08-B CAPP endorsing certain legislative changes

Home Browse Search

Important Policy Issue for 80th Legislative Session: Texans Need Relief from Excessive Market Power in the State's Wholesale Market Contrary to the original objectives and expectations of passage of Senate Bill 7 in 1999, the deregulation of electric energy rates in Texas has not produced the benefits envisioned for either the wholesale or retail markets. And while the reasons that prices have increased dramatically since S.B. 7's inception are numerous and interconnected, one of the primary contributors is the concentration of ownership of power generation in ERCOT's wholesale market. Some generators-known as pivotal suppliers-control so much capacity that the market must accept at least part of their offers to meet demand, no matter the price. Thus, they can virtually dictate prices most of the year. Certain generators are even more dominant within the smaller zones that make up the ERCOT market. Under some circumstances, each smaller zone can in effect become its own market, and companies with large amounts of generation in particular zones can have increased influence over those smaller markets. .CAPP* members are deeply concerned that such concentration of power has damaged the market's ability to create competitive pricing, which in turn has resulted in higher prices for city governments, local businesses and Texas consumers. The problem is particularly acute in areas where generators control so much capacity - either because they own it themselves or have contracted for capacity from other generators -that their dominance approaches a monopoly. CAPP members urge the legislature to focus on this serious problem that undennines the objectives of deregulation and to enact measures to prohibit a generator from owning more than 20 percent of ERCOT's system's total capacity or the capacity located within each zone ofERCOT. *Cities Aggregation Power Project (CAPP) is a political subdivision corporation and registered aggregator for its almost 100 member cities and utility districts, all of whom are located in the areas of Texas that are open to retail electric competition. CAPP's members are concerned about the effect of rising energy costs on their own budgets as commercial consumers, but are also troubled by the prospect that Texas's increasingly expensive electric rates may compel large energy consumers to locate their businesses in other states or countries, taking with them needed jobs, tax revenue, and the potential for further economic development. '!". '.-