07-G Senate Bill 7 - Laserfiche WebLink

Home Browse Search

of the power used to serve Price to Beat customers was purchased at spot market prices at their peak pricing periods. The institution of the inflated fuel factors has resulted in a $600 million statewide electric rate increase for residential and small commercial customers. Cities' attempts to establish that the REPs and affiliated generating companies were over-earning under the current Price to Beat rate and that the requested increases bore no relationship to actual costs were dismissed by the Public Utility Commission as irrelevant. Adjustments Made to the Price to Beat Rate in 2002 Mean That Customers Are Paying More Under Competition Than Would Have Been Paid in the Regulated Rates. In its 2003 Scope of Competition Report, the Public Utility Commission reports that on the first day of competition residential customers received double-digit decreases from regulated rates charged on December 31, 2001. While the claim is not technically incorrect, it leads to the misleading conclusion that the decreases were attributable to the advent of competition. Basing such a conclusion on that claim is inaccurate because rates charged on December 31, 2001, included a fuel component that reflected a surcharge that expired December 31~ as well as unusually high natural gas prices that peaked in the summer of 2001. The rates instituted on January 1, 2002, simply reduced the outdated natural gas prices to reflect then-current lower natural gas prices and eliminated the expired fuel surcharge. Contrary to the claim of double-digit decreases, the table below shows that the institution of inaccurate, inflated Price to Beat fuel factors have ensured that customers of the affiliated REPs will be paying rates that are higher than they would have been under regulation. There is no corresponding provision for municipalities, citizens, or the Public Utility Commission to propose decreases in Price to Beat rates to reflect declines in fuel costs. Increase in the Price to Beat Rate as Compared to the Regulated Rate Usin~ Similar Natural Gas Prices Regulated Regulated Total PTB Base PTB Fuel PTB Base Rate Fuel Factor Rate Factor Total Increase Reliant 6.47 2.6 9.07 6.08 3.27 9.35 3% TXU 6.05 2.4 8.45 5.76 2.89 8.65 2% CPL 5.89 2.9 8.79 5.61 3.89 9.50 8% WTU 5.43 3.3 8.73 5.09 4.64 9.73 11% An Inflated Price to Beat Rate Does Not Portend a Competitive Market. An inflated fuel factor increases potential profit for both affiliated and non-affiliated REPs, but it is important not to confuse benefits to competitors with benefits to Price to Beat customers. An inflated Price to Beat rate will artificially increase headroom and may accelerate the erosion of the affiliated REP's market share for residential and small commercial service. Although potential competitors might benefit from inflated Price to Beat rates, it is not apparent that ratepayers will be better off if they pay higher prices today in order to effectuate a competitive market. The goal to be achieved by enacting SB7 is not simply to deregulate the retail electric market, but to do so in a manner that ensures that customers enjoy real savings. It 1813\O0~na¢~m-aoO3Oll3gmg 14