How well is energy deregulation working?
By: DAN WALLACH, The Enterprise 05/22/2005

Remember last May? Southeast Texas stayed cool throughout almost the entire month.

The weather was great.

Air conditioners didn't really start humming until June.

No such luck this year, which is why certain movements along the electric front are of more than passing interest.

On Tuesday, the state Senate is expected to vote on a bill that would allow Entergy Texas to ask the Public Utility of Texas for financial relief because of the more than $130 million the utility has spent on its transition to retail competition.

There is no retail competition in Southeast Texas because there isn't independent transmission of wholesale electricity crossing state lines for retailers to find, buy and ship to potential customers here.

Southeast Texas is not like most of the state, which is served by an in-state grid. That grid is run by an independent authority that guarantees transmission will be open to retailers.

That means Energy Texas still is regulated by the Public Utility Commission, as are a handful of other utilities along the state's border.

At first glance, consumers might want the ability to shop around for the best deal they can get. Looking into it a little deeper shows competition might not be delivering the goods.

A Wall Street Journal article on Friday suggests deregulation isn't producing the kind of savings originally envisioned by competition.

Electric customers who stayed with the incumbent utilities are paying an average of 43 percent more from January 2002 to October 2004, the Journal reported.

That's because of higher fuel prices, said Joe Domino, chief executive of Entergy Texas.

"That's part of how the markets are set up. Texas put into its (deregulation) law that what happened in California wouldn't happen here, which is adjusting for fuel prices," Domino said.

In the California deregulation, utilities could not recoup their rising fuel costs - mostly natural gas - and that gave rise to all kinds of mischief. Some former Enron executives are on trial in connection with some of that.

The bulk of Entergy's monthly bill is for fuel - current costs and a surcharge to pay for fuel the utility burned six months ago to generate electricity. The state allows a regulated utility to pass through those costs to customers. Utilities cannot profit from that pass-through.

Competition for Southeast Texas electric customers won't happen until there is an assurance of open wholesale transmission. Eleven of the nation's largest retailers and commercial property owners recently sent a letter to President Bush endorsing it.

Bush, of course, agrees with them, and put at the head of the Federal Energy Regulatory Commission a person he believed could achieve it.

Pat Wood III, originally of Port Arthur, and a one-time chairman of the Public Utility Commission of Texas when deregulation passed the Legislature, didn't achieve it during his tenure at the federal agency. Wood is moving back to Texas to raise his family.

Copies of the letter the business group sent to Bush also went to the chairs of the House Energy and Commerce Committee and the Senate Energy and Natural Resources Committee. Markup on federal energy legislation is beginning.

And thermostats on air conditioners all over Southeast Texas are clicking on, and will stay on for the next few months.

But we'll always have last May.

 

dwallach@hearstnp.com


ŠThe Beaumont Enterprise 2005