Here’s a couple articles I’ve seen the past few days which I found interesting that relate to the Texas electricity market, along with my thoughts. Most of it is market cap related, but there’s a welcome snippet at the bottom that would be great news for Texas.
PUC Commissioners Continue to Push Increased Market Cap: This article by Mike Norman of the Ft. Worth Star-Telegram gives a great update on where things have progressed with regards to the efforts by Chairwoman Donna Nelson of the PUC to increase the Market Cap of Texas. I wrote back in March about how this move in no way guarantees the new power generation the state desperately needs, but will raise electricity prices with 100% certainty. Norman’s article is a great summary of where things stand now. Commissioner Kenneth Anderson is the only PUC commissioner currently opposing the raising of the market cap.
Texas Politicians Urge The PUC to Move With Caution Regarding the Market Cap: This article from Paul Ring at Energy Choice Matters discusses an open letter filed to the PUC by state congressmen Sylvester Turner and Wendy Davis. Turner has bit of a reputation for being vocal and active in all matters that pertain to electricity in Texas, sometimes with interesting positions, but this time he got it right. The letter they filed points out many of the things I’ve mentioned before, specifically that raising the market cap now won’t bring any more generation to Texas by 2013, and potentially even beyond. Also interesting to note is the letters filed by Stream and Ambit, the largest REPs in the country that aren’t tied to any generation assets. Which brings to the forefront another interesting dynamic: Big REPs like Reliant and TXU, Direct Energy and Just Energy just to name a few, sell retail electricity but also have huge generation assets where they make money as well. They’re poised to make money off the market cap increase, big money, even though raising the market cap will hurt the REP side of their businesses. But companies like Ambit and Stream, and every other independent REP without ties to generation plants, will just be hurt. So it’s not surprising that we hear Ambit and Stream speaking up, while other big names are remaining quiet.
Shell CEO Predicts Cost of Natural Gas Will Rise: While not directly related to the market cap issues in Texas, part of the reason there hasn’t been any new generation constructed in Texas is that the low cost of natural gas has made big companies wary about investing in new plant construction when the profits would be uncertain. Shell’s CEO says the forecast models they’re using place the cost of natural gas in 2014-2015 at double what it is at now. Which would still be low, but couldn’t be bad news for new generation construction in Texas as the national need for natural gas increases.
Texas Summer Could be Cooler Than Expected: We’ll follow up the Market Cap discussion with something much more positive, which is that this Texas summer might be much cooler than expected. Currently the PUC is forecasting another hot summer, but it makes sense for them to predict another dire wave of heat to get people to conserve energy and keep our reserve margins at acceptable levels. However, many other weather outlets are predicting a summer much milder than last year’s record breaking scorcher, which was declared a national disaster. Finger’s crossed.