Texas Electricity News and Notes 8/07/12

Posted on Posted in PUC/ERCOT, Texas Electricity, Texas Electricity News

There’s been a lot of damning pieces about the current state of the Texas electricity market lately, including more criticism by Loren Steffy. I figured it would be easier to paste some of the bigger articles in the past week with a summary about why it matters to Texans.

Wholesale Electricity Price Cap Study Raises Questions on Increase – This article is probably the most damning. It breaks down that according to the study by Potomac Economics, the Independent Market Monitor of Texas, that the current state of the market in Texas coupled with the prices of Natural Gas should have been sufficient to warrant the construction of new energy generation plants in Texas by investors. Of course, there hasn’t been any, and the same PUC who solicited the study decided to raise the market power cap to $4500 (and to $9000 in 2013) before the Independent Market Monitor’s study was complete. Why hasn’t there been new generation if it already made sense? Because why would generators start construction now when they knew they could just sit tight and squeeze more money and concessions from the PUC? All they had to do was play chicken with the PUC to be about to triple their profits long term. Unfortunately, the losers are the citizens of Texas and our wallets.

Former Texas EPA Official Talks State’s Biggest Problem – This is a pretty interesting article which interviews a former Texas EPA official. Predictably, the man talks about his concerns for the environment and that future Texas summers might resemble the one from 2011. What I did find really interesting was the former EPA official, Al Armendariz, discussing how the state and the EPA were able to communicate effectively and productively with one another until special interest groups and lobbyists got involved. At that point things got difficult for Texas and the EPA to work together. I’m not surprised that political interests ended up making everything more complicated than necessary.

Steffy: More Questions About the Wholesale Electricity Market – Building off the first article we linked in regards to the Texas market already being profitable enough to encourage new energy market generation, Loren Steffy continues to beat at the Texas electricity market and the PUC for their reckless behavior in regards to pricing. In addition to summarizing the findings, Steffy also examines how this uncertainty has effected energy trading in the marketplace and is actually making things MORE volatile for traders and REPs. Steffy also discussed with a trader who said that the spread between bids are as wide as he’s ever seen and he’s concerned many bigger banks might exit the market completely. That…that would be disastrous.

Steffy: As Consumers Face Higher Prices, NRG buys GenOn – This news was awhile back, but it is a pretty important piece of information that I don’t want to slip below the cracks. In light of all the talk we’ve been focusing on in regards to Texas needing more energy generation, the raising of the market cap to lure more generation, and the concerns about how the market will respond to these new forces. NRG’s purchase of Houston based GenOn is telling news. NRG, who with this move becomes the nation’s largest independent power generator, and who recently made a deal with the PUC that some people have called a license to steal, has purchased more existing power generation in Texas. And despite a report from the Independent Market Monitor that it makes economic sense to build new generation in Texas currently, NRG has decided to purchase existing power generation? Could that be because it makes more sense for them to own a larger slice of the scarce pie than to cook a new one? Steffy points out that this also gives NRG more sway over an already pliable PUC. Again, more bad news for Texas customers and for Retail Electricity Providers who don’t have ties to generation like Reliant, Pennywise Power, and Green Mountain Energy have with NRG.

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