{"id":10809,"date":"2012-05-21T06:00:25","date_gmt":"2012-05-21T11:00:25","guid":{"rendered":"http:\/\/stateimpact.npr.org\/texas\/?p=10809"},"modified":"2012-05-22T13:17:58","modified_gmt":"2012-05-22T18:17:58","slug":"keeping-the-lights-on-in-texas-will-big-profits-spur-new-power-plants","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/texas\/2012\/05\/21\/keeping-the-lights-on-in-texas-will-big-profits-spur-new-power-plants\/","title":{"rendered":"Keeping the Lights On in Texas: Will Big Profits Spur New Power Plants?"},"content":{"rendered":"
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Dave Fehling\/StateImpact Texas<\/p>

Keeping the lights on at home in Houston as state regulators debate letting power companies make bigger profits<\/p><\/div>\n

The three members of the\u00a0Texas Public Utility Commission<\/a>\u00a0(PUC) seem in agreement that the cap on the peak price for wholesale power should be raised. They’ll likely finalize a massive increase this summer.<\/p>\n

Then, the big question: will it encourage power generating companies to build more plants in Texas as intended? Or will it only encourage profit-taking and possibly even market manipulation?<\/p>\n

At a meeting of the PUC April 12, there was disagreement over how to implement a higher cap on the price allowed on the spot market, typically a factor in extreme weather<\/a>\u00a0when power use surges. The current cap has been tripled in recent years and is now the highest in the nation at $3,000 per megawatt\/hour (during normal times, the price per megawatt\/hour can be $50 or less). The commissioners are considering raising the cap to $4,500 this summer and to $9,000 by 2015.<\/p>\n

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Texas PUC<\/p>

Texas PUC Chairman Donna Nelson<\/p><\/div>\n

“What we’re trying to fix is, the prices in the wholesale market are not high enough to attract investment. Would you agree with that?” asked PUC Chairman Donna Nelson to commissioner Kenneth Anderson.<\/p>\n

“Well, I’m not sure they are. I’m not sure I agree now. They have jumped, just the changes we’ve made if you look at the averages…”, \u00a0responded Anderson.<\/p>\n

Anderson detailed what he figured was the spread between average prices and what would happen if the $3,000 capped-price kicked in on the hottest summer days when demand spikes.<\/p>\n

“You’re carting away money, not in wheelbarrows, but in Mack trucks,” Anderson said.<\/p>\n

But that’s the theory behind dramatically raising the price cap: if the Texas electricity market is seen as lucrative and a good bet for profits, investors will be willing to fund the construction of new power plants. The state has warned that with a growing population, power generating capacity is not keeping up<\/a>.<\/p>\n

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Texas PUC<\/p>

Texas PUC commissioner Kenneth Anderson<\/p><\/div>\n

“And the longer we wait for investment, the clearer it is we’re going to have a problem having enough electricity,” said the PUC’s Nelson.<\/p>\n

When Texas lawmakers “deregulated” the market for\u00a0electricity\u00a0in 1999, they left it up to free enterprise to build new power plants. Other states impose fees or taxes to gradually raise money to fund new plants. And therein lies a problem according to one nationally prominent utility consultant.<\/p>\n

“Texas is the only state in the U.S. that has this curious system,” said Robert McCullough, of McCullough Research<\/a> in Portland, Oregon.<\/p>\n

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