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A case 1 The 64th Legislature is more likely than any session in memory to pass a utility regulation bill. The well-publicized stink over Southwestern Bell has a lot to do with the push for a utilities commission, but so does general public outrage over utility rates see Max Woodfin’s story below. Opponents of regulation insist that setting up a statewide commission is no guarantee that rates will come down. Obviously, the type of regulation adopted Austin Texas consumers could pay millions of dollars less for utility services if their rates were regulated by a statewide commission. Utility rates in Texas have been proven to be excessive. They are excessive because rates and profits are not effectively, regulated in this state. Monopoly suppliers set their own rates in rural areas and in will have a great deal to do with the effect regulation has on rates. Dr. Jack Hopper, a tconsulting economist for the Texas Senate Subcommittee on Consumer Affairs and the Legislative Ad Hoc Group on Utility Regulation, here presents the arguments for believing that a commission could reduce utility rates. Dr. Hopper himself says that he is not promising rate decreases as soon as a bill is passed: he is pointing out areas where a commission could affect the cost of utility service. many towns; city councils do an inadequate job in many other jurisdictions. A state commission could reduce rates by attacking three abuses in the rate-setting company operation. Each of these factors is considered below. Most companies have received two or three rate increases since 1969. Utility companies commonly ask for two or three times as much as they actually need in rate increases to protect themselves against being forced to reduce their requests. A survey of mayors conducted by the Legislative Ad Hoc Group on utility regulation last fall showed that, in most cities, companies are seldom required to make such reductions. More than half the city councils covered by the survey simply granted the full amount of requests, without analyzing the requests or bargaining. In the winter of 1973, for example, the 245 cities in North Central Texas that are served by the Texas Power review or question, the 10 percent increase that the company requested. The request has been shown to be unjustified: TP&L was earning 25 percent more for its stockholders in 1973 than average electric companies in the rest of the United States. By Jack Hopper Getting ‘adjusted’ By Max Woodfin Fort Worth Remember the good old days when folks in South Texas were upset about natural gas costing 50 cents per thousand cubic feet? And San Antonio was planning rotating brown-outs because suppliers discoered they could make more money selling gas on the open market than they could by honoring existing contracts? \(see Obs., Well, bring back the good old days, say folks served by Texas rural electric cooperatives. We may have a good old consumer revolt on our hands. Don Blevins, who lives on an RFD route outside Keller, in Tarrant County, opened his January bill to find all sorts of figures on it. The two that hit his eye the hardest were $54.83 for electric service and $31.29 for “fuel adjustment.” “The $54, that’s OK,” said Blevins, “because I figure I used that much power last month. But that fuel adjustment, well, that’s something else.” THAT SOMETHING else called fuel adjustment is rising natural gas prices Woodfin is a reporter for the Fort Worth Press and a frequent contributor to the Observer. 6 The Texas Observer being passed along to customers of Brazos Electric Power Cooperative of Waco. Brazos serves 115,000 meters through 19 local cooperatives in Central and North Texas. In 1973, 50 cents was an outrageous price. Brazos is now paying $1.69. “We buy gas at the best price we can find,” Brazos Manager John Etheredge told the Fort Worth Press. “Some of it is under old contracts, but some of it is what we find on the open market and it has gone as high as $1.70 in the last month. Of course we blend the gas, but more than half of what we buy is at the open market price.” The Brazos System, according to Ethesedge, is a non-profit cooperative. Increases are passed along to consumers, who are also shareholders of their local coops. Real fine consumer oriented system, until it gets a bit more complicated than the Brazos public relations explanation. It seems that the highest prices Brazos pays, those hefty $1.70 figures, almost double the next highest price, go to Brazos Fuel Company, a totally owned subsidiary of Brazos Electric Cooperative. “That ain’t the way it is, what you’re thinking,” said Etheredge before anyone said a single word about what he was thinking. “It doesn’t affect the price one bit.” Brazos originally refused to reveal the names of its suppliers. Not only to reporters, but to customers, stockholders, as well. “Our attorneys have advised us not to give that information.” That information just happens to be a matter of public record, filed every month with the Federal Power Commission. The FPC only regulates gas that crosses the state line, but it also keeps tabs on intrastate companies just to check on the flow of gas and the amount of electricity produced. In May, 1974, when prices began to rise at a rate higher than normal inflation, the obviously coincidental name of Brazos Fuel began appearing on the monthly reports filed by Brazos Electric. “We knew prices were going up and we needed some expertise on natural gas, so we set up Brazos Fuel to do all of our buying for us. They don’t affect the prices at all.” Brazos Fuel Co. is registered with the Texas secretary of state as a profit-making entity. Company officials continue to refuse to . discuss matters of corporate structure. What Brazos Electric also will not say, and what it doesn’t have to file with the FPC, is where its suppliers buy their gas. Brazos folks will say, or rather they did slip and say, that some of their gas comes from one of the biggest suppliers in the state, which brings up names like Coastal States and Lone Star. So far, no one will confirm the names of any of the producers. Whoever produces the gas that Brazos buys isn’t going to get any medals for