflated bills.  mr. commisioner, what are they payin' you or yer ne'er do well nephew?

cynical old bastard
cynical old bastard

I'm confused.  Don't people in Texas already pay some of the highest electric rates in the country?  And in order to have enough electricity for the expected usage the regulators are going to approve a rate increase?  Something is wrong with the business model. Thank goodness deregulation was established.

Paul
Paul

 For the data junkies:

http://www.eia.gov/electricity...

OK produced 47% of its electricity with nat gas in 2010 and TX produced 45% of its electricity in 2010 with nat gas.

So if nat gas is such a driver of electricity prices then why is TX ~2.5 cents/kWHr higher than OK?

Paul
Paul

 1) Probably not; and, 2) Nope, finitely stupid, and it is a very large amount of stupid ... but what the hey ... no new taxes ... and ... limited government

Vote for the dead possum ... You know it won't do anything at all.

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