Texas PUC Commissioner "Disturbed" About Retail Market Concentration Among Gentailers, Concerned Gentailers Proposing Market Reforms That Would Result In Further Retail Consolidation

November 4, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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During a Texas PUC workshop, Commissioner Jimmy Glotfelty, in questioning a representative from NRG, which has proposed an LSE obligation as a reliability solution, stated he is "disturbed" about the existing retail market concentration among gentailers, and that he is concerned about any market design changes that could only be weathered by such gentailers

Glotfelty stated, "Since 2018, you all have acquired 5 of the 8 largest [REPs in Texas]. And NRG accounts for almost 50%, under 50%, of the residential load in the state. 45%, according to one study. Your acquisition of Direct Energy totally skewed the HHI index which basically said [now] that this market is very concentrated. And that disturbs me. It disturbs me that the crown jewel that we tried to pass to give consumers a choice is becoming: 'You get 1 of 5'. And one of those five corners their generation market. And then there are five that corner their generation market. And there are no small REPs that come in here, because they can't build. You yourself just said, you are trying to get a[n] economy of scale by pairing your retail load with your generation load. Not everybody has that balance sheet and that ability. And that's what scares me about this. It scares me that you all are pushing something that you all can achieve, but nobody else can. Maybe you and your four other brothers, that are the big gentailers, but nobody else can. And that concerns me."

NRG's representative said that a design that would not maintain a robust retail market would ruin it for everyone, including NRG, and such outcome is not the objective. NRG's representative said that concerns such as those raised by Glotfelty would have to be addressed as the proposal is worked through. NRG's representative said that NRG would be the largest buyer under its LSE obligation proposal. NRG's representative said that the number one threat to the retail market is reliability

Chairman Peter Lake, who offered an LSE obligation straw proposal, noted that numerous independent REPs monetize their investments by selling their REP business to one of the gentailers, resulting in the concentration, and he isn't concerned in preserving such a model where the market design just facilitates small REPs selling out to gentailers (rather than being long-term choices)

Commissioner Lori Cobos said that she would go back to the drawing board on alternatives to an LSE obligation, suggesting further development of a strategic reliability service

Commissioner Will McAdams suggested revisiting the current goal for natural gas generation in the statute, and using a gas generation credit program similar to the REC program to achieve the desired investment in dispatchable generation

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