Electricity Price Cap Goes to Vote
The amount you pay on your Austin Energy bill could be affected by a vote today by the Texas Public Utility Commission. It all has to do with the maximum wholesale price that companies can charge for electricity.
Energy regulators in Texas are trying to come up with a way to avoid a repeat of the rolling blackouts experienced in early 2011. The state’s population is growing and its industrial base is getting larger. Regulators say that means we need more power plants.
Later this morning, the Public Utility Commission is scheduled to vote on whether to raise the maximum wholesale price that electricity providers can charge. Currently, it’s capped at $3,000 per megawatt hour. PUC spokesman Terry Hadley says the new proposal would raise the cap to $4,500.
“By having a higher wholesale price during peak demand periods, that would encourage the investment community to develop new power-generation plants in Texas,” Hadley says.
The only time prices hit that ceiling is when demand for electricity approaches the upper limits of available supply. On Tuesday, Texas came within a few dollars of the current cap as temperatures soared. Demand for electricity reached its highest level ever in the month of June.
We actually hit the cap during last year’s heat wave. At one point in August, Austin Energy didn’t have enough of its own electricity to power the city. That meant the utility had to buy off the wholesale market at $3,000 a megawatt-hour.
“One of our units went down at Fayatte Power Project and we had to go buy electricity at the wholesale prices during the worst time,” says Austin Energy spokesman Carlos Cordova. “And over a four-day period, we spent $11 million on buying power.”
With a price cap at $4,500, that cost could have been up to 50 percent more. Those kinds of costs are eventually passed on to the consumer through Austin Energy’s fuel charge, which rose about $5 a month per household this year. Prices can be even more volatile in deregulated markets like Pflugerville and Round Rock, according to Tim Morstad at the AARP.
“And the promise of new power plants being built isn’t good enough when rates are going to be allowed to go this high,” Morstad says. “We need to have a guarantee. We also need to have a thorough analysis of how this would impact consumers.”
Right now, there is no comprehensive analysis of consumer impact. Estimates of the increase have varied widely so far – from a 2 percent hike per household to an increase amounting to $200 for every person in Texas. John Fainter with the Association of Electric Companies of Texas says the latter figure is way overblown.
“I think reliability of the system is very much in the consumer’s interest,” Fainter says. “I don’t think there’s anything more important to the consumer than having a reliable supply of electricity.”
No one knows for sure how the PUC board will vote on the issue. Its three members appear divided. Their meeting starts at 9:30 a.m. this morning at the Travis Building at 17th and Congress.