Le Jacquelope
Loves Spam
- Joined
- Apr 9, 2003
- Posts
- 76,445
So what did the interfering hand of the Government do wrong this time?
http://www.star-telegram.com/804/story/672053.html
Surge in power prices may portend long, costly summer in Texas
By R.A. DYER
Star-Telegram staff writer
AUSTIN -- In a sign of tough times ahead for ratepayers, electric wholesale prices have spiked to nearly unprecedented levels this week, and regulators now warn that thousands of Texans who have been involuntarily switched to alternative power providers may end up with shockingly high bills.
The tumult in the state's deregulated power market also appears to have taken a toll on electric retailers, with two going out of business this month alone and analysts predicting more failures in the near future.
With an eye toward the upheavals, the Texas Public Utility Commission on Thursday called an emergency meeting in which commissioners warned of painfully high prices for Texans who have been involuntarily sent to default providers because their regular electric companies went belly-up.
Commissioners signaled that default providers should take it upon themselves to lower their rates but also urged Texans getting stuck with service from those providers to immediately shop for better deals.
"Get off POLR now!" said Commissioner Paul Hudson, referring to the default "provider of last resort" electric companies.
But analysts say it's not just POLR customers who need to worry. As wholesale prices go up, so have rates charged to Texas home consumers and businesses, they say.
Since Jan. 1, 12-month fixed-rate electric prices have gone up nearly 40 percent for residential customers, according to an analysis by an online electricity shopping site.
And those prices will probably continue going up this summer and beyond, said Chris Brewster, a consumer representative at the Electric Reliability Council of Texas, which manages the state's power grid.
Brewster blamed increasing fuel costs and said that wholesale market spikes also put pressure on retailers.
"This is real cause for concern," Brewster said. "The price spikes may not affect the bill that a regular customer pays at this time, but the fact that [wholesale prices] can and do go so high occasionally makes [retailers] tend to increase the prices that they charge."
Brent Moore, chief executive of SaveOnEnergy.com of Dallas, also expressed concern.
"Natural gas prices are up to where they were in the year of [Hurricanes] Katrina and Rita," he said. "To my knowledge, electricity has never been this high before the hot summer weather."
Market failures
In the past month, two companies, Bridgeport-based PreBuy Electric and Houston-based National Power, failed to keep up with their financial obligations, and as a result, thousands of their customers were forcibly switched to providers of last resort.
Rates charged by POLR companies are typically higher than those of other electric retailers. However, increases in the cost of wholesale power have driven up POLR prices even more.
In the case of National Power, some customers on fixed-rate deals who were using about 1,000 kilowatt-hours of power a month could have expected National Power bills of about $110, according to calculations from Public Utility Commission data.
However, some of those same customers who were switched to a provider of last resort could pay $200 to $300 for the same usage.
And given that summer usage goes up, the difference in bills could be even more dramatic.
PUC Chairman Barry Smitherman said that anybody who gets switched to a provider of last resort should switch service plans as quickly as possible. "We want to get the word out -- the POLR rate will be high," he said.
The price spikes
Those rates are a function of certain prices in the wholesale electricity market. Transactions in that market are managed by the Texas power grid.
According to information from the grid, the wholesale prices in question spiked for 15 minutes Wednesday from about $175 per megawatt-hour to the maximum price allowed by law: $2,250.
The market experienced several other spikes of more than $1,000 in recent days, and has seen spikes to $2,250 on a handful of occasions since that price cap went into effect three months ago.
By contrast, prices in that segment of the wholesale market typically hover at $50 to $100 a megawatt-hour.
It's unclear what's causing the spikes, because they are not correlated directly to natural gas costs, analysts say.
But Dan Jones, an independent monitor at the power grid, said he suspects that they result from problems with the design of the state's deregulated wholesale market.
He said that a $300 million market overhaul scheduled to be completed next year should alleviate the problem.
Geoffrey Gay, an attorney with expertise in utility matters, said the problem may be more serious. He has little confidence in what he describes as an overly expensive market redesign but adds that the current system isn't working either.
"At some point, policymakers are going to have to realize that this [electric deregulation] path we are on is creating some long-term economic instability," Gay said.
Consumer advocate Randy Chapman also sees problems ahead and said the PUC should insist on more financial and performance assurances from electric companies that do business here.
Otherwise, consumers won't have confidence that when they select an electric company, it won't go abruptly out of business, he said.
"Anyone with two SUVs, a Persian carpet and $100,000 can call themselves an electric company in Texas," he said.
rdyer@star-telegram.com
R.A. DYER REPORTS FROM THE STAR-TELEGRAM'S AUSTIN BUREAU, 512-476-4294.
http://www.star-telegram.com/804/story/672053.html
Surge in power prices may portend long, costly summer in Texas
By R.A. DYER
Star-Telegram staff writer
AUSTIN -- In a sign of tough times ahead for ratepayers, electric wholesale prices have spiked to nearly unprecedented levels this week, and regulators now warn that thousands of Texans who have been involuntarily switched to alternative power providers may end up with shockingly high bills.
The tumult in the state's deregulated power market also appears to have taken a toll on electric retailers, with two going out of business this month alone and analysts predicting more failures in the near future.
With an eye toward the upheavals, the Texas Public Utility Commission on Thursday called an emergency meeting in which commissioners warned of painfully high prices for Texans who have been involuntarily sent to default providers because their regular electric companies went belly-up.
Commissioners signaled that default providers should take it upon themselves to lower their rates but also urged Texans getting stuck with service from those providers to immediately shop for better deals.
"Get off POLR now!" said Commissioner Paul Hudson, referring to the default "provider of last resort" electric companies.
But analysts say it's not just POLR customers who need to worry. As wholesale prices go up, so have rates charged to Texas home consumers and businesses, they say.
Since Jan. 1, 12-month fixed-rate electric prices have gone up nearly 40 percent for residential customers, according to an analysis by an online electricity shopping site.
And those prices will probably continue going up this summer and beyond, said Chris Brewster, a consumer representative at the Electric Reliability Council of Texas, which manages the state's power grid.
Brewster blamed increasing fuel costs and said that wholesale market spikes also put pressure on retailers.
"This is real cause for concern," Brewster said. "The price spikes may not affect the bill that a regular customer pays at this time, but the fact that [wholesale prices] can and do go so high occasionally makes [retailers] tend to increase the prices that they charge."
Brent Moore, chief executive of SaveOnEnergy.com of Dallas, also expressed concern.
"Natural gas prices are up to where they were in the year of [Hurricanes] Katrina and Rita," he said. "To my knowledge, electricity has never been this high before the hot summer weather."
Market failures
In the past month, two companies, Bridgeport-based PreBuy Electric and Houston-based National Power, failed to keep up with their financial obligations, and as a result, thousands of their customers were forcibly switched to providers of last resort.
Rates charged by POLR companies are typically higher than those of other electric retailers. However, increases in the cost of wholesale power have driven up POLR prices even more.
In the case of National Power, some customers on fixed-rate deals who were using about 1,000 kilowatt-hours of power a month could have expected National Power bills of about $110, according to calculations from Public Utility Commission data.
However, some of those same customers who were switched to a provider of last resort could pay $200 to $300 for the same usage.
And given that summer usage goes up, the difference in bills could be even more dramatic.
PUC Chairman Barry Smitherman said that anybody who gets switched to a provider of last resort should switch service plans as quickly as possible. "We want to get the word out -- the POLR rate will be high," he said.
The price spikes
Those rates are a function of certain prices in the wholesale electricity market. Transactions in that market are managed by the Texas power grid.
According to information from the grid, the wholesale prices in question spiked for 15 minutes Wednesday from about $175 per megawatt-hour to the maximum price allowed by law: $2,250.
The market experienced several other spikes of more than $1,000 in recent days, and has seen spikes to $2,250 on a handful of occasions since that price cap went into effect three months ago.
By contrast, prices in that segment of the wholesale market typically hover at $50 to $100 a megawatt-hour.
It's unclear what's causing the spikes, because they are not correlated directly to natural gas costs, analysts say.
But Dan Jones, an independent monitor at the power grid, said he suspects that they result from problems with the design of the state's deregulated wholesale market.
He said that a $300 million market overhaul scheduled to be completed next year should alleviate the problem.
Geoffrey Gay, an attorney with expertise in utility matters, said the problem may be more serious. He has little confidence in what he describes as an overly expensive market redesign but adds that the current system isn't working either.
"At some point, policymakers are going to have to realize that this [electric deregulation] path we are on is creating some long-term economic instability," Gay said.
Consumer advocate Randy Chapman also sees problems ahead and said the PUC should insist on more financial and performance assurances from electric companies that do business here.
Otherwise, consumers won't have confidence that when they select an electric company, it won't go abruptly out of business, he said.
"Anyone with two SUVs, a Persian carpet and $100,000 can call themselves an electric company in Texas," he said.
rdyer@star-telegram.com
R.A. DYER REPORTS FROM THE STAR-TELEGRAM'S AUSTIN BUREAU, 512-476-4294.
