This op-ed was sent to me by a reader of my blog who gave me permission to post it here. I have not verified the information contained in the letter, but the writer said it was published in several news papers. The way our electricity rates are determined is outrageous!
If electricity deregulation is so good for me, why don’t I feel any better?
I’m tired of hearing our elected officials tell us that electricity deregulation is working. It kills me to see that the Star-Telegram’s Mitch Schnurman is now buying into it. The rates I am paying rank me right up there with New York and New Jersey. Something is wrong. It is not working for me. How about you?
The most recent Fortune Small Business magazine states that the national average for electricity is 8.9 cents per kwh. I’m currently paying 14.4 cents here in Arlington. The last time I checked, neither New York nor New Jersey had a nuclear power plant, and neither was sitting over any coal or natural gas. Something isn’t right.
All the politicians who gave the power generating companies everything they asked for last legislative session, and, now, Mr. Schnurnam, say, “Yeah, we’re paying more, but look at all the positive things that are happening. We’re going to get new state of the art meters (we will be asked to pay more for them). New transmission lines are being built to handle wind generated electricity (we are being asked to pay for them). We’re pushing for more energy efficient appliances, and ONCOR has programs to help you improve your home’s energy efficiency (we pay for these upgrades and improvements).” We will use less electricity per household, but we will be paying about twice what we were for it before deregulation came to pass. Please show me your definition of “good”, Mr. Schnurnam. Good for who?
One consultant quoted in Mr. Schnurnam’s piece says that Texas can meet future energy needs without building new generating plants if we fully implement all the efficiency programs available to us and continue to develop wind and solar options.
This is just the opposite of what Rep. Phil King, head of our Regulated Industries Committee, recently conveyed to me. In his letter, he states that the current method of pricing is based on marginal fuel costs; a costing structure which allows the generating companies to not only cover expenses and build in a standard profit margin, but is “now designed so that private investors take the risk of investment on new power plants…and recover their much higher capital costs.” He is saying that the windfall profits going into the generating entities’ pockets is pre-paying for new power plants. If we’re not going to need many more of these expensive plants, are they going to send this money back to us?
I bet that most of you have never even heard of the “marginal fuel equation”. This is the real culprit, and it is hardly ever discussed when the “why are my rates so high?” question is asked. Here’s what I know.
Our elected “deal makers”, and our appointed Public Utilities Commission, allow the generating companies to charge all the energy they produce at whatever the cost is for the fuel that is the most expensive. For instance, ONCOR (the old TXU) generates electricity using three different types of fuel – natural gas, coal and nuclear. Coal and nuclear generated electricity is much, much cheaper to produce, yet they are allowed, under marginal fuel guidelines, to charge all at the much higher natural gas prices. ONCOR electricity is mostly generated using coal and nuclear power. There is no averaging.
This would be similar to my taking off on a five day business trip. One night I stay in Temple and pay $75 for a motel room. The next two nights, I am in Waco and pay $100 per night. The last two, I am in Houston and pay $200 per night. This totals $675 for the week. When I get back, I turn in my expense report to the company for $1,000, showing that each night cost me $200. I stick the balance in my pocket. This is illegal. I call this stealing. Our “guardians” make it legal for ONCOR and others to do it.
Do you see why the venture capitalist group that bought TXU was so willing to participate in the largest leveraged buyout ever? Why they were so anxious to “gamble” on the Texas market being lucrative and assume so much debt? It was a no-brainer! Literally billions of windfall profit dollars have gone into their pockets these last few months. All yanked directly from my pocket and yours.
As far as I know, it is not mandated anywhere that this windfall go into any sort of escrow account designated for building new plants. I also know that this type of pricing is foreign to any other type of free enterprise business operation I am aware of, and I would suspect that ONCOR and others all have some sort of capital equipment/facilities recovery already build into their basic pricing structure, as is the norm.
Mr. Schnurman does us all a great disservice when he pats the pirates on the back for anything included in the deregulation package. Number one, we are paying approximately 40% more than we should be for electricity. Number two, all the great little things he mentions in his article, we are going to pay “over and above for”. The energy companies aren’t “giving” us anything. We will have paid for all the research and development of these new technologies and we will have paid for the entire infrastructure related to their implementation. ONCOR will still be tucking away 40% more than they should be. Our rates will still be about twice what Oklahoma is paying.
This is the root of the problem. This is reducing the situation to its lowest denominator. No one brings it up. No one wants to talk about it. I don’t even know if our elected officials understand it. If they do, they certainly don’t want to address it. We should all be trying to find out why.
John T. Johnson, III. is a small business owner living in Arlington. firstname.lastname@example.org
Please see correction in comments.
About Sharon Wilson
Sharon Wilson is considered a leading citizen expert on the impacts of shale oil and gas extraction. She is the go-to person whether it’s top EPA officials from D.C., national and international news networks, or residents facing the shock of eminent domain and the devastating environmental effects of natural gas development in their backyards.
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I will be the first to correct a misstatement in this piece I submitted. I wrote that ONCOR is the power generating arm of the old TXU. Luminant is, in reality, the generating segment of Energy Future Holdings, the old TXU. Sorry for the mistake.
I agree prices are high, but this is the only way we can become the leader in wind energy. The way i understand it, if electricity were not deregulated the electric companies would not allow the wind companies to use their lines. I guess they could still buy it, but why would they when they can burn coal & make more money?
I’m pretty sure that your and my tax dollars paid for those lines.
What makes you think that any of that money is going for wind energy infrastructure?
I know the PUC just granted ERCOT 4 billion dollars to build more transmission lines. What difference does it make who paid for it? Texas is now the leading state for wind power generation and that should negate any pricing issues. Why take this guys word for it, try reading the Schnurman column:
To Anonymous ….The consumers pay for everything. We don’t get anything for free. As far as wind solving our rate problems … just how much wind energy do you think is going to be pumped into our system in the next ten years? Only a small fraction of our demand.
Our PUC is supposed to be able to dictate to the energy providers how it is going to be. Not the other way around. Right now, we’ve allowed the gorilla to get so big he won’t take no for an answer.
Here’s what my friend in Austin had to say about Mr. Schnurnam’s take on things:
All this energy efficiency could have been achieved without deregulation. Proponents of deregulation are trying to hook their broken wagon onto a concept that is generally viewed favorably by the public – energy efficiency. While the deregulation bill – SB 7 – did include some EE provisions, all of this EE could have been done without deregulation. In fact, many states have done just that, keep low rates through regulation and still forge ahead and innovate and even mandate EE. Second big, big point is that many states (not Texas) have a process in place called Integrated Resource Planning that provides a comprehensive analysis and view of considering different energy efficiency programs and ultimately selecting the alternative that gives us the biggest bang for the buck. Texas had IRP for a few short years in the 90’s. Now in Texas the EE technology chosen is a function of whatever special interest gets their technology mandated into the law. Why do we have a billion dollars of expensive meters going in to households over the next decade? Not because expensive meters are the best EE bang for the buck, but because advanced meter companies and their surrogates (one of whom was quoted in Schnurmann’s piece) got bills passed. HB 2129 (2005) and HB 3693 (2007) nearly mandate widescale advanced meter deployment.
I never said wind would SOLVE our rate problems. I basically said I DON'T CARE about rates as long as renewable energy use is increased. I think that if rates are high that encourages conservation, just like we are now seeing with gas prices. Here is an article from the NY Times that says the same thing. http://www.nytimes.com/2008/02/23/business/23wind.html?_r=1&pagewanted=2&oref=slogin
I agree that high rates encourages conservation. However, the politicians, especially Phil King, and the electric company executives are getting filthy rich off our backs! I don’t see any need for that.
I am all about converting to clean, renewable energy ASAP and I firmly believe there is a political solution that will take us in that direction as will telling the public the bare-bones truth. Also, we desperately need campaign finance reform so we the people and not the corporations run this country.
Cathy Sykes says
For the last eight years, we have not had a a truly capitalistic country.
True capitalism works on a system of risks versus rewards, and that provides the checks and balances to make it work. With true capitalism, entrepreneurs think long and hard before risking their own capital, take responsiblility and accept losses when they make mistakes and reinvest a portion of their profits to improve and expand their businesses.
But for the last eight years, we’ve had an adminstration in power that believes that return to investors is the ONLY thing that matters in our society, and has sought to maximize that return by using tax dollars for corporate “welfare” and actually decreasing competition by passing legislation that favored the entrenched interests against any competition from emerging technologies. Good regulations level the playing field and make true competition possible…the type we have now is designed to protect the interests of the largest and most powerful corporations in the country and allow them do whatever they want.
At the time these companies are making record profits, they are also demanding governmental subsidies. At the same time they’re refusing to use some of those profits to improve their own operations, they’re having their tame politicians force customers to pay for such expenses. Their grip on the energy industry is so powerful that smaller companies have no chance to compete.
“Profit is all.” That is the cry of the corporate welfare queens. They care nothing for this country, they care nothing for their customers, they care nothing for their workers. They have more in common with CEOs and hedge managers around the world than they do with their fellow Americans,
Remember that in November.
"decreasing competition by passing legislation that favored the entrenched interests against any competition from emerging technologies" The fact that we have a deregulated electricity market is the sole reason the wind companies have been able to get into the market. Is that not an emerging technology? An open system like we have is available to all companies big and small.
"Their grip on the energy industry is so powerful that smaller companies have no chance to compete" I can name 5-6 companies from right here in Texas including, Chief, David H. Arrington & 4-7's that have made hundreds of millions of dollars just in the last few years, & none of them would be considered a big company. There are probably hundreds of companies that have made money in the energy business without ever drilling a well. I don't know where you live in Texas, but it obviously isn't around here or you would know this.
Ahmmm… She lives right on top of the Barnett Shale so I’m pretty sure she knows a thing or two about it.
Ahmmm… She lives right on top of the Barnett Shale so I’m pretty sure she knows a thing or two about it.
John Johnson says
Kudos to Ms. Sykes. I couln’t agree more, and I’ve voted Republican all my life.
To Anonymous … you views appear to be coming from the far side of the ledger. No compromise in you.
You appear to be, what I call, a Green Person. I’m all for alternative energy myself (I spent most of the day studying about the possiblity of using geothermal energy to produce electricity here in Texas. I have priced home wind turbine units. I can’t wait for the price of photovoltaic cells to come down). This being said, I’m all for more exploration and drilling, and for finding cleaner means of using the vast supplies of coal here in the U.S. I’m for compromise. This is a word that we don’t hear much about anymore. The far left and far right yank all of us moderate Repub’s and moderate Dem’s back in their direction all the time. They don’t want us to ever meet in the middle. They know that we will find that we have much more in common than we do with those on the two ends of the spectrum. When we figure this out, we can vote for the person, not the party. We can maybe get some truly independent people to run for office. However, as Sharon states, we can’t do this until we have campaign finance reform.
John – thanks for the compliment. Cathy – you’ve either been breathing toxic drilling fumes or drinking too much DNC Koolaid. You may be accurate in a generic way about the corporate mentality but I don’t think it has changed any in the last 100 years nor do I think it applies to all companies.
When you resort to ad hominem attacks, you know you have lost the debate.