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<br /> <br />Important Policy Issue for 80th Legislative Session: <br /> <br />Texas Needs Reform in Unfair, Artificial <br />Pricing of Baseload Electric Energy <br /> <br />Texas municipalities and industry currently pay generators prices for routine, or <br />"baseload" electric energy needs, that are inflated well beyond their actual costs. The <br />reason? Such power is priced as if it were produced by high-priced natural gas-fueled <br />plants, when it is actually produced at a much lower cost by lignite, coal al1d nuclear <br />plants. The state's inflated prices for baseload energy have become a serious issue with <br />leaders of Texas industry, who will likely build future manufacturing plal1ts elsewhere. <br /> <br />To make these inflated prices even more unfair, this artificially high-priced energy is <br />produced by baseload plants that consumers will be paying for in the form of so-called <br />"stranded costs" for years. <br /> <br />Municipalities across Texas whose budgets are held hostage to these falsely-inflated <br />prices, along with business leaders, urge the legislature to reform this unexpected and <br />negative result of deregulation. CAPP* proposes legislation that will require owners of <br />low-cost baseload generation capacity to sell IS percent of that capacity to Retail Electric <br />Providers at their variable cost plus ten percent (and not a price that is benchmarked to <br />natural gas power production). <br /> <br />This refonn will still provide fair prices to generators. More importantly, it will restore <br />much-needed fairness to Texas consumers who will be paying unjustified "stranded <br />costs" payments to utilities for years, and will help return Texas to a competitive position <br />in economic development. <br /> <br />*Cities Aggregation Power Project (CAPP) is a political subdivision corporation and registered <br />aggregator for its almost 100 member cities and utility districts, all of whom are located in the <br />areas of Texas that are open to retail electric competition. CAPP's members are concerned <br />about the effect of rising energy costs on their own budgets as commercial consumers, but are <br />also troubled by the prospect that Texas's increasingly expensive electric rates may compel large <br />energy consumers to locate their businesses in other states or countries, taking with them needed <br />jobs. tax revenue, and the potential for further economic development. <br /> <br />r..-...........-.."..-"....-.... <br />