Anyone who visits my blog regularly has probably seen that I’ve been talking a lot about the Texas Coalition for Affordable Power (TCAP) lately. TCAP recently published their “history” of deregulated electricity in the state of Texas, and there are several things about their self-proclaimed history I find questionable, which I’ve documented at great length in the four posts below:
While I’m finished critiquing the “Major Findings, “Facts,” and “Recommendations” sections of the document (which only comprise the first few pages), I wanted to take some time to revisit exactly who TCAP is, what they do, and why they might have an interest in shaping the Texas electricity market.
Who Is TCAP And What Do They Do?
This section is pretty straightforward. Per their website:
Texas Coalition for Affordable Power (“TCAP”) is a non-profit political subdivision corporation established by the 2010 merger of Cities Aggregation Power Project, Inc. (“CAPP”) and South Texas Aggregation Project, Inc. (“STAP”), both created in 2001 to aggregate members’ power needs in order to negotiate electric better prices for their members. TCAP is one of the largest political subdivision aggregation groups in Texas with over 150 political subdivision members that purchase approximately 1.4 billion kWh annually
Let me sum that up succinctly: TCAP is an organization that works to use the combined electricity demands of its member institutions to bargain for cheaper electricity prices. In short, they’re leveraging their combined size to attempt to buy electricity at a discount, something that anyone with a Costco card can understand and appreciate. Currently, because of Texas regulations, TCAP can only target government institutions and usage for their aggregation. In other words, they can’t negotiate an electricity rate and contract for the entire city of Corpus Christi and its residents. But they can negotiate an electricity rate and contract for all of the government buildings and usage for the city of Corpus Christi, like courthouses, schools, etc. It is no coincidence that TCAP’s board of directors is made up of city politicians and functionaries.
Make sense so far? Ok. So what does TCAP charge for their service? I’ve posted this before, but it is applicable in this blog post as well:
There is a one-time New Membership Fee equal to the greater of (i) $0.05 per capita of the resident population of the Member or (ii) one-half (1/2) of one percent (1%) of the prior calendar year’s total electric bills, not to exceed $14,000. Also, TCAP members pay a per kWh aggregation fee that is set annually by the Board of Directors. Over the last three years the aggregation fee set by the CAPP and STAP Boards has been $0.0013 and $0.0010, respectively. The 2011 fee ranges from $0.0010 to $0.0012 depending upon the member’s location. Funds raised through the aggregation fee are used to: pay attorneys, energy and public relations specialists; develop and provide interactive web portals for members use; maintain web sites; and promote market reforms that would benefit political subdivisions and their residents.
So TCAP collects a fee for new members, as well as per kWh aggregation fee. These funds go to pay for the day-to-day expenses as well as maintaining websites and funding TCAP promotions. There’s one other thing this money is used for that isn’t mentioned. While TCAP operates as a non-profit, that doesn’t mean its board of directors and employees don’t earn very real salaries, which are paid via the funds collected from its members.
Why Does TCAP Care About Deregulated Electricity?
Obviously TCAP cares about deregulation because it allows them to exist in general. If there isn’t electric choice, there isn’t any need for aggregation. TCAP goes to great lengths to paint themselves as a Consumer Advocacy Group by talking about supporting pro-deregulation bills and acting as voice for the consumer but if you examine their website, along with the webpage of their public relations face Recharge Texas, you won’t actually find any specifics about what they would like to change or HOW they suggest things change.
Don’t misunderstand me; some of the things TCAP supports are logical no-brainers that everyone in the industry supports, like cracking down on loopholes that cost customers money. Other things they promote, such as apples-to-apples comparison of rate plans, don’t have any substance at all or an example of execution. In fact, a closer look at the Recharge Texas website will see two things:
1.) A lengthy list of “official reports” and articles written by TCAP themselves sensationalizing all of the things wrong with deregulated electricity in Texas. These articles if taken at surface level face-value will likely make you angry.
2.) Once you’re good and angry, the only recourse or call to action is for visitors to sign an online petition. It doesn’t matter what specific item you’re outraged over, there’s only one petition for all the issues.
What does this petition say? I’m glad you asked:
I stand with RechargeTexas in demanding that the Texas Legislature make deregulation work, and bring back cheap Texas electricity.
Not call your congressmen. Not write a letter. Just sign our petition. But what good does a vague petition do to effect change, much less any specific change to the deregulated market, such as Apples-To-Apples comparison? TCAP’s own webpage offers us an answer to that question:
CAPP (now TCAP) was the only effective voice on behalf of electric customers in the 2003, 2005,2007, and 2009 legislative sessions.
Remember, TCAP is a political organization. And their dubious claims of being an effective voice for electric customers aside, the thing they want more than anything is have a huge list of people who have signed their online petition that they can parade around a congressional session, effectively giving TCAP their vote by proxy. The larger the number of people who sign the petition, the more clout and perceived power they will have to be taken seriously by the legislature and effect change.
After visiting the Recharge Texas website, which remember is the PR face of TCAP, we’re reminded that they don’t give a lot of details about what changes they want to effect. They’re just collecting these signatures. In fact, this non-profit agency who’s charter is to aggregate power for local government electric contracts is spending lots of time and money to maintain two websites, writing suspect histories and long documents negatively skewing deregulated electricity, and being vague about their general purpose and initiatives as a “Consumer Advocate,” for the sole purpose of getting people to sign their online petition.
That seems like a lot of time, money, and effort for a non-profit agency solely to capture digital signatures on a petition. It is even more surprising when TCAP doesn’t seem to have any real concrete plans or details on the reforms they would like to make in the deregulated marketplace.
TCAP’s Real Agenda?
After reviewing the articles on the TCAP website, I certainly know one thing that they would like to change in the Texas deregulated electricity market. They tip their hand in their 2008 year in review page from their statistically challenged “history” of deregulation in Texas. What is it? Opt-Out Aggregation.
What is Opt-Out Aggregation? Basically, it would allow entire cities and municipalities to negotiate electricity contracts and rates on behalf of their citizens. Remember earlier where I explained how right now TCAP can only negotiate contracts for local government entities? Opt-Out Aggregation would allow them to negotiate the rates and contracts for every individual resident living in a city that is a member of TCAP. So instead of bidding on just all the local government electricity usage in the city of Corpus Christi, TCAP would have the right to negotiate on behalf of everyone in Corpus Christi. Individuals that didn’t want TCAP to negotiate for them could simply Opt-Out, hence the name. No big deal, right? Lets remember two very important things:
1.) TCAP, as an aggregater, would suddenly find the potential market for their services increase by 24,000% to potentially 335 billion kWh. TCAP currently handles approximately 1.4 billion kWh annually (numbers from 2011).
2.) TCAP’s entire board is made up of local city politicians. In many instances they would be negotiating with themselves. This is an obvious conflict of interest, and with that money on the table the potential for collusion is enormous.
And yet, here on the 2008 recap page, we see TCAP complaining about how difficult the rules are currently for Opt-In regulation, and how much easier it would be for Opt-Out regulation. They share this story below:
A group of six West Texas cities tried and failed to use opt-in aggregation in 2007 and 2008. About 1,600 households in the cities of Cisco, Comanche, Dublin, Eastland, Hamilton and Snyder (in largely rural West Texas) agreed to participate after being contacted by their cities’ representatives through a long, extensive and costly outreach program. Most of the residents had never before negotiated electric contracts and many expressed enthusiasm about the sense of empowerment they received from the program. Their city representatives then attempted to negotiate a bulk rate deal. But competitive electric providers — some noting the relatively small number of residential participants — either declined to submit bids to serve them or would not beat the lowest prices already advertised on a website operated by the Texas Public Utility Commission.
“Most of the residents had never before negotiated electric contracts and many expressed enthusiasm about the sense of empowerment they received from the program.” I found this statement odd because, well, by the very nature of the program itself residents wouldn’t actually be negotiating any electric contracts themselves. And the following statement also seemed quite subjective: “after being contacted by their cities’ representatives through a long, extensive and costly outreach program.” Long, expensive, and costly compared to what exactly? And how would TCAP know this for sure?
Because, shock upon shock, the 5 cities mentioned in the report (Cisco, Comanche, Dublin, Eastland, Hamilton and Snyder) are all members of TCAP. So basically TCAP and the local politicians tried to expand their business scope to residential service in 2008 and implemented a program in 5 of their cities to try and get customers to Opt-In. THEY found the program to be expensive and time consuming, and it failed miserably when their efforts didn’t generate enough interest to get any bids or any rates other than the standard rate customers could get for themselves. And then they wrote about it as part of TCAP’s “history” in the 3rd person, pretending it wasn’t actually them the entire time, complaining, and pining for Opt-Out Aggregation so they could expand their potential business scope by 24,000% percent.
I consider that to be just a little bit shady. I would also say that it seems like we have found a major part of TCAP’s agenda. Step 1: complain bitterly and vocally about how terrible deregulated electricity in Texas is for consumers, using questionable data and statistics that don’t paint an accurate picture. Step 2: offer no real solutions, but solicit people to sign an online petition. Step 3: when enough users sign petition, use said petition to try and push for Opt-Out aggregation. Step 4: claim public success and say opt-out aggregation is the tool that forces electric companies to offer the best possible rates, all the while fattening TCAP’s own pockets and political power.
That’s just my speculation. But it certainly fits. And I’m not even against Opt-Out aggregation as a concept, although I’m highly skeptical of a situation where local politicians who sit on the board of TCAP are negotiating with themselves “on behalf” of consumers. That seems like a situation ripe for corruption. What I’m definitely against is the notion of TCAP parading themselves around as some kind of consumer advocacy organization when their own agenda is strictly financially motivated. I have an enormous problem with that and so should everyone else.
TCAP is very critical of political lobbyists for big energy companies that leverage politicians and the deregulated electricity system for their own interests. But from my point of view, they’re also a group of politicians trying to do the exact same thing. They do that by painting themselves as consumer advocates, all while seeking to remove electric choice from Texans and put it in the hands of the local politicians. We should ask people in El Paso and Austin how having their city government in charge of electric policy has worked out for them. In the mean time, Texans should understand exactly who TCAP is and their personal agenda.