While we wait to hear whether there was illegal profit-taking during February’s rolling blackouts, Rep. Burt Solomons, a Carrollton Republican, is pushing a bill that would require power generators to “disgorge” revenues made from market manipulation. Solomons’ bill, HB 2133, would give the Public Utility Commission the power to force a company to return excess profits to those who were harmed. Currently, the PUC can levy administrative penalties against power generators that manipulate the market but that money simply goes into the state budget. The idea with HB 2133 is that market manipulation is theft and so the stolen property ought to be returned to the victims, presumably retail electric companies or consumers.
Since deregulation, there has been just one major case of market manipulation. In 2007, the Public Utility Commission recommended a $210 million penalty against TXU (now Luminant) for driving up prices during the summer of 2005. Later that penalty was dropped to $15 million, a pennies-on-the-dollar settlement given the (alleged) violation. The state got the $15 million while those who ended up paying too much for the power received nothing.
While most of the discussion centered on exactly how Solomons’ legislation would change the status quo, things didn’t really get heated until Bill Peacock, a representative of the free-market Texas Public Policy Foundation, took the dais. Peacock testified that penalizing companies for gaming the system is tantamount to “regulating prices.” The proposal, he said, rests on the “fallacy that companies shouldn’t be able to price their products at higher than marginal costs.” (Translation: Companies should be able to charge whatever they want without penalty.)
Solomons lost his cool at that line of argument. “The idea that somehow we’ll cause significant harm to Texas consumers,” Solomons said, “that’s a bunch of hot air in my opinion. You’re better than that.”
Undeterred, Peacock went on to say that those ripped off by market manipulation could always go to court – an interesting position, Solomons pointed out, for the Texas Public Policy Foundation, which vociferously opposes “frivolous lawsuits.”
Ever since Texas deregulated the power sector in 1999, it has become an extremely difficult proposition to impose any additional controls over the powerful utility sector. We’ll see if Solomons can muster support for this relatively modest legislation.