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September 7, 2001    (512) 463-0300

Texas Electric Deregulation Efforts Get Mixed Reviews

AUSTIN--Texas' fledgling efforts at creating an open marketplace for electricity were given a mixed report card at today's meeting of the Joint Legislative Oversight Committee on Electric Utility Restructuring at the Capitol in Austin.

Industry representatives told a mixed group of senators and representatives that Texas doesn't have the problems faced by other states but the system is by no means perfect. While Texas has generating capacity that's adequate for its current needs, the bookkeeping and pricing structures need work.

Much of the morning was taken up by stiff questioning of representatives of the Electric Reliability Council of Texas (ERCOT), the corporation that administers the state's power grid. Lawmakers were concerned with media reports that the price of electricity soared very briefly immediately after deregulation began, saying such instances could undermine public confidence in deregulation. ERCOT members replied that in any transition from a closed to an open marketplace, such temporary price spikes were unimportant, since they really don't show up in customers bills. An additional problem this summer was unusually high demand at the time deregulation actually took effect.

ERCOT says the market is generally working as planned, with wholesale buyers and sellers of electricity working well together. But on the retail end, Representative Steve Wolens of Dallas reported that 70 thousand Texas homes have signed up for deregulated power under this pilot program but only a fraction have actually been switched over. Both sides conceded that some of the problem stems from a lack of understanding in regard to the terminology of the industry.

There were also serious questions as to how the electric industry is keeping its books. When Senator David Sibley of Waco attempted to clarify whether audits of the industry had been made public, witnesses were unable to agree whether proper audits had ever been done. Senator Troy Fraser of Horseshoe Bay commented that even though ERCOT is a private entity and not subject to the Open Records Act that it needs to be open, saying "People are watching here to see if there's a problem...it's better to get it out!"

Shipping electricity across Texas can also be a problem. Under the new plan, generators in South Texas have been sending an unusually large amount of power to customers in North Texas, sometimes overloading the existing grid. ERCOT says this is because newer facilities in the south can generate power more cheaply than old power plants in the north, so it makes more sense for those power companies to buy electricity elsewhere. ERCOT says that new plants coming on-line over the next couple of years in North Texas should help alleviate the overload problem.

The afternoon session began with a discussion of what happens to electric customers who don't pay their bills. Rep. Sylvester Turner of Houston said he was concerned that people who get shut off from one company's service due to non-payment could wind up paying as much as fifty percent higher rates with another company. He said many of those who traditionally get disconnect notices include low-income homeowners. Senator Sibley replied that while a small group of non-paying customers could see higher bills, the vast majority would see lower charges.

The Joint Legislative Oversight Committee on Electric Utility Restructuring is chaired by Senator David Sibley and Representative Steven Wolens. Members include Senators Teel Bivins of Amarillo, Frank Madla of San Antonio, Jane Nelson of Flower Mound, and John Whitmire of Houston. House members include Representatives Kim Brimer of Fort Worth, David Counts of Knox City, Debra Danburg of Austin and Sylvester Turner of Houston. The committee is charged with overseeing the implementation of SB 7, the electric utility restructuring bill and with monitoring its effectiveness. The committee recessed subject to call of the chair, with the next meeting at a time and place to be announced later.

You can watch the public hearing from the Senate RealMedia archives.

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