Tall Tales of Texas: Electricity Deregulationcute as a possum or plug ugly

1
Tall Tales of Texas Electricity
Deregulation--cute as a possum or plug ugly?

• Janee Briesemeister
• Consumers Union, Southwest Regional Office
• Presentation to the National Association of State
  Utility Consumer Advocates
• June 17, 2002

2

• "Never ask a man if he's from Texas. If he is,
  he'll tell you on his own. If he ain't, no need
  to embarrass him."

3

• Texas is not California
• Lots of new generation
• Texas market a success
• Texas did it right
• Eyes turn to Texas as deregulation model
• 1 billion in savings
• 1 on RED index

4

• Just cause you put a boot in the oven don't
  mean it's a biscuit.

5

• Operational problems include billing, switching,
  low income discount
• No real consumer savings
• Price increases are pending
• Market manipulation, gaming, secrecy
• No reserve margin standard
• Failure of POLR safety net
• Customer education lacking marketing is
  misleading, incomplete
• Facing the same national trends in wholesale and
  retail markets

6

• Just because a chicken has wings doesn't mean
  it can fly.

7
Texas Market Structure

• ISO has retail and wholesale functions
• No federal jurisdiction in most of state
• Bilateral wholesale market, balancing energy
• Default price (Price to Beat) extends until
  2007 and set by PUC, but has fuel (ie. market
  price) adjustment
• Customer deals only with REP (one bill, etc.)

8
Texas Market Structure

• Provider of Last Resort
• Safety Net for Consumers with No Other Provider
• Carry Out Disconnection for Nonpayment
• Low income discount/weatherization programs for
  the first time
• Electricity Fact Label
• Customer protection/anti-discrimination
• Renewable Portfolio Standard

9
Residential Market Overview

• 5 service areas open to competition
• 5 million eligible customers
• About 150,000 (3) have switched
• 12 REPs certified to serve residential customers,
  6 are affiliated with incumbents
• Most activity in Dallas, Fort Worth and Houston
• Aggregators are buyers representatives
• Law does not make municipal aggregation of
  residential customers easy

10

• "You can always tell a Texan, but you can't tell
  him much."

11
Pilot Project FailureConclusion Full Speed
Ahead

• 6 month pilot intended to test systems PUC had
  power to delay market opening based on pilot
  results
• Pilot initiation delayed for two months
• Price spikes in wholesale market
• Systems were never fully functional
• work arounds continue to this day

12

• I can explain it to you, but I cant understand
  it for you.

13
Phantom savings

• Not a real 6 savings from 1999 prices
• 1 billion claimed savings pegged off effect of
  record high natural gas prices
• Competitive savings about 3-4 per month in with
  New Power in market
• Variable rates can change monthly
• Rate discounts for low-income customers are not
  reaching all eligible customers
• Fuel adjustment loophole is large and
  growingbill increases of 5-6 pending

14
Wholesale market

• Yes, gaming can occur in Texas PUC staff files
  (secret) 7million penalty recommendation against
  Enron Power Marketing, Inc., accused of market
  manipulation via scheduling
• Transmission constraints significant
• New plants Reserve requirements or Wall
  Streetstill under debate while Enron effect
  means fewer plants will be built

15
Declining Standard of Service

• Delays in switching and billing
• Longer wait for new service when moving than
  pre-dereg
• No reserve margin standard is a reliability issue
• Lower standards of protection for consumers who
  leave affiliated REP
• Unhappy customers may face cancellation fee
• Your Rights as a Customer document failed to
  comply with rules

16
Marketplace Hassles

• Despite Facts Label requirement, it is difficult
  to find and to compare prices
• Terms of service agreements are non-standard and
  add confusion
• Education has focused more on selling competition
  than preparing consumers to navigate the market
• Door to door sales complaints of agents making
  misleading or false statements

17
Safety Net has failed

• POLR rates significantly higher than Price to
  Beat, especially during the summer
• Safety Net will drive vulnerable consumers
  further into debt
• Customers dumped by their REP will be in for a
  shock consumers petitioned to avoid POLR for New
  Power customers
• Advance payments and special fees add to the price

18

• If you find yourself in a hole the first thing
  to do is stop diggin'.

19

• Put the emphasis on the consumer rather than
  companies and their profits
• Close PTB price loophole
• Make reasonable, stable prices the priority
• Fix the ERCOT systems
• Transparency, oversight, enforcement in retail
  and wholesale markets
• Adopt a reserve requirement
• Reform Provider of last resort  

20
This ain't my first rodeo.
21

• Redefining the standard of success wont fool
  consumers.
• If competition has to be artificially propped up,
  that tells us the market cant be competitive.
• Just like telecom, making life easier for
  companies has done nothing to benefit residential
  consumers.