Settlement issues bedevil Texas wholesale electricity market

Ann de Rouffignac
OGJ Online

AUSTIN, Oct. 3, 2001 – Consumer advocates called for a reassessment period of Texas’s electricity deregulation scheme here Wednesday, but industry representatives said the market should open in January as scheduled.

Some market participants complained of problems settling up bills in the wholesale market. “There is a $100 million glitch showing up in settlements,” said a representative of Austin’s municipal utility at the Gulf Coast Power Association fall conference.

“The market won’t be perfect in January. But Texas should be given an opportunity to work,” said Suzanne Bertin, director of government affairs for retailer New Power Co., Purchase, NY. Bob King, president of Good Co. Associates, said it won’t be “death,” if the market isn’t “perfect” in January.

Retail electric suppliers who serve residential and small commercial customers said they were worried about turn over in retailing companies and billing problems that could hurt consumer confidence.

“It is very difficult to assure customers that we will be here for a long time,” Bertin said. “Getting the data necessary to issue an accurate bill is also an issue.”

Bill Spears, manager, regulatory affairs for retailer TXU Energy Services, an affiliate of TXU Corp., Dallas, said he is also concerned about turn over. “Are we going to get REPS [retail electric providers] pulling out of the program 6 to 12 months later,” he said.

Vanus Priestley, manager, government relations, AES New Energy, a unit of AES Corp., Arlington, Va., said he is worried low profit margins will force suppliers out of the market. “Without that (profit margin or headroom), we end up with unregulated monopolies,” he said.

Consumer adovocate Janee Briesemeister said her biggest worry is that prices will increase under competition. Briesemeister of Consumers Union said the only way to measure success in a retail competitive electricity market is whether anyone is saving money.

Since 17 states out of 24 states that passed a restructuring bill are now retreating or at least delaying the implementation of competition, isn’t it time for Texas to “stop and reassess,” she asked.

Once considered a benefit, Texas’ transmission isolation from the rest of the country could become a liability. Only about 825 Mw can be imported into the Electricity Reliability Council of Texas’ 60,000 Mw market from outside the state, Spears said. The lack of import capacity isn’t much of a worry now because of excess capacity, but it could become an issue in the future, he said. Conversely, Texas generators can’t move excess power out-of-state to buyers in periods of low in-state demand.

With respect to the wholesale market, final settlement statements have begun trickling in, giving some market participants an unpleasant surprise. ERCOT bills schedulers for the difference when the amount of power scheduled doesn’t match the amount of power or load actually used.

Originally, it was anticipated this charge would be relatively low. Load imbalance was supposed to average near zero. But that’s not what’s happening, said conference participants. An Austin Energy representative noted the imbalance totaled $100 million in August.

Individual schedulers also complained about receiving multimillion dollar charges when everyone expected those charges to be low, he said. The line item on settlement statements is called balance energy neutrality adjustment or BENA.

“There is a lack of understanding of what BENA really is or includes,” he said. “What we do know is there is a lot more congestion than we had thought.” The unanticipated amount of congestion could require more transmission facilities, which won’t happen quickly. ERCOT has a technical committee examining the issue.

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