When is a deal not a deal? It may be a question worth asking your retail electric provider — especially if your provider is TXU or Reliant and if you plan on signing a fixed-rate contract with them.
In official filings this month, TXU, Reliant and several other retail electric companies (collectively serving more than 2 million Texas customers) say they should have the right to increase prices included in fixed-rate contracts if Texas regulators follow through with a controversial proposal. That’s because the proposal could impact their bottom line by driving up wholesale power costs.
In a May 29th filing, for instance, TXU acknowledges that hiking already agreed-upon retail prices would likely create “a negative customer experience” but claims it may have little choice if wholesale power costs significantly increase. Officials representing Reliant, Green Mountain and others have filed similar comments with the Public Utility Commission.
What’s prompting this potential stampede of deal-breaking are discussions at the PUC to dramatically increase price caps in the state’s wholesale energy market. The theory is that a higher cap will lead to higher profits for big electric generation companies. The generating comanies, in turn, will then invest in new power plants. But generators offer no guarantees that they’ll not simply pocket the extra money and the PUC has not conducted any analysis as to the potential cost impact to Texas homes and businesses.
The cap could be increased by 50 percent before August — and then go up even more later. And now, with murmuring about breaking fixed-rate deals with consumers, the anxiety over the proposed change is growing.
“If the PUC makes this technical change to the wholesale market, then keep a close eye on your bill,” writes Elizabeth Souder of the Dallas Morning News. “Most retailers protect themselves from swings in wholesale prices by buying insurance, called hedges. But a retailer who hasn’t bought enough insurance could face steep wholesale costs on very hot days, when electricity demand surges and wholesale prices go berserk. That retailer might decide to break its fixed-rate contracts and hike prices. And some retailers think they have every right to do so.”
Have an opinion ? Don’t be shy. You can comment at the end of this post, write the Texas Public Utility Commission at PUC Central Records, P.O. Box 13326, Austin, TX, 78711-3326 (be sure to reference Projects #37897 and #40268), or write your local lawmaker at the mailing address found at this link.
Is a policy analyst consultant for TCAP, a coalition of political subdivisions in Texas that purchase electricity in the deregulated market for their own governmental use. Because energy costs are typically a significant budget item to our members, TCAP is consistently looking for ways to save our members money, through cost-saving contracts, energy efficiency or demand response programs.