{"id":3139,"date":"2011-12-14T09:03:42","date_gmt":"2011-12-14T15:03:42","guid":{"rendered":"http:\/\/stateimpact.npr.org\/texas\/?p=3139"},"modified":"2012-01-02T09:07:08","modified_gmt":"2012-01-02T15:07:08","slug":"regulating-the-price-of-power-in-texass-deregulated-market","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/texas\/2011\/12\/14\/regulating-the-price-of-power-in-texass-deregulated-market\/","title":{"rendered":"Regulating the Price of Power in Texas’ Deregulated Market"},"content":{"rendered":"
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Dave Fehling\/StateImpact Texas<\/p>

Electricity transformer station in downtown Houston<\/p><\/div>\n

Even in Texas, where it may seem the sky’s the limit for making fortunes in the energy business, there are rules. Or at least, there are rules when it comes to the price of one form of energy: electricity.<\/p>\n

In this case, there is the rule called a “price cap” and it’s imposed by state regulators on the wholesale price of electricity (what retail providers pay for the\u00a0electricity\u00a0they then sell to you). Now, the state’s Public Utility Commission<\/a> (PUC) may raise the cap, letting big power generating companies make more money during times of enormous demand.<\/p>\n

The cap\u00a0comes into play during critical times like what Texas experienced this past year, first with extreme winter cold then record summer heat, driving demand for electricity through the roof. Wholesale prices that are now averaging around $40 per megawatt skyrocketed this past August when persistent triple-digit temperatures had air conditioners running non-stop. The demand taxed the state’s total electric supply nearly to its limit. On seven days that month, wholesale prices spiked <\/a>to $3,000 per megawatt, the state-imposed price cap.<\/p>\n

At a meeting last week of the commission, one of the three commissioners, Kenneth Anderson<\/a>, surprised some in the audience when he seemed to indicate a willingness to eliminate the price cap<\/a>.<\/p>\n

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Texas PUC<\/p>

PUC Commissioner Kenneth Anderson<\/p><\/div>\n

“I’ve got no particular problem raising the system wide offer cap, or eliminating the cap or adjusting the cap,” Anderson said.<\/p>\n

But the next day, he seemed to backtrack. In response to questions about where he stood on changing the cap, he told StateImpact Texas: “The short answer is, we’re not talking about eliminating the cap at all. We’re talking about whether it makes sense to increase it.”<\/p>\n

The commission is concerned that power generators in Texas are falling behind<\/a> in building enough new generating units, so they need a financial incentive–the prospect of higher profits–to build new units. A 2011 report<\/a> by the North American Electric Reliability Corporation said Texas had the smallest margin of reserve power generation capacity in the nation. What’s more, the Electric Reliability Council of Texas<\/a> (ERCOT) earlier this month warned that next summer could again strain the state’s electric grid<\/a> to the point of “emergency procedures and conservation appeals.”<\/p>\n

“I think we need more generation,” said Anderson.<\/p>\n

Not everyone agrees.<\/p>\n

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