I revieve reader questions on a regular basis about how the PUC handles their ranking system. The general thrust is “I see there is a state rankings system for Texas electricity, but it looks dated.” Or “I don’t see the electricity provider that I’m interested in listed on the PUC’s page. What gives?” I wrote an article in early November about some serious flaws and confusing inconsistencies in how the PUC updates and lists the Texas retail electricity providers (REPs) in their complaint scorecard in attempt to address some of these FAQs. I then posted an update in early January pointing out that yet again the PUC had fallen behind and failed to update their complaint scorecard. I’m not sure what the problem is, but Continue reading “PUC Continues to Drop Ball on Consumer Advocacy?” »
After writing a post asking some questions about whether or not it was possible if the Texas electricity market was being manipulated on 06/26/12, I have since received a fair amount of attention. On top of the previously linked articles, my post was also mentioned at the bottom of another Houston Chronicle piece discussing the state of Texas generation capacity as well as an article the Texas Energy Report. The most interesting to me, however, Continue reading “Texas Electricity Manipulation Questions Possibly Reveal Larger Concerns” »
In what I consider to be extremely poor tidings, Paul Ring of Energy Choice Matters is reporting that a judge in the Texas Courts is going to allow AEP to sell retail electricity as “AEP Retail Energy” under the license name AEP Texas Commercial & Industrial Retail Limited Partnership. I’ve written about this extensively before (part 1, part 2, part 3, part 4) and things were looking up when the PUC (Public Utilities Commission of Texas) formally weighed in against AEP’s brand licensing, but apparently Continue reading “AEP Gets Approval To Sell Texas Electricity as AEP Retail Energy” »
Most people probably haven’t heard of TCAP, the Texas Coalition for Affordable Power. Although, if you’ve read the TER Blog or visited the TER Facebook page with any regularity, you might have seen me comment about TCAP’s public relations face, Recharge Texas. So who is TCAP? TCAP is a membership group of local community politicians who have banded together to negotiate bulk electricity rates. Basically they’re politicians who charge a membership fee and percentage of usage to negotiate the electricity contracts for local government entities:
Recharge Texas is back to their usual tricks and painting deregulated electricity in Texas in a negative light. Even worse is they have managed to wrangle a position blogging for the Houston Chronicle’s Fuel Fix blog, which I’m concerned will give them further false credibility.
Anyway, Recharge Texas is once again claiming that Texans are paying more in deregulated areas than they in regulated areas. The problem with this argument is that the numbers they use to support their theory are supplied by the United States Energy Information Administration (EIA).
Now, don’t misunderstand me, there’s nothing incorrect about the EIA’s numbers, other than they’re typically 2 years old at any given the time. The problem is that the EIA can only compare average regulated electricity rates to average deregulated electricity rates wholesale. What that means is that deregulated averages must include all of the people who don’t shop for electricity, don’t leverage the market choices to their financial advantage, and the people who still don’t know or understand they have electric choice.
Believe it or not, almost half of Texans in deregulated areas are paying as much as 50% more than the competitive market rates for electricity. Because of this the EIA information is a poor source for comparison because it skews deregulated rates high. Recharge Texas then uses these inflated numbers to make a blanket statement that deregulated electricity is more expensive than in regulated areas. When the fact of the matter is that deregulated electricity rates are substantially cheaper in deregulated areas for people who actually shop and compare.
Basically Recharge Texas is painting all of deregulation in a bad light simply because some people choose to pay a premium or don’t take advantage of the deals available. It is the equivalent of saying the price of food is more expensive in Texas than elsewhere because everyone chooses to shop exclusively at Whole Foods or Central Market, or that purchasing cars in Texas is more expensive because everyone purposefully chooses to pay sticker price without haggling.
Why am I bringing this up when the title of this post is discussing Entergy bills? Well, I stumbled across this article, and it is yet another example of a regulated utility about to raise rates. In this instance, the rates to be raised are already substantially higher than deregulated rates. In the month of October, the average bill for a customer with Entergy that used 1,000 kWh of electricity was $114.69.
For comparison, and you will have to take my word for it because it required me to do a lot of math, the average electricity bill in October for all the deregulated areas of Texas was $103.89 cents. And this includes all of the inflated bills from people who pay 50% over market prices. Entergy is ALREADY almost $11 more expensive compared to deregulated areas. If you add $14 to Entergy’s bill, it would be more than $24 higher than the monthly average in deregulated areas of Texas. If Entergy only gets half of what they’re asking for, it is still more expensive than all of deregulated Texas by about $18.
Other regulated areas more expensive than the average cost of the deregulated areas of Texas include El Paso and Victoria. And I’ll also include Austin considering Austin Energy is 250 million dollars in debt because they have refused to raise rates in well over a decade. They’ll be more expensive than deregulated areas very shortly while still be sporting a quarter billion dollar debt.
So chalk up Entergy, which services a massive chunk of East Texas customers, as another regulated area with massively higher bills than areas with deregulated Texas electricity. And that is even with all the high bills from indifferent shoppers that inflate the picture of deregulation. What would those numbers look like if everyone exercised electric choice?
In a series of articles, I want to take a look at American Electric Power’s (AEP) court hearing regarding their application to become a Retail Electricity Provider (REP), similar to Reliant, TXU, Gexa, or Bounce. The interesting thing about their application is that AEP is currently a Transmission and Distribution Utility (TDU) for 2 regions of Texas. This is interesting because all TDU’s like Centerpoint, Oncor and AEP were forced to split from their REP businesses as a part of deregulation in 2002. Consequently, this hearing is big news and could have a huge impact on the entire Texas electricity landscape.
Understanding the Basics
To start, lets take a quick look at the intent of the rules put in place by the PUC when deregulation was first enacted. In section 25.342 of PURA (Public Utility Regulatory Act), the general purpose of the separation of TDU’s (Transmission and Distribution Utilities) and REP’s is laid out as follows:
The commission seeks to prohibit practices between regulated and
competitive activities that may unreasonably restrict, impair, or reduce the level of competition during the transitional separation of personnel, information flow, functions, and operations, and after a competitive market is established
In short, the intention of the rules are to prevent a competitive advantage in the deregulated areas of the Texas electricity market. Companies like Centerpoint and AEP who operate transmission utilities and have access to valuable customer information as well as an established brand shouldn’t be allowed to sell electricity. This separation is the reason that a deregulated electricity market can function and succeed. It is why in 2002 Reliant spun off Centerpoint and TXU spun off Oncor. AEP sold Central Power & Light and West Texas Utilities, which were their retail electricity business units, to Direct Energy. If the PUC hadn’t forced companies to separate their retail and transmission businesses then creating a fair deregulated market would have been impossible.
AEP Texas & Retail Electricity in Texas
When PURA went into effect in 2002, AEP opted to sell their retail electricity interests outright and concentrate on their power generation and transmission businesses. Now, nine years later, AEP Texas has filed an application with the PUC to become a certified retail electricity provider. And surprisingly, AEP has been granted a hearing that will determine whether or not they will be certified to sell electricity to all mass market customers in Texas. As I write this, parties are giving testimony in the hearing and a decision will be made sometime in early 2012. If their motion fails, AEP will still have the right to appeal in another court.
How is this even possible? As previously mentioned, deregulation forced the separation of retail and transmission energy companies in 2002 and AEP was forced to sell their retail interests. How can they now be allowed to start a new retail company using the AEP name?
The short answer, unsurprisingly, is legalese. The company seeking a PUC license is a subsidiary of parent company AEP, registered as AEP Texas Commercial & Industrial Retail Limited Partnership. The two separate companies that operate the transmission and distribution services, commonly referred to as AEP or AEP Texas in this article, are officially known as AEP Texas North and AEP Texas Central, respectively. In the eyes of the law, these are all three separate and independent companies.
Of course, there is some precedent in this situation. Oncor, the TDU for the Dallas and Ft. Worth area, and retail electricity provider TXU operate as two individual entities under parent company Energy Future Holdings. But this isn’t quite the same situation at all. The split of Oncor and TXU was carefully handled with massive PUC oversight in 2002 to ensure the two companies were truly separate. Oncor operates completely independently without any management from Energy Future Holdings. Additionally, great pains were made to separate TXU and Oncor with very different names and separate branding. And over time, Oncor has taken on separate minority ownership and board members from their parent company to even further the separation. AEP is simply coming along almost a decade later, starting a new subsidiary, and saying they’d also like to sell retail electricity to everyone in the deregulated areas of Texas-despite the fact they also operate two TDUs. The kicker is that they’d like to do it under the AEP name or some variation of the highly recognized AEP brand. But more on branding and marketing later.
These are just the basic facts surrounding the AEP case in regards to their intentions, the complications, and how it relates to the rules and boundaries set up by the initial laws put in place during deregulation in 2002. In the next section I will examine the details of AEP’s application and the issues surrounding their efforts to sell deregulated electricity in Texas .
One of the most common questions most people ask is when to shop for Texas electricity. In fact, I’ve written about this topic before. Normally, my previous advice would apply any year, and for the most part it still does: Shop during the winter months when the rates are lowest and lock into long term plans with stable rates so you won’t be surprised by any huge bills. That is still the case, but I wanted to revisit the topic of the best time to shop because of a couple of new factors that will unquestionably effect our electricity rates…both in the short term, as well as potentially in the long term.
As I’m sure anyone who has been living in Texas is aware, we had a record setting drought and heat wave this past summer. Almost a month of consecutive days over 100 degrees, multiple threats of rolling blackouts and soaring electricity prices. Now, the soaring electricity prices and the high bills were the effect, and the cause was not having enough energy generation resources to meet demand because of the high temperatures.
Energy generation resources (coal plants, natural gas plants) are likely to continue to be a problem. With the looming EPA changes taking some of the existing resources offline, next summer could be even more grim than this past summer. Additionally, I’ve also spoken about and linked several articles recently discussing how the current economic market is making it unlikely that any companies will be building any new energy generation plants in Texas in the near future despite the fact that the state desperately needs more of them.
So what does this have to do with shopping for electricity plans? Well, recently multiple companies have come forward in their projections saying that they expect Texas electricity rates to rise in the near future. They highlight a scarcity of energy generation assets as well as companies that might attempt to recoup their losses from our sweltering summer (which I have also discussed previously) as reasons for the likely rate increaes. The parent companies for Reliant, TXU, Dynowatt, StarTex Power and more have all posted serious losses that they have attributed directly to the previous Texas summer weather.
The short of it is, that while there is no question that winter is the best time to shop for electricity plans, customers might really want to start keeping an eye on the marketplace RIGHT NOW. There’s reason to believe that the Texas electric rates are going to go up in the very near future, and probably for a long time to come. To that end, it might really behoove Texans to consider locking into long term plans that will last through the summer now, as opposed to waiting for January or February to start shopping. I can’t say when the rates will start going up for certain, but I can definitely advise people to keep an eye on the market prices and lock in a long term plan as soon as they start moving. Also, I’ve always been a proponent of 12 month fixed plans. Considering the state of the market, I’d actually consider more people start taking a look at 24 month fixed plans as well.
Anyway, I hope this post motivates people to keep an eye on the market prices moving forward.
Paul Ring over at Energy Choice Matters has been on fire lately with a number of interesting and thoughtful articles. In the latest one, Paul analyzes some comments Calpine COO Thad Hill in regards to the issues that Texas is having in attracting new investments in energy generation. Calpine is a fortune 500 company with more than half a dozen major power plants all over the country.
As always, the original article by Paul Ring is fantastic, and I encourage everyone to take the time to read it. That being said, below I’m going to spell out the issues facing Texas electricity.
The basic issue discussed by Hill and analyzed by Ring is how Texas is currently having trouble attracting interest from investors who are willing to build new power plants in Texas. As last July and August demonstrated, Texas is right on the edge of having enough electricity generation capacity to meet the state’s needs during the hottest months of the year. And that doesn’t even take into account what pending EPA changes in 2012 will do do to older coal-fired plants that have been deemed as too “dirty” in regards to pollution. In short, it looks like Texas is going to have problems meeting their power needs, particularly if we have any more summers like the one we just experienced.
So what is the problem? Just build more plants, right? Well, that’s where things get tricky. Under deregulation, the model is that investors shoulder the burden of new plant construction, when before the state could simply tax or charge Texas electricity customers directly through their bills to subsidize new plant construction. But this is out of the question in the deregulated market (as it should be). Meanwhile, investors like Calpine, are saying that building plants in Texas is too risky and might not be profitable enough to warrant them taking the risk. In a regulated market, investors could be guaranteed a certain amount of energy to be purchased over a long time period by the state or regulated entity, but in the Texas electricity market the only driver is demand, there aren’t any built in guarantees or incentives. Basically, most Texas customers don’t like to sign up for electricity more than a year at a time with one company, so most REP’s are only buying energy in year metrics. Investors need to take their chances just like customers when they’d prefer to have 7 year guarantees. Since they can’t predict their profits and losses, and they’re unwilling to invest. Meanwhile, Texas desperately needs more energy generation plants. So we are at an impasse.
Whatever the solution, and I have no idea what it will be, guarantees are out of the question as are subsidies from Texas citizens to build new plants. Both of those solutions would be large steps towards removing deregulated electricity completely because they would be flying in the face of electric choice in Texas. One thing is certain, this issue will only continue to get more visibility as time moves on, because it is a huge problem that will have to be solved somehow.
I always seem to get a lot of people who question the Texas deregulated electricity market and categorically dismiss it as inferior to regulated utilities. There is no shortage of people who say the entire system is graft, or some form of organized price gouging to take advantage of consumers. If you haven’t noticed, I’ve written about this kind of thing before:
And that doesn’t include mentions by the JD Power & Associates in support of deregulation here, taking the time to correct people who don’t think market activity is a sign of success, and my efforts to respond to people who erroneously blame deregulated electricity for every energy problem under the sun such as Loren Steffy of the Houston Chronicle.
I think it’s safe to say that people who lazily paint deregulated electricity in a negative light without any support irritate me. Which is why this article by the ABC affiliate in El Paso was a refreshing change of pace for me.
The whole article is interesting, and as always I encourage everyone to read the entire thing. However, I’ll highlight some points as well. For starters, lets set the stage that El Paso is currently a regulated area of Texas, so customers have only one choice of electricity providers. San Antonio and Austin are always (incorrectly) pointed to as proof that regulation means cheaper electricity prices. How about El Paso?
The City Council asked El Paso Electric officials on Tuesday to show why electric rates — which are some the highest in the state — should not be lowered, and the city approved establishing a temporary rate at its Oct. 25 meeting.
So, some of the highest in the state of Texas? So high the City Council is demanding an explanation as to why they’re so high? Check.
City Rep. Courtney Niland, who said she has been studying the issue, said the utility has not been able to justify the high electric rates. She said the city’s utility consultant, Norman Gordon, had been trying to negotiate with the utility for about three weeks and had a meeting with the company on September 13, in which the utility was asked to ‘show cause’ of their rates. Niland said the city had made every effort to get an explanation from the company, but electric officials had been unwilling
Ok. In fairness, the CEO of of El Paso Electric says that the city never sent him any formal request and that his efforts to explain his reasoning to Niland were ignored so he stopped trying. Ok, fair enough.
Actually, to be perfectly honest, the whole article degenerates into a relatively large spat between City Council Representative Courtney Niland and the CEO of El Paso Electric, David Stevens. And to be honest, Neiland seems to be a bit out of control and some of the points Stevens makes might be perfectly valid. Now, that being said, I do find this quote to be very telling:
Niland contends that the electric company has averted the issue. “What are you not doing in your business that can’t make you competitive, because you and I both know that if you had competition and you had to get competitive, you’d do it,” she told Stevens.
Stevens said the utility’s rates are high because there’s less consumption in the area, while the cost of producing electricity remains high.
I’m not sure exactly what the current electric rates are in kWh for El Paso Electric. That information isn’t available online (regulated utilities don’t have to post rates, they don’t have to be accountable to customers). If representative Niland is correct and the El Paso Electric rates are much higher than competitive areas of Texas, that is a big problem. Because, in my opinion. Steven’s reply in the quote above about less consumption doesn’t hold water. And it’s not that less consumption doesn’t result in higher cost, that can be debated. My issue with that statement is that there’s a HUGE chunk of the Texas New Mexico Power Footprint that operates in West Texas, not far from El Paso. This is an area of low population density, and much lower consumption (as are most of the TNMP service pockets). And yet I see electricity rates for different electricity plans fairly close to the rates in Houston on a regular basis. So if that area of West Texas can remain competitive, why can’t El Paso electric?
Last week’s purchase of First Choice Power by Direct Energy was yet another major acquisition of a Retail Electricity Provider by a major energy conglomerate. There’s been around a half a dozen of these deals in the past year, and in my opinion things have gotten a bit muddled and confusing. So I wanted to write a post to chart exactly who owns who in the deregulated electricity space in Texas.
Dominion Resources: Dominion Energy probably isn’t a name that is very recognized by Texas electricity customers. However, they are a huge energy company that deals in both energy generation and distribution in multiple states. Headquartered in Richmond, Virginia, they own the incumbent and regulated electricity providers in Virginia and North Carolina. In Texas, they own Cirro Energy, which they purchased in 2008. Earlier this year, Cirro Energy purchased Simple Power and absorbed their customers.
NRG: NRG, a new Jersey based company, is another huge energy company with massive power generation resources. On top of energy generation plants, NRG also owns Green Mountain Energy, which they purchased in 2010 for 350 million dollars. In 2009, they purchased former incumbent Texas electricity provider Reliant Energy for 287 million and change when Reliant was under heavy financial distress. This was a steal considering Reliant was the second largest REP in the state at the time and has huge brand recognition. In turn, Reliant Energy owns (and I believe operates) Pennywise Power, which is a new brand they’ve put into the deregulated Texas electricity market to try and capture different customers without effecting their core brand. So NRG owns Green Mountain and Reliant, and Reliant in turn owns Pennywise Power.
Just Energy – Just Energy is yet another big energy company, with resources all over North America. They had been a fairly smaller player in the retail electricity market in Texas until recently. Just Energy itself was mostly a niche provider, offering 5 year long term contracts to customers. However, they recently purchased the entire retail arm of Fulcrum Power. That includes Amigo Energy, Tara Energy, and Smart Prepaid. So now all of those brands are part of the Just Energy portfolio. They’ll likely keep the branding and still do business under the names Tara and Amigo, but it’s all Just Energy. Just Energy also owns another smaller REP, Commerce Energy.
Direct Energy: Direct Energy is actually a subsidiary of a British company called Centrica, but they’re known almost exclusively in North America as Direct Energy, so that’s the name we’re going with. Direct Energy is yet another huge energy generation company with huge and varied resources. In the retail electricity space they do business as Direct Energy and they are one of the biggest REP’s in Texas. They also operate in Texas as WTU Energy and CPL Energy in two respective TDSPs. In the Spring, Direct Energy also purchased Gateway Energy Resources for 90 millions dollars. Since then, Direct has removed Gateway as a brand from doing business in Texas. Just last week, Direct Energy made another huge purchase, this time of First Choice Power for 270 million dollars. Which is a huge price tag. So, as of now, every company I mentioned above is really a subsidiary of Direct Energy.
Constellation Energy: Constellation Energy is the largest energy supplier in America. Their 2007 revenues were 21 billion dollars. So yes, they’re another big energy guy. They own the regulated electricity entity Baltimore Gas and Electric. In 2 month period last spring and summer, Constellation announced purchases of both StarTex Power as well as MX Energy, two retail electricity providers that operate in the Texas deregulated markets.
Gexa Energy: NextEra Energy is the parent company of Florida Power and Light, the regulated electricity provider for much of Florida. They’re another big energy company, having generation resources in over 20 states. In 2005, Florida Power & Light purchased Gexa Energy. They still do business in Texas under the name Gexa.
Dynowatt: Dynowatt is a subsidiary of Accent Energy, which is a large company with natural gas ties in Ohio. Accent also serves deregulated New York, but they do business in Texas as Dynowatt.
TXU Energy: TXU is actually a subsidiary of Energy Future Holdings, which also owns Luminant, the power generation portion of the old TXU company that was forced to split because of deregulation laws. Now Luminant and TXU operate separately. TXU is the largest individual REP in Texas and one of the two former incumbent providers.
The following Retail Electricity Providers are stand-alone entities:
Texpo Energy: Texpo Energy is a smaller company operating in Texas. What makes them interesting is that they actually operate under 3 different brand names while all sharing the same PUC Certificate. The other two brands are Southwest Power & Light and YEP. So to sum things up, Texpo, Southwest Power & Light, and YEP are all the same company operating in Texas under different names.
Hopefully this helps to give people a clearer picture about who some of the players are in Texas electricity. It is important that people know exactly who the company is that is supplying their electricity. For example, if someone had a bad experience with one company, they might not want to get service from another one of their subsidiaries. And since there’s been so many purchases and mergings of REP’s in the last 6 months, I thought it might be a good idea to chronicle which companies have ended where after the dust has settled. I’ll try to update this page moving forward as well. I doubt we’ve seen the last of big REP acquisitions, so this family tree might change.
I’ve included a crude flowchart below. Yes, I do realize it looks like it was put together by a 3rd grader.