Here Are a Couple of Common-Sense Pieces of Legislation the Texas Electricity Lobby Killed

Categories: Legislature

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Peter Ryan
Electricity issues may not get as much ink as abortion-ban legislation here in Texas, but there were a few bills filed this session -- more like kale than red meat -- that sure as heck would have had a bigger impact on your pocketbook. They were common-sense and pro-consumer protections and, obviously, they died pitiless, ignominious deaths in Austin.

For example, Representative Sylvester Turner tacked on a provision to a sunset bill that would have required the Public Utility Commission to conduct a cost-benefit analysis before it implements any change in the electricity market that may cost consumers $100 million or more. The Texas House passed the bill and the Senate took it up. Senator Troy Fraser offered up a similar -- though watered down -- amendment that raised the study trigger to an even $1 billion. He called the need for this kind of study an essential "transparency issue."

Apparently, not many shared his views, because Fraser eventually withdrew the amendment.

Have you ever attempted to decipher your electricity contract? Senator Wendy Davis and Turner proposed that each retail electricity provider offer at least one easy-to-understand, fixed-rate contract whose terms are vetted by state regulators. AARP has long supported such contracts and thought they made eminent good sense for its membership. You may be noticing a pattern here. The bills languish in committee.

Not all electricity-related legislation failed. Texas utilities, including Dallas-based Oncor, are collecting hundreds of millions of dollars from ratepayers to offset federal tax liabilities. In Oncor's case, however, the Texas Coalition for Affordable Power says it hasn't paid a dime to the IRS in years. The PUC has the ability to reconsider a utility's tax liabilities. Or, at least, it does until Governor Rick Perry signs a bill that would strip the regulator of this ability.

That such sensible legislation fails while phantom-tax legislation thrives should come as no big surprise. The Association of Electric Companies of Texas is a powerful lobby, employing employing some 34 lobbyists last year. According to Texans for Public Justice, four of the top five lobbying clients during this legislative session were in the electricity sector. Dallas-based Energy Future Holdings comes in second, and its poles-and-wires utility Oncor comes in fourth. EFH and its subsidiaries, all told, spent $6.2 million on lobbying contracts this session, according to TPJ.

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...this is why stuff that everybody needs and uses every day like electricity, gasoline, etc. should be controlled and regulated by an agency that represents the people instead of the "blood suckers" in the business community...

ScottsMerkin topcommenter

wait, Im subsidizing a tax bill for Oncor that either they dont pay or doesnt exist?  And I thought it was supposed to be easier to shop for electricity today.  To me its more difficult, trying to add the kw/hr $ and the distribution fee and all the other crap is a joke.  Bravo Mr Moccasin, I rate this 4/5 loafers

ThePosterFormerlyKnownasPaul topcommenter

@ScottsMerkin You are now.

Regulated utilities often have to keep two separate sets of books.  One for the utility regulator and one for the IRS.  The chief differences between the two are: 1) Depreciation schedules; and, 2) Federal Taxes.

In the regulatory framework, the utility is allowed to book 100% of the federal tax liability to the rate structure.  However, when past expenses are reviewed the actual federal taxes paid are considered and may result in a rate adjustment.

Here our esteemed legislators have said that only the federal tax liability need be considered.  They are receiving reimbursement for an expense that they may not actually incur.  Essentially, the regulated utility now earns a greater rate of return on their invested capital.

The basic economic concept in regulated utilities is that the expenses of operating and maintaining the utility are to be passed through to the consumer subject of course to the requirement that the operating and maintenance expenses are reasonable, prudent and necessary.  Then the regulated utility receives a return on the invested capital.


@ScottsMerkin Great, now I have my own vagina-style rating system. Yes, ratepayers subsidize Oncor's tax bill, which goes to its parent company, EFH. EFH hasn't paid any federal income taxes in a while. It's all perfectly legal.

Sotiredofitall topcommenter

@ThePosterFormerlyKnownasPaul @ScottsMerkin

Not questioning your tax example but I think it goes beyond regulated utility since EFH is a deregulated utility?

In 2002, the state of Texas deregulated the Texas electric market, under deregulation, electric utility companies were allowed to chose deregulation.  

1998 to 2007, the company was known as TXU Corporation until its $45 billion leveraged buyout by Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs Capital Partners. That purchase was the largest leveraged buyout in history. As of February 2013, the company has been described as "struggling".

ScottsMerkin topcommenter

@brantley.hargrove1 and I was mad about the .94 Im paying arlington to subsidize new trucks for republic which constitutes the citizens covering 90% of the cost of the trucks and and new 64 gallon can recycling program

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