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10-Move to approve a resolution that supports CAPP"s legislative position during the sunset review process for the PUC and ERCOTCITY COUNCIL AGENDA ITEM BRIEFING S EET Submittal Date: Otiginating Department: Presented By: A.ge da Item No.: 04/19/10 Council Date: Finance Gene Anderson 10. 04/26/10 RECOMMENDED MOTION: Move to approve a Resolution that supports CAPP's legislative position du ing th sunset review rocess for the PUC and ERCOT. POLICY ISSUE(S): Fiscal Policy; Legislative Affairs See attached staff report. BOARD/COMMISSION RECOMMENDATION: EXHIBITS: Staff Report; Resolution ACTION: BUDGET INFO: ❑ Financial Report ❑ Minute Order Expense $NA ❑ Department Report Z Resolution Budgeted Amt. $NA ❑ Presentation ❑ Ordinance y'I'D Actual $NA ❑ Public Hearing ❑ Other Acct. Name NA Acct. Number NA FISCAL NOTES: None REVIEWED AND APPROVED BY: 0 Administration Z City Clerk ❑ Community Development ❑ EMS/IT Fina ce ❑ Fire ❑ Municipal Court 0 Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Uti ties City of Paris 75 Revised 2/04/08 STAFF REPORT REGARDING THE RESOLUTION ENDORSI11iG CAPP'S 2010 SUNSET ADVOCACY PURPOSE The City of Paris, Texas is a member of Cities Aggregation Power Proj The CAPP Board of Directors has voted to authorize certain legislative efforts Sunset Commission's review of the Public Utility Commission ("PUC") and the Council of Texas ("ERCOT"). The Sunset agency's recommendations pe organizations are expected to form the basis of bills during the 82nd Legislative S such, CAPP will recommend legislative action related to the Sunset Commissiol both the PUC and ERCOT. In addition, CAPP will offer all resolutions of its meml hearings to apprise lawmakers of CAPP Cities' perspective on how to make tl more competitive and beneficial to consumers. DISCUSSION In 1999, Texas lawmakers adopted Senate Bill 7, the state's electric d legislation expanded competition in the wholesale electricity market and competition among electric retailers. Proponents of the legislation promised 1 i ("CAPP"). ~ng to the eliability to both 12011. As -nation of Ing Sunset lic market P 's latio law. The ed t door to elect ic prices. Unfortunately, the reality has been otherwise. Although Texans paid e ectric ices well below the national average during the decade before Senate Bill 7 was pas ed, cu omers in deregulated parts of the state now pay prices above the national average. In fa t, even e lowest residential electric rates in deregulated areas of Texas typically exceed rates p id by al residents of neighboring states, such as those in Oklahoma and Louisiana. CAPP believes that for deregulation to fulfill its promise, the market iryr, ust bec me more competitive. Problems include the ability of some generators to exercise mono oly-like ontrol in large swaths of the state, and the inability of many consumers to make inform d choic because of confusion in the retail electricity market. Efforts to address market design iss es by E COT also have been mismanaged, gone over budget and fallen behind schedule. As an active market participant, CAPP is in the unique position to ide have developed in the deregulated marketplace and to provide a consum legislators interested in fixing those problems. Based upon this point of view, CAPP has formulated recommendatil Review Commission as it conducts its PUC and ERCOT reviews. CAPP's reo intended to improve competition in the electric market place by making the PU accountable to consumers, by limiting market power, and by creating competi customers. CAPP's recommendations reflect the organization's desire for a tri market where consumers can save and competition can flourish. Such a m~ power remains affordable and reliable will mean more economic developme and a better standard of living for our citizens. :ify pro lems that "s pers ective to is for e Sunset mmend tions are and E OT more ive opti ns for all y healt y electric ket e where t for T as cities, 79 Legislative change is necessary to better protect cities' budgets, enhan protect their citizens, and increase competition among retail providers. The foll proposed by the CAPP Board: • All generators, regardless of size, should explicitly be barred exercise of market power. • Entities such as municipalities, commercial customers or retail harmed by wholesale market abuse should be given explicit stan in market power abuse enforcement actions brought by the PUC. • Fines should be increased for market abuses in such a way that full restitution to the market, market participants, or parties injur, • Activities defined as market abuse by the Federal Energy should be prohibited. • The statutory purpose of the PUC should be modified to e harmonizes its pursuit of competition with the protection of el • As a condition of conducting business in Texas, Retail Electric : should be required to include among their offers one standard that has PUC-approved terms and conditions. Such standard 1 ensure that REPs compete based on price, not on customer confus • The number of consumer representatives on the ERCOT board from the current three members, to six. e cities ability to wing c anges are om th unlawful lectric roviders ~ng to articipate e PUC an order by the iolation. orv C mission that t e agency consu ers. ivider ("REPS") !ctrici package ~r pro ucts will uld bellincreased • The Office of the Comptroller should be assigned a seat on the ER OT bo d and on as appropriate budget oversight panels within ERCOT. The C mptroll r's office should be given access to all ERCOT contracting material and be cha ged with conducting a bi-annual performance review of ERGOT. • The PUC should be required to provide prior approval of all ~lebt fin~ncing by ERCOT. I II The CAPP Board, made up exclusively of City representatives, requ sts tha the City Council pass the attached resolution endorsing CAPP's legislative/Sunset agend . RECOMMENDATION The staff of the City of Paris recommends that the City Council a~opt th~ attached resolution. 77 attorney\reswork\current\CAPP legislative changes ~ Sunset ] RESOLUTION 1V0. DRAFT iew 2010 Res A RESOLUTION OF CITY COUNCIL OF THE CITY OF PAR S, TE S, ENDORSING CERTAIN LEGISLATIVE CHANGES RELATING TO HE SUNSET REVIEW OF THE TEXAS PUBLIC UTILITY COMMISSIO AND HE SPECIAL PURPOSE REVIEW OF THE ELECTRIC RELIABILITY C UNCI OF TEXAS; MAKING OTHER FINDINGS AND PROVISIONS RELAT D TO HE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, the City of Paris is a member of Cities Aggregation ower roject, Inc. ("CAPP"), a non-profit organization created by cities throughout Texas t secur affordable energy for its members in the deregulated electric market; and WHEREAS, affordable and reliable power means economic de~elopm~nt for our cities and a better standard of living for our citizens; and WHEREAS, by deregulating the retail electric market, Senate ill 7 0 1999 ("SB 7") intended to allow competitive forces to drive down the price of electr city; a WHEREAS, CAPP's eight-year experience with the deregulated marke including negotiating power contracts with several different retail electric provi ers, in icates that the Texas electric retail market has failed to develop into a truly com etitiv market as envisioned by the Texas Legislature; and WHEREAS, competition has failed to develop in the deregulat d elec because certain power generation companies own or control enough gen ration exercise market power to the detriment of customers and non-affili ted rel providers; and WHEREAS, alleged market power abuse inquiries conducted b the Pi Commission ("PUC") are hampered by the lack of adequate resources b cause hurt by the illegal activity, like cities, are not allowed to participate in he inv and WHEREAS, the managers at the Electric Reliability Council of T failed to adequately manage expenses and operations. The most o ERCOT's implementation of a nodal market - a project now four years b, expected to cost at least eight times original estimates; and, WHEREAS, the Sunset Review Commission is expected to reforms for the PUC and ERCOT; and, WHEREAS, the City supports all such legislative reforms healthy electric market where competition can flourish and consu: and (E s c market Lpacity to 1 electric lic Utility e parties tigations; OT) have ample is !dule and enql legislative can a truly money; 79 WHEREAS, the Ciry endorses efforts proposed by CAPP to competition, implement the original intent of SB 7 and reduce costs residents. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL PARIS, TEXAS, THAT: Section 1. The findings set out in the preamble to this resolu things. lify e electric the iry and its OF Tj~ CITY OF are h6rebv in all Section 2. The City urges reforming the PUC and ERCOT in such a way as to enhance competition in the deregulated market, to promote consumer protec ion and to encourage the sale of affordable electricity. Specifically, the City urges the Texas Legislature, as it considers changes recommended by the Sunset Adviso Com i9ssion, to adopt reforms consistent with the following: • All generators, regardless of size, should explicitly be barred from t~e unlawful exercise of market power. • Entitles such as municipalities, commercial customers or retai electri providers harmed by wholesale market abuse should be given ex licit anding to participate in market power abuse enforcement actions broug t by t PUC. • Fines should be increased for market abuses in such a wa that t e PUC can order full restitution to the market, market participants, or pa ties inj red by the violation. • Activities defined as market abuse by the Federal E~ergy ~egulatory Commission should be prohibited. • The statutory purpose of the PUC should be modified to requre it toha its pursuit of competition with the protection of consumers of lectri ty. • As a condition of conducting business within Texas, a compet tive Re ail Electric Providers (REPs) should be required to include among their ffers o e standard electricity package that has PUC-approved terms and conditio s. • The number of consumer representatives on the ERCOT board should be increased from the current three members to six. • The Office of the Comptroller should be assigned a seat on t e boar as well as on appropriate budget oversight panels within ERCOT. The omptr ller's office should be given access to all ERCOT contracting material a d be c rged with conducting a bi-annual performance review of ERCOT. • The PUC should be required to pre-approve all debt financing py ERC9T. 79 Section 3. A copy of the resolution shall be sent to the lected representing the City's interests in the Texas House and Senate and to the Ch legal counsel of CAPP. Section 4. This resolution shall be effective immediately upon tirman and DULY PASSED AND APPROVED on this 26th day of April, 2010,~by a v~te of ayes and nays at a regular meeting of the City Council of the City of aris, T xas. Jesse James Freelen, M~ ATTEST: Janice Ellis, City Clerk APPROVED AS TO FORM: W. Kent McIlyar, City Attorney 80 Apri126, 2010 The Honorable Mark Homer Texas House of Representatives P. 0. Box 2910 Austin, Texas 78768-2910 Dear Representative Homer: On behalf of the City of Paris, Texas, I am writing in support of proposed legislative r Commission (PUC) and the Electric Reliability Council of Texas (ERCOT) intended to address deregulated electricity market. As you know, recommendations by the Sunset Advisory Cc two organizations are expected to form the basis of bills during the 82nd legislative session th of Paris supports a number of PUC and ERCOT reforms intended to improve competition in t encourage savings for our citizens. The City of Paris is a member of Cities Aggregation Power Project ("CAPP"). Tc political subdivision corporation South Texas Aggregation Project ("STAP"), have more subdivisions, purchasing approximately 1.2 billion kWh annually. CAPP has served as a ve} to navigate the deregulated market and bargain for the best electricity rates an contract ter As an active market participant, CAPP is in the unique position to identify problems deregulated marketplace. CAPP wants what all Texans want: a competitive electric market it has been our experience that the 1999 electric restructuring law has failed to live up to it: market power abuses have driven up consumer prices. And while residential rates have de still remain higher than those in neighboring states and well above those one would expect i competition. The attached resolution reflects the City's support for legislative proposals relat Commission's examination of the PUC and ERCOT. These proposals, if implementi establishment of a truly healthy electric market where consumers can save money and comf market - one where power remains affordable and reliable - will result in more economic and a better standard of living for our citizens. I also want to offer CAPP, as a resource, as your eyes and ears in the market, whi: Advisory Commission's review of the PUC and ERCOT. CAPOP has gained important first-] deregulated electric market. CAPP members understand what works right for consumers, ~ We share your goal of crearing the best possible market for Texas. Working together, we kno The City would very much appreciate your support regarding these issues. Sincerely, Kevin Carruth /ap City Manager Enclosure P.O. BOX 9037 • PARIS, TD(AS 75461-9037 9 (903) 785-7511 • FAX (903) the Public Utility g problems in the i regarding these in 2011. The City lated market and ther CA PP and its sister an 150 member political e to inc ase cities' ability hat hav developed in the hat wor s. Unfortunately, initial pi -omise. Repeated lined si ce last year, they om a m rket with healthy g to th Sunset Advisory , can ntribute to the rition c flourish. Such a evelop ent for our cities you that isider the Sunset vledge about the needs to change. )rm is possible. 8 .l April 26, 2010 The Honorable Kevin Eltife Texas Senate P. 0. Box 12068 - Capitol Station Austin, Texas 78711 Dear Senator Eltife: A On behalf of the City of Paris, Texas, I am writing in support of proposed legislative r Commission (PUC) and the Electric Reliability Council of Texas (ERCOT) intended to address deregulated electricity market. As you know, recommendations by the Sunset Advisory Cc two organizations are expected to form the basis of bills during the 82°d legislative session th of Paris supports a number of PUC and ERCOT reforms intended to improve competition in t encourage savings for our cirizens. The City of Paris is a member of Cities Aggregation Power Project ("CAPP"). Tog ther CA political subdivision corporation South Texas Aggregation Project ("STAP"), have more t an 150 subdivisions, purchasing approximately 1.2 billion kWh annually. CAPP has served as a vehi le to inc to navigate the deregulated market and bargain for the best electricity rates an contract term . 'the Public Utility g problems in the i regarding these in 2011. The City ilated market and and its sister nber political ~ cities' ability As an active market participant, CAPP is in the unique position to identify problems hat hav developed in the deregulated marketplace. CAPP wants what all Texans want: a competitive electric market hat wor s. Unfortunately, it has been our experience that the 1999 electric restructuring law has failed to live up to it initial p omise. Repeated market power abuses have driven up consumer prices. And while residential rates have de lined si ce last year, they still remain higher than those in neighboring states and well above those one would expect f om a m rket with healthy competition. The attached resolution reflects the City's support for legislative proposals relati g to th Sunset Advisory Commission's examination of the PUC and ERCOT. These proposals, if implemente , can ntribute to the establishment of a truly healthy electric market where consumers can save money and comp tition c flourish. Such a market - one where power remains affordable and reliable - will result in more economic evelop ent for our ciries and a better standard of living for our citizens. I also want to offer CAPP, as a resource, as your eyes and ears in the market, whi: Advisory Commission's review of the PUC and ERCOT. CAPOP has gained important first-1 deregulated electric market. CAPP members understand what works right for consumers, ; We share your goal of creating the best possible market for Texas. Working together, we kno The City would very much appreciate your support regarding these issues. Sincerely, Kevin Carruth /ap City Manager Enclosure P.O. BOX 9037 • PARIS, TEXAS 75461-9037 9 (903) 785-7511 • FAX (903) you that hsider the Sunset Wledge about the ~ needs to change. brm is possible. 8 ?