Bush Should Look To Texas If He Doesn’t Want the Nation To Become California

Texas is beginning to look more and more like California. That might sound good to folks like me living here on the Left Coast, but for the Bush Administration touting the concept of electricity deregulation as the solution to our power supply woes, what is going on in our president’s home state is proving that the devil is always in the details. Putting oil and chemical companies ahead of ordinary consumers is never a good idea, even in Texas.

The Public Utilities Commission of Texas (PUCT) finally issued its decision this past November in a regulatory proceeding involving CenterPoint Energy of Houston, Texas, a transmission & distribution (T&D) utility serving 1.8 million customers in the fourth largest city in the US. The long awaited PUCT decision — delayed three months at a cost of $27 million — belies comprehension. Not only will it increase ratepayer bills for most Texans, but could frustrate efforts to develop wind power in a state with one of the best wind fuel resources in the country. According to the requirements of the Texas electric deregulation law signed into law in 1999 by former Texas governor George W. Bush, T&D utilities such as CenterPoint were to recoup so-called “stranded costs,” a term used to describe past investments, in a “true-up” proceeding this year. CenterPoint “true-up” total is $3.8 billion; the PUCT disallowed $1.7 billion of this amount. In essence, the PUCT ruling erased all the profits of CenterPoint’s regulated electricity and natural gas businesses since deregulation went into effect in Texas. The case is now likely to take two years in the courts, and CenterPoint is likely to recover most of the $1.7 billion disallowed by the PUC, plus interest. If you look at all the numbers involved in tying this case up for yet another two years, Texas ratepayers end up sacrificing a half billion dollars. Why should Californians care about happens in that big, bad red state of Texas? Here are two good reasons: First, our current Governor Schwarzenegger is about to make another push for deregulation in California. Second, President Bush is about to do the same at the federal level, the level of government that is the primary regulator of the nation’s largely ignored transmission highways. The best way to harness the market to protect ratepayers against see-sawing natural gas prices is to add power sources such as wind power, which has zero fuel costs and is currently cheaper than natural gas power plants. Financially starving T&D utilities that build the transmission lines necessary to bring more wind into the Texas electricity system is just not a prudent thing for regulators to do. Transmission bottlenecks permit existing power generators (like oil and chemical companies) to raise prices, knowing that competitors can’t hook up to the grid to challenge them. One of the main reasons electricity prices got so wacky in California back in 2000 and 2001 was transmission bottlenecks that resulted in wind power being dumped from the grid because there was no room on constipated transmission highways. The Texas electricity deregulation law has been held up as a success story primarily because of the addition of wind power to hedge against high natural gas prices. Without new transmission lines being built by the likes of CenterPoint, Texas could still become another California, a prospect that should send shivers down the spine of folks residing in the self-described energy capital of America. Already, antiquated transmission lines are frustrating wind developers trying to bring their clean and cheap power to urban consumers in Austin, Dallas and Houston from West Texas. This PUCT ruling only makes matters worse. Interestingly enough, the PUCT was under intense political pressure from large industrial oil and chemical companies (which happen to enjoy the lowest electricity rates in the state and recently ran up oil prices to record highs) to slash what CenterPoint felt was its due; no residential ratepayer groups or environmental groups even bothered to get involved. The PUCT still has a week or two to revise the agreement to strike a better balance between what is legally due to CenterPoint according to the terms of the deregulation legislation, and the stated desire of the utility to work with regulators to solve the transmission problems that are currently contributing to high energy bills. Texans preened they knew better when California’s deregulation law drove prices up. Talk is cheap as the PUCT is proving it would rather favor oil and chemical companies over residential consumers. The Bush Administration might want to check in with the folks back home before they begin their hard sell on a national energy strategy focused on deregulation. What is currently going down in Texas could be a harbinger of things to come in Washington, DC and Sacramento – and would be a disaster for both economy and environment. About the author… Peter Asmus of San Francisco, California has been covering national energy issues for 15 years. He is author of Reaping The Wind and Reinventing Electric Utilities, both published by Island Press.
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