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11/19/2013

Municipal groups knock proposed changes in Texas power market

A state group that includes many cities and municipalities says in a new report that proposed payments to electricity generators aimed at ensuring enough power could cost consumers billions annually, but not necessarily bring more generation online. The Texas Coalition for Affordable Power and Steering Committee of Cities Served by Oncor commissioned the report. It follows a 2-1 vote in October by the Public Utility Commission of Texas to mandate a minimum reserve margin -- a desired excess of capacity over projected demand -- on the state's largest power grid. The PUC will wait until a January report by a national consultant before setting the margin.

Currently under Texas deregulated electricity market, generators are paid only when they sell power. That's called an "energy only" market. Under a mandated reserve margin unspecified payments would be made to generators to providing capacity. That's called a "capacity" market. Electricity generators in the state have struggled with low wholesale power prices in recent years and support the mandated margin and payments. In February the Austin office of Public  Citizen estimated the cost at $1.2 billion to $2.3 billion. Another study put the cost at $3.6 billion a year.

"With these subsidies, generators would be paid simply for existing," said Jay Doegey, Arlington's city attorney and chairman of the Steering Committee of Cities Served by Oncor. "These very expensive proposals will almost certainly lead to higher electricity prices. What's unclear, however, is whether these subsidies really are necessary and how Texas consumers would ever benefit from them." Oncor Electric Delivery is the principal utility that distributes electricity in North Texas.

A link to the groups' report is here.

-- Jim Fuquay

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