CAPITOL OFFENSES De-Reg or Not De-Reg? BY JEFF MANDELL Can falling prices hurt consumers? Maybe so, if the electric companies have their way with the Legislature on deregulation. Enron, Texas Utilities, and the other big utility companies want you to believe that utility deregulation is inevitably in the consumer’s best interest. But that’s only half the story. Deregulation has the potential to be a boon to Texans but ac cording to public-interest watchdogs who keep an eye on regulatory matters, the bills currently under consideration at the Lege are a bust. “Utility deregulation” is in fact a catch-all term, which for this session refers specifically to two bills: House Bill 349 \(proposed weaker derivative, Senate Bill 7 \(by Waco would remove significant state limitations on the ways the utilities do business. In probusiness theory, “less regulation” leads to “the free market” which inexorably leads to “lower prices.” However, in this case, the free market requires some help; the current Wolens/Sibley plan would freeze electricity rates beginning September 1 for five years, thus providing a window of opportunity to would-be competitors. At the end of the freeze period, frozen prices would be cut by 5 percent, and then price competition would begin. This plan requires splitting the utilities into three distinct functions: generation, transmission, and distribution. The first and last would be open to competition, while continue to regulate transmission. By “open to competition,” the state intends that no single utility company would have enough market share to exercise an inordinate control over the market: that is, Texas Utilities would have to sell some of its power generation plants. How much market share T.U. currently controls and thus how many plants they would have to sell is a contentious issue. But the general ideas are just as contentious as the details. Not everyone likes the idea of deregulation achieved through Many free market and industry groups disagree with the legislation as written. According to the Wall Street Journal, “T.U. officials vehemently oppose the proposal and vow that they will fight the deregula tion bills if they include language forcing the sale of power.” On the other hand, the opposition of industry groups does not imply the support of , consumer advocates. Tom “Smitty” Smith of Public Citizen, for example, has serious complaints about the currently proposed legislation. Smith readily acknowledges that deregulation could reap some advantages for consumers. Among the potential benefits: substantially lower prices for energy consumers; scheduled billing to help consumers equalize utility bills year-round; moves toward more environmentallyfriendly power sources; and the availability of “steady-state power” for those who need it. However, Smith argues that currentlypending legislation will not necessarily deliver these benefits. One late-breaking improvement was the addition of “pretty good language on pollution,” that would provide funding for the utilities to 70 percent \(which Sibley calls the equivalent of removing eleven million cars from will be more bad news for consumers: the bill for retrofitting the power generating plants will be added to the “stranded costs” consumers pay every month. Even so, Smith calls this provision “an enormous victory for the environment.” Less enormous is a “good first step” amendment requiring that utilities generate 3 percent of their capacity from renewable resources These environmental protections passed as amendments to the Senate bill, but they are not currently in the House bill. The House bill notes that it was not drafted by the Legislative Council \(as is try lobbyists wrote most of the text. Wolens vociferously denies any such allegations as “absolutely and unequivo cally untrue. I wrote that bill out myself with Pat Wood, Chairman of the Public Utility Commission. Pat’s an upstand ing guy, and David Sibley was there for some of the writing. He saw us…. This bill came en tirely out of my head, as a re sult of travel to Pennsylva nia and California [two states that have recently deregulated their utilities] and as a result of all the discussions I had in 1995 and 1996.” As for the bill’s prospects, the big fights are yet to come 18″erraik APRIL 2, 1999 THE TEXAS OBSERVER 13 nryr. .
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