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December 12, 2002
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Legislative Committee Examines Progress of Electric Deregulation

The Electric Utility Restructuring Legislative Oversight Committee today heard that the deregulation of electric rates in Texas is proceeding, but only after a slow, sometimes uncertain start. Today, the committee heard from electric users, providers, and ratepayers' organizations as to what their experiences have been this far.

Richie Jackson of the Texas Restaurant Association said that their members had seen slightly lowered rates in places, but that it was very difficult to compare the different situations of their members across the state. He testified that the varying costs of natural gas, used to generate electricity in some places, hadn't made that task any easier. He said that it's too early to say it's a "ringing success, but it's certainly not a failure".

Chris Szaniszlo of the Texas Association of School Boards said that when school districts let power out for bid they were able to get lower prices. There was, however, a great lot of hesitation among the school districts about entering the deregulated market given the problems that had appeared in other states such as California, where rates skyrocketed under deregulation.

Scott Hart, from Texas Commercial Energy, testified that as an independent seller of electricity, they had seen no problems in billing and that deregulation was working in Texas. He held his company up as an example of a business that helps customers think differently about how they purchase electricity now that they have a choice. His company serves commercial accounts and plans to offer residential service at a later date. He said that more than anything, this first year has been an educational process for both company and consumer alike and that within ten years it will prove to be an excellent economic stimulus to Texas.

The first panel was closed by John Hockenyos of Texas Perspectives, Inc. According to Hockenyos, while electricity is electricity, customers actually do care how it is produced and they are willing to pay extra for electricity that is generated by solar or other environmentally friendly methods, or perhaps more to a company that invests its profits in what he called a "socially responsible way".

The second panel began with Tim Morstad, a policy analyst with Consumers Union. He said that their research indicated that consumers have not seen significant drop in electric rates, and that any supposed drop in recent years was due to the fact that the Legislature had forced prices down and that there were unusually high prices for natural gas in recent years. He also said that complaints about service had "skyrocketed" and that "the market needs fixing to ensure reliability and a fair price."

Suzy McClellan from the Office of the Public Utility Counsel testified that electric rates are once again trending upward from the levels (the "price to beat") set by the last Legislature. She said that when utilities ask for price increases based on rising fuel costs, those price increases are not reversed when fuel costs drop.

Rebecca Klein, chair of the Public Utility Commission (PUC), confirmed this saying that there was currently no mechanism in place to ratchet prices back down, but that they were working to put a rule in place that would enable the PUC to drop the base rates. She felt that many consumers do not shop for the best electric rates and that the PUC is currently doing a study to find out why this is happening.

The committee also heard that in today's deregulated marketplace it is sometimes difficult to tell who to blame when something goes wrong with a customers power supply or billing. Klein said that Texas' reserve generating capacity is not sufficient and that there are problems in moving power from where it's generated to where it's needed.

Randy Chapman from the Texas Legal Services Center closed the second panel with testimony that consumer complaints have more than doubled, as people have seen high pressure tactics and deceptive door-to-door sales tactics from certain companies. He also said that some customers have been switched to other companies without their knowledge and sometimes it takes months to get their bills straightened out.

Public testimony followed. Concerns during this part of the hearing included the status of programs for lower-income customers, advanced metering services and the growth of the fuel cell industry.

The Electric Utility Restructuring Legislative Oversight Committee is co-chaired by Senator Troy Fraser and Representative Steven Wolens. Members include Senators Teel Bivins, Frank Madla, Jane Nelson and John Whitmire, as well as Representatives Kim Brimer, David Counts, Debra Danburg and Sylvester Turner. The committee recessed subject to the call of the chair.

Session video and all other Senate webcast recordings can be accessed from the Senate website's Audio/Video Archive.