The “small fish swim free” rule — a controversial regulation that critics say could leave the door open to manipulation of the Texas energy market — lives on.
By a 3-0 vote last week, members of the Texas Public Utility Commission rejected a request to nullify the rule. However, one commissioner said the agency should keep an eye on the issue.
Under the “small fish swim free rule” generation companies that control less than 5 percent of the state’s wholesale energy market are automatically deemed too small to possess market power — and so therefore cannot be prosecuted for abusing it. Critics say the 8-year-old rule lets these “small fish” generators off the hook for questionable market practices.
Raiden Commodities, a Virgin Islands-based company that trades wholesale energy in Texas, filed on April 21 a regulatory petition calling for the PUC to rescind the rule. Raiden also filed a separate federal lawsuit accusing a generator of improperly manipulating the energy market for financial gain.
In its claims, Raiden cites findings by the state’s energy market monitor that some small-fish generators — not withstanding their size — possess the ability to significantly drive up wholesale prices when energy surpluses are running short. This in turn can lead to higher prices for home consumers.
Raiden’s federal lawsuit remains pending. However, the PUC on Friday rejected the company’s regulatory petition.
PUC chair Donna Nelson said that if a “small fish” company were to attempt to bid its power into the market at excessively high prices, other generators would enter the market. “It’s a short-term issue — and one that the market handles well,” she said.
Commissioner Kenneth Anderson said the panel vetted the issues raised by Raiden when it originally adopted the small-fish rule. “The question is: where do you draw the line?” he said, referring to the 5-percent threshold.
Commissioner Brandy Marty said the petition raises “an interesting question” and that she was “glad that this was brought up” — but that she did not want to amend the rule at this time. “To the extent that a small fish is big enough to have an impact, we should keep an eye on it,” she said.
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.