Proposals under consideration by the PUC could lead to higher wholesale energy costs.


New rules under consideration by Texas regulators could result in higher energy prices as early as this summer — and then even higher prices in future years.

The Public Utility Commission of Texas — the state agency that oversees the state’s electricity market — last week signaled its willingness to adopt the new rules to address ongoing concerns over the state’s energy reserves. The Commission’s goal is to use high prices to encourage additional generation construction as a bulwark against future energy shortages and blackouts.

Under one of the proposals a price cap in the wholesale energy market would increase to $4,500 per megawatt/hour by August. Currently the cap stands at $3,000 — or about 80 times higher than typical prices in the wholesale energy market.

The Public Utility Commission will then consider increasing the cap in later years to even higher levels, including a cap that may exceed $10,000. That would far exceed similar caps elsewhere in the United States and could bring Texas in line with an extremely high $12,500 megawatt/hour cap in Australia.

Commissioner Kenneth Anderson questioned the impact of potential rules changes this summer on existing electricity contracts.

The changes and others under consideration by the PUC are designed to increase some Texas wholesale energy prices, which have declined in recent years.  “If we don’t get investment in the generation market, we are in a world of hurt,” said Chairwoman Donna Nelson. But the changes also could indirectly impact how much Texas residential, commercial and industrial customers pay for power.

PUC commissioner Ken Anderson expressed concern that increasing the cap by this summer may have an impact on existing electricity contracts. “I don’t know what signal it sends, raising the cap this summer, other than panic,” he said. Generators will be “carting money away … in Mack trucks.”

The proposed changes are not final. The PUC will continue to consider them during future meetings.

The Texas Coalition for Affordable Power, a coalition of cities that purchases electricity in the deregulated market, urged the PUC Commissioners to consider the most cost-effective responses to the state’s ongoing generation challenges.   “Cost and reliability both matter,” said Jay Doegey, TCAP board president. Mr. Doegey also commended the PUC for their diligent consideration of a very difficult issue.

You can read more about the proposed changes at the PUC’s electronic file sharing webpage. Search for docket no. 37897. You can find a link to the a PUC debate on the issue here.

— R.A. Dyer

Who is the Texas Coalition for Affordable Power?

TCAP is a coalition of more than 160 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.