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Texas Coalition for Affordable Power Updates Report on Impacts from Deregulation
January 24, 2012
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Copyright 2010-
The Texas Coalition for Affordable Power has released an updated version of its report of electric deregulation in Texas.
Deregulated Electricity in Texas: The First 10 Years of Retail Competition is based largely on a 2009 report by TCAP, but, among other things, includes updated commentary on pricing and other recent events.
Although TCAP claims that, "[e]lectricity prices above the national average have cost Texans more than $11 billion during the 10-year history of retail competition," TCAP also concedes that, "for the first time since the state deregulated its electricity markets, it appeared that annual average residential electricity prices in 2011 would dip below the national average."
TCAP also takes aim at the ERCOT's low reserve margin as a negative consequence of deregulation. Though Matters does not wish to minimize the "serious reliability challenges" facing ERCOT, a reserve margin, ideally, at or just above the reliability target should be viewed as one of the strongest benefits of electric restructuring, because customers aren't paying for gold-plating of system. Although TCAP praises the fact that, "Texas had the highest generation reserve margins in the nation prior to the implementation of the deregulation law," it does not examine how much customers paid in excess costs to support unnecessary capacity and high reserve margins.
In any event, even as it faults the low reserve margins, TCAP also balks at changes meant to assure resource adequacy.
Citing both calls for a capacity market as well as other changes meant to ensure true scarcity prices, TCAP said that, "[c]onsumer groups expressed alarm, especially given that generation owners were offering no guarantees that these artificial price supports would lead to new plant construction."
"The proposals also raised issues of basic fairness. That is, generators pushed competition and supported it when prices were high, but eagerly sought artificial price supports when they felt the system was failing to deliver to them sufficient profits. For consumers, generators were offering 'a heads I win, tails you lose' vision of deregulation," TCAP said.
While Matters does not disagree with the last sentiment, a trade-off resulting from eschewing administrative price support for generation -- whether through capacity payments or the old rate of return regulation -- must be the acceptance of reserve margins centered around the reliability target, with little or no cushion.
TCAP said that, "Policymakers should look for ways to stimulate growth in generation resources other than through price supports and subsidies that are inconsistent with the principles of competition and a free market. Policymakers should reject all proposals for 'capacity markets,' in which generators get paid even when they do not operate. This will only add to consumer bills."
More generally, TCAP concluded by saying, "Policymakers should strive to make the state's deregulated electricity system as efficient and fair to Texas consumers as possible. Re-regulation is not the answer. Instead, the Public Utility Commission should pursue a balanced approach with regards to the state's electricity market. Consumer protection should have equal footing with the promotion of competition."
Consistent with an earlier recommendation, TCAP said that REPs should be required to offer uniform, standard-offer products.
Email This StoryCopyright 2010-
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