Texas ruling a victory for potential electricity competitors

Texas electricity ratepayers could get a credit instead of extra charges on their transmission and distribution bills when competition begins in 2002, under a Wednesday ruling by the Public Utility Commission of Texas. Vanus Priestley, Texas business leader NewEnergy, said the decision goes a long way in eliminating the rate distorting effect of excessive mitigation of stranded costs.


Kate Thomas
OGJ Online

Texas electricity ratepayers could get a credit instead of extra charges on their transmission and distribution bills when competition begins in 2002, under a Wednesday ruling by the Public Utility Commission of Texas.

The commission "has done a good job with this decision," says Vanus Priestley, Texas business leader NewEnergy. "It shows they are really dedicated to creating a competitive market."

He said the decision goes a long way in eliminating the rate distorting effect of excessive mitigation of stranded costs. Potential electricity retail competitors, including Shell Energy Services, a unit of Shell Oil Co.; Enron Energy Services, a unit of Enron Corp.; and NewEnergy Texas, a unit of AES Corp.; earlier filed testimony challenging stranded cost demands by Texas utilities.

They argued utilities have �negative� stranded costs and consumers should not be stuck with extra charges attached to transmission and distribution rates. They argued for a credit instead. Competitors are concerned about what the wires charges will be. The higher the charge the more difficult it will be to offer electricity at a price that will be competitive with the utility's prices.

Negative stranded costs mean the deregulated market value of generation assets is greater than what it would be under regulation. Several years ago under different market circumstances, stranded costs were anticipated to be hefty.

But changes in the market have altered the calculations. Power and natural gas prices are higher. That means, for example, Texas utilities' electric generation assets don�t need to be subsidized in the competitive market by collecting additional money from customers through added on wires charges, potential competitors argue.

The legislation that provided the framework for deregulation allows for a reckoning or �trueup� of the collection of stranded costs 2 years after competition begins. But new market participants say overcollecting stranded costs for the first 2 years of competition would have detered new competitors from entering the market.

In a memorandum, Commissioner Judy Walsh said "where there has been mitigation, the statute clearly forbids over recovery of stranded costs." Use of a credit will reduce the total non bypassable charges for all retailers of electricity. The retailers in an effort to compete among themselves will then pass the credit through to customers, she said.

More in Companies