Ordinary Texans Lack Representation in Organization at the Center of the Recent Blackouts

AUSTIN, Texas–(BUSINESS WIRE)–The Electric Reliability Council of Texas, the organization now under fire for the recent blackouts in Texas, has a history of missteps, mismanagement and broken deadlines, according to a new study released Monday to all members of the Texas Legislature.

Commissioned by two non-profit municipal coalitions, The Story of ERCOT documents an alarming increase in borrowing and spending by the organization and a lack of accountability to state officials and regulators. The report shows that self-interested industry players dominate the ERCOT board while Texas consumers, who indirectly or directly pay the entire cost of the organization and the electric market that it helps oversee, have only a limited voice.

The twin coalitions that commissioned the study, the Steering Committee of Cities Served by Oncor and the Texas Coalition for Affordable Power, represent more than 150 cities and political subdivisions in Texas. Jay Doegey, who chairs both coalitions, said the report shows that missteps at ERCOT have needlessly cost Texans hundreds of millions of dollars.

“Texans deserve better than this,” said Doegey. “Residential consumers and businesses — those who actually foot the entire bill for this organization — should have more representation on the ERCOT board. The out-of-control spending, mismanagement and lack of accountability must end.”

ERCOT’s performance during the recent blackouts is expected to become the subject of a key legislative hearing this week. ERCOT also came under fire during rolling blackouts in 2006.

Report also identifies problems with rules governing the wholesale electricity market

Separately, the report also includes important findings relating to the deregulated electricity market in Texas. The market is largely overseen by the state”s Public Utility Commission.

For instance, the report found that a legal loophole allows some electric generation companies to engage in anti-competitive activities. Another loophole prevents the PUC from ordering restitution to consumers or entities harmed by improper market manipulation.

The report also documents instances in which electric generators have sold power at levels well above their marginal cost, a sign that the Texas market is insufficiently competitive. Policymakers have rejected rules that would limit excessive prices in the wholesale market.

“Texans have paid billions of dollars in excess costs because of inefficiencies in the deregulated market,” said Doegey. “We support competition in the electricity market — but competition that works. It’s time to close the loophole on anti-competitive activities and time to fix the broken enforcement process. Big generators must not profit through deceit.”

Based on the findings, the city coalitions recommend the following legislative reforms:

*The Public Utility Commission should be granted greater authority over ERCOT’s borrowing and spending.

*Consumers ultimately pay all costs in the electricity market, but only control a minority of seats on the ERCOT board of directors. This should change.

* The PUC should be granted authority to order restitution to parties harmed by anti-competitive activities. A loophole that allows relatively small generators to engage in anti-competitive behavior should be closed.

The Story of ERCOT is based on months of research, including a review of journalistic accounts, regulatory documents, academic studies and years of data from the United States Energy Information Administration. It is available for download at www.tcaptx.com.