Public Utility Commissions (PUCT) Answer On "Is Deregulation Working?"

Public Utility Commission of Texas Talks Straight

The PUCT today explained why deregulation may not be working as planned in some areas of the state of Texas. There is not a whole lot of data prior to Texas deregulating the electric rates in 2002 but what information we do have has remained inconclusive at this point. Right after deregulation we saw several large electric monopolies become deregulated. “Deregulated” just means that the state of Texas has unbundled the pole and wires charges from the “retail energy rate”. The reason they unbundled the rate is because the pole and wires company is an altogether different operation from the energy trading desk that buys energy in the form of natural gas and other commodities and resells it as electricity to commercial and residential customers. Once the rate was unbundled any new Texas electric company that wanted to could open up business and sell the retail energy to customers while the same pole and wires company you have always used passes through the pole charges onto the electric bill with no markup. If you have picked an alternate electric provider since deregulation you can actually still see the pole and wires company number on the bill in case of an electric outage. The number on the bill helps to confirm to Texas energy customers that they still deal with the company they always have when it comes to the electric service infrastructure and transmission.

An Example Of A Deregulated Electric Utility

TXU Electric Company was deregulated back in 2002 and as you may or may not know they kept their same name when they became an independent Texas electric provider. That means that their pole and wires company was called TXU and their retail energy company was called TXU even though they legally could not be affiliated with the pole and wire division. They were basically two altogether separate companies because legally there could be coercion if they were still affiliated. Imagine if you switched to a different retail electric provider and “TXU” the pole and wires company decided they would get you back by raising your TDSP charges on your bill which covers the pole, wires and meter maintenance? This would be a good way to keep people from leaving TXU since pole and wires charges can sometimes make up 50% or more of your Texas electric bill.

TXU Electric Delivery Had To Rebrand

What ended up happening because of continuous fear and confusion, because the name was so similar to the old monopoly, was a complete rebrand of the pole and wires part of the company. TXU Electric Delivery had to rename themselves “Oncor Electric Delivery” in order for people to distinguish between TXU (The Retail Electric Provider) and TXU (The Pole and Wires Company or TDSP Company, now called Oncor). Even after reading this lengthy explanation many people will still have no idea that TXU just sells the electricity (a paper transaction bought and sold on commodity markets and hedged) and no longer maintains the poles, lines and meters. Even as of today you will still see TXU Electric Delivery as a brand name for Oncor Electric Delivery even though they are no longer called that. Oncor even owns the name “TXU Electric Delivery” although imagine if Microsoft found a company using their brand name even if not in the same line of work? Microsoft would sue their pants off and the company would immediately need to cease and desist all use of their brand name. This is not the case with Oncor as they use Oncor and TXU interchangeably which helps in the confusion process and brings in multiple electricity customers back to TXU Energy Retail Electricity. It would appear that Oncor using TXU as a part of their brand name is an effort to help TXU Energy Retail gather new and existing customers even though they are no longer the same company. Many people call TXU Energy to have their electricity turned on thinking they are calling the poles and wires company. TXU Energy signs the new customers up left and right because of this confusion process and there does not appear to be any end in site. The rate is usually not very competitive in comparison to other retail electric providers in Texas and neither does it need be considering that these customers are signing up on a brand they believe to be their only choice in “turning on new electric service”.

Example of An Alternate Texas Residential Electric Provider To Compare With TXU: Startex Power is currently the cheapest provider: learn more and Champion Energy comes in second place.

Oncor Maintains The Poles, Wires and Meters

So what have we learned? Oncor reads your meter and maintains the electric infrastructure in North Texas. They are the ones who pass through your TDSP charges on a 1 to 1 basis on your retail electric bill. The reason they are called pass through charges is because most retail electric providers like, TXU Energy, Gexa, Startex, Spark, Champion, Bounce Energy and multiple others do not markup the TDSP charges from Oncor but pass them through on a 1 to 1 basis. There are a few Texas electric providers who do in fact markup the TDSP charges while offering a competitive retail electric rate. What ends up happening is you believe that Oncor has past through those charges with no additional markup on your bill, which is the only company who can since they own the electric infrastructure in North Texas. You receive a competitive retail electric rate with no indication, except in fine print in the energy contract, that the TDSP charges have been marked up by the retail electric provider (not Oncor). This allows a few retail electric providers to come away with extra profit margin until the PUCT of Texas makes this an illegal deceptive trade practice. Until the PUCT does something about it some electric providers will continue to do this until bad publicity catches up with them.

No Historical Data On TXU Energy Electric Rates Prior To 2002

There is not a lot of data showing what the last previous 2 years prior to deregulation showed for what electric rates were at for TXU Energy. This information would be useful in understanding what the Texas retail electric rates have done before and after with TXU since deregulation began in 2002. What we would need is the electric usage data file going back before 2002 for a particular company or residence. This can be obtained from Oncor Electric Delivery in the Dallas and East Texas area and from Centerpoint Energy in the Houston area. We would then need some corresponding electric bills prior to deregulation. Any electric bills before 2002 will prove helpful. We can then compile the data and give some estimates of what electric rates have done before and after Texas deregulation in regards to TXU Energy. We would also take into account what natural gas prices have done since deregulation began. There was a time right after deregulation when natural gas spiked up to some historical highs which caused electric rates to drastically rise. This rate spike made it look like deregulation was having the opposite effect that the state of Texas was expecting.

If you have old electric bills and usage data please feel free to fax it to 1-903-484-9222 and we can use it in our analysis. We appreciate your help in this matter.

Texas Deregulation Debate, What Is the Current Controversy?

The debate right now is whether or not Texas deregulation actually caused electric rates to go up instead of down. Many people believe that NOT breaking up the monopolies would have been a better choice. Their reasons have to do with several factors.

Factor 1

One reason has to do with the natural gas spike back in the beginning of 2002. Natural gas has a 90% correlation with electric rates in Texas. Because natural gas spiked so did Texas electric rates and this was at the same time Texas unveiled deregulation. Timing was very bad in this case in giving the Texas public the perception that deregulation works to reduce electric rates.

Factor 2

The second popular reason is that city municipalities and coops near deregulated towns often pay a few cents kWh less for their electricity then the deregulated city next door. These city owned municipalities and coops give the public the perception that deregulation has done nothing but raise rates. The factor that people are not recognizing is that the prior monopoly retail electric providers like TXU, First Choice Power, Entergy, WTU, Reliant, and CPL may have had abnormally higher electric rates then some of the smaller city owned coops and municipalities. The only way to know for sure if this is the case is to provide historical electric usage data and historical electric bills prior to 2002 from one of these retail electric monopolies also known as Texas Affiliate electric providers. You can send us your historical bills and usage data and we would be glad to investigate.

Please call us at 1-800-971-4020

Factor 3

Another point to consider in regards to factor 2 is that not all city owned municipalities and coops have cheaper electric rates then the deregulated Texas electric providers. Take for instance the city of Garland Texas. The city of Garland has many times had higher electric rates in comparison to competitive Texas electric companies like Champion Energy or Startex Power. There are several other municipalities that have historically had much cheaper electric rates then the competitive Texas electric providers in the deregulated counties of the state. One such provider is in the cities of Longview and Marshall Texas. SWEPCO also known as AEP is not deregulated in these areas and is a few cents cheaper then cities just outside of it like Tyler Texas. The only explanation as to why they are able to provide a cheaper electric rate would be related to less advertising dollars spent at competing against multiple other electric companies. Texas has made the record books at being the most competitive electricity market in the world and AEP SWEPCO has avoided the issue of needing to compete with other providers by having absolutely no competition in this area of Texas. They also have the added pressure of needing to keep the rate low so that the city does not decide one day to deregulate the area because of being overcharged by their monopoly electric company. Longview must also contend with the fact that by deregulating the area they could bring in new businesses and jobs to the city which gives them more tax dollars. In the end a Texas city or county may decide to deregulate because the electric rates would be cheaper, they could add tax revenue and new jobs, and the possibility that Texas Energy lobbyists have swayed them.

Commercial Electric Rate Rise Higher 2 days in a row

Commercial Electric Rates In Texas

In Texas, commercial electric rates have risen higher for the 2nd day in a row. This rise in energy prices has partially to do with natural gas storage reports being less then expected. For those who may not ne aware you will many times see electric rates react as volatile as natural gas itself since the correlation is so strongly tied to it. If you think about it, Texas commercial electricity is produced primarily from natural gas power generating plants. Because of the type of power generating facilities we rely upon in Texas we have to ride the ups and downs of these energy spikes like it is the norm.


If you look at the Texas Commercial Electric Rate Chart for today (Feb 6 2008) you can see that electric rates are about in the middle of where they have been all year. The prices bounced off the 7.7 cents support quite a few times and will likely not come back down there for several months. These rates are for commercial customers using over 1,000,000 kWh of usage a year. If you do not use that much we can put your company in an aggregation to obtain similar competitive rates.

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Feb 6 2008 Texas Commercial Electric Rates

Other States Don’t Have The Electric Rate Price Spikes

In other states you may notice that the energy is not nearly as volatile as they may have quite a few nuclear power generation facilities and other alternative power generating plants to provide their electricity. Texas has a large enough natural gas power plant infrastructure that it will be awhile before we transition over to more diverse power sources. Part of the volatility also has to do with maxing out the supply of natural gas as we use it to heat our homes and produce our electricity. Texas commercial electricity becomes a hot topic because of the predicament we currently find ourselves with the absolute need for fossil fuel.

New Fuel Sources Will Bring Down Electric Rates

10 years from now natural gas will no longer be our primary fuel source. Just look at a historical energy source chart and you will see that as one energy source becomes cheapest it eventually becomes the primary source of fuel for power generation. This type of historical data can be traced all the way back to the late 1800’s. Nuclear shows to be the likely winner as the fuel source that will soon overtake fossil fuels altogether. You may have noticed that thin film solar panels have also made some startling headway with the most recent news showing applied materials putting it on the roof of their manufacturing facility able to produce 3,000 megawatt hours a year. If thin film solar continues successfully and follows the path of Applied Materials we may very well see all Texas commercial electricity customers retrofitting their roofs with thin film solar panels. If this ends up being the success story Applied Materials is making it out to be then Solar could be the primary fuel source for electricity generation and not the predictable source many think it will be of nuclear.

Texas Commercial Electric Rate Trend Line

Commercial Rate Trend

Commercial electric rates ended lower at year end and then spiked up along with oil when a barrel of oil sold at $100. The rest of the energy sector followed and that bottom in electric rates appears to be over.

Go directly to texas commercial electric rate graph

Feel free to call us if you have any questions at 1-800-971-4020

Looking for the Cheapest Texas Residential Electric Providers? Check it out under Residential

Commercial Electric Rates in Texas have had their ups and downs during the year 2007 and a small window was available a couple weeks (Dec 18 – 28, 2007) to go and lock in near the bottom of where energy rates have been this year. That opportunity is over as the prices have bounced off of the support line back up again. Take notice just how often the bounce has occurred this year off this support line and ask yourself how many more times is it going to bounce before the rate starts heading back up. We may have seen the last of those low electric rates for sometime as you will notice rates can hover at their highs for sometime until they come back down again to their lows.

Waiting To Lock In

If you are waiting to lock in on a commercial electric rate until they come back down you may be spending more money doing this way then just locking in on something short term as you try and make up your mind. Electric companies in Texas generally charge a premium electric rate while you are off contract until you sign back up again. For those holding off it would be better to go ahead and sign up on something even if just for 1, 2 or 3 months. Electric rates on the shorter terms are much better then the longer term energy contracts. As an energy consultant I would however recommend going on a longer term contract for 8, 9 or 12 months as rates are still quite low in comparison to where they have been this year. By locking in while rates are low you will be insuring yourself against a rate spike that might go even higher.

Proposal Of Commercial Electric Rate Choices

If you are interested in receiving a proposal of different fixed rate term prices from multiple energy providers as well as other variable rate products you may be able to combine with fixed to reduce your cost even further then give us a call and we can assist in putting a proposal together. There are several ways to take advantage of where the market is at and one of our energy consultants can assist in directing you to the best possible option.

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Learn more about Texas Electric Companies

Champion Energy

Champion Energy is a large wholesale energy provider and operates primarily in the commercial sales arena. There are several smaller Retail Electric Providers who buy their energy from Champion and resell it under an alternate name. Champion Energy consistently provides competitive pricing to commercial businesses in Texas although with any electric company certain risk management policy changes can make their prices more or less competitive throughout the year.

For large commercial accounts there is usually the option to have a blend of multiple energy products to bring down the overall cost of the energy you will be paying for throughout the year. Champion Energy can assist in procuring your energy using both MCPE index pricing along with a fixed price product at the right percentage to benefit you the most based on market conditions. Eisenbach Consulting can assist in managing the risk and converting over part of a blended product when opportunities arise in the market to lock in more of the rate to a fixed energy product.

You can learn more about Texas Electric Companies and Choices by speaking to an energy consultant at Eisenbach Consulting.

 

Texas Historical 12 Month Commercial Electric Rate Graph

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Texas Historical Commercial Electric Rate Graph 2007  


This Years Commercial Electric Rates For 2007

We picked a 12 month term contract rate as the electric rate data to be used in putting this graph together. 6 and 12 month fixed rate energy terms remain the cheapest among all available terms on average in the past 12 months. This graph shows what commercial electric rates have done in Texas over the last 12 months. As you can see we had quite a dip in the heat of summer. Texas did have a mild summer which may have led to energy rates dropping from a wrong forecast on what the weather would do. As you see the seasonality has little to do with the rate. The fact is the seasonality is built into the energy rates because the futures contracts that these Texas electric rates are based off are all made up of speculation and analysis of weather patterns, hurricanes, and many other variables. Because seasonality is built into the rate already you would be better to lock into a rate now rather then later. One thing you could do however is lock into a term contract that ends about the time you think a wrong weather prediction would be realized. If a summer or winter is not as strong as expected then the energy rate would likely come down.

Unrealized Hurricanes Through The Gulf Of Mexico

Did you know there were expected to be at least 10 new hurricanes coming through the Gulf this year and we have yet to see even one since the speculation came about. This unrealized weather prediction has kept the electric rates low in Texas during hurricane season even while we see another variable of the Texas electric rate, “natural gas” begin to approach $8 mmbtu. Obviously this wrong prediction has offset the rising natural gas costs that we use in the production of our electricity here in Texas in the many electric natural gas and coal fired power plants throughout the state.

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