Statement of CAPP general counsel Geoffrey Gay relating to NRG’s announced acquisition of Reliant.
Today’s announcement that electric generation giant NRG will acquire Reliant’s retail business for $388 million could spell more trouble for consumers. The Texas electric deregulation law was adopted in 1999 with a prohibition against generators controlling more than 20 percent of the statewide market. The problem is that a handful of companies – NRG among them — already control far more than 20 percent in the smaller regional markets where they operate. These companies are the proverbial big fishes in small ponds. Such large operators have the ability to affect wholesale energy prices, even unintentionally.
With today’s announcement, NRG theoretically could extend its market power because its retail arm will control through contract a large percentage of power locally, adding to the control NRG already possesses through ownership of generation. Lawmakers should take into account this fact as they consider reforms this year. A big fish is about to get even bigger – and instead of confronting the power of a regulated monopoly, consumers could find themselves confronting an unregulated monopoly.
The state legislature in 2007 considered legislation that would put new limits on how much generation a single company can control. Under intense pressure from the industry lobby, that legislation failed. It’s time to reconsider those reforms.
Is a policy analyst for TCAP, a coalition of cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.