| Start by going here to view the map of Texas Energy plants.Start by going here to view the map of Texas Energy plants.. ( I can't get it to link properly, sorry )
If this chart can be relied on, the only competitive thing about Texas energy markets is who supplies us with the generated power we use. The chart ilustrates that there are all these corporations generating power who then offer to sell it to us. In theory that means that we can reward the most efficient producer and punish the others by simply buying th cheapest power we can find. The fly in the ointment is that they don't all sell directly to us. That's were companies like the three that went bankrupt come in. They are the proverbial middle men.
They try to guess what the future price of energy will be, then sell this future energy to you and me, competing with each other. What went wrong for these 3 and can and will go wrong for others is that they will end up guessing wrong. They will offer to sell energy more cheaply then will be able to buy it.
Check out this:
"Electric companies wilting away in summer heat
By LOREN STEFFY
How well hedged is your electric company?
If you don't know the answer, you may be sorry. Just ask customers of Riverway Power, which filed for bankruptcy last week and now says it can't continue operating. Riverway is one of four retail providers that failed in the past month.
With the summer heat, electric companies are wilting like unwatered daisies.
Welcome to dereg roulette, Texas-style. As if higher rates weren't bad enough, now we have to worry about the solvency of the electric companies themselves.
The price of natural gas, which determines wholesale electric rates, has more than doubled since August. That's squeezing companies that offered fixed-price contracts but didn't adequately hedge to protect against a wholesale price spike.
In other words, some companies have found themselves obligated to pay more for electricity in the wholesale market than they're collecting from retail customers.
With Riverway's failure, some 35,000 customers have been forced to switch to other companies at higher rates or "dumped to POLR," the "provider of last resort."
Rates for POLR are a bear. A customer who was paying 11.9 cents a kilowatt-hour to National Power before it failed last month found himself facing a POLR rate of 21.7 cents. In some parts of the state, it can be as high as 30 cents.
By comparison, most fixed-rate prices in the Houston area currently are running in the range of 16 cents to 18 cents a kilowatt-hour. Rates much below that may be too good to be true.
As expensive and uncertain as buying electricity has become in Texas, it's likely to get worse. Prices aren't showing signs of easing. That means more companies could follow Riverway and its ilk into the dark in the coming weeks.
So the safeguard in the system is the deep pockets of the company that allows them to put away sufficient reserves (hedge money) in case they guess wrong. Guess who this favors? It is not a huge number of mom and pop shop energy retailers. It favors the big boys , both within and without of the state.
So what does all this mean for you? Let Loren Steffy , the Houston Chronicle's business columnist tell you:
"Electric companies wilting away in summer heat
[snip]
If natural gas prices continue their rapid ascent, even better-financed compan-
ies are going to feel the pinch.
Keeping the lights on now requires more than replacing a bulb and throwing the switch. We must make a bet on commodity prices like a trader, scour contract terms like a lawyer and investigate a company's financial wherewithal like an accountant. And we get to pay more for the privilege.
In dereg roulette, we know we can't win.
The object of the game is to not lose.
Welcome to Texas, the land of ideological free marketers, where consumers must be economic gurus to have a fighting chance to break even. The corporate interests and their allies created this system. They benefit, we don't. The game is rigged against us.
Anybody for regulation???
UPDATE
Apparently, the answer to my rhetorical question is yes. The Public Utility Commission and the industry itself are behind this , belated, call for closer regulation and supervision by the state of Texas. Specifically, two ideas are being discussed:
Power regulators propose report cards, strict rules
One is to create a "report card" with more detailed information on electric companies. The other is to raise the financial requirements for starting an electric company in Texas.
Even if adopted, it wont' help this former Riverway Power customer:
Power regulators propose report cards, strict rules
"I felt like if they were out there selling it, someone must be regulating it, making sure they're a good company," said Amanda Branch, a former customer of one of the companies, Riverway Power. "It never crossed my mind they wouldn't last."
Additionally, note that the real reform and regulation is the second proposal - rise the minimum requirements for starting an electric company in Texas. That bites directly into the objections in my original posting. It will mean fewer and fewer companies can enter the competition. Which, in turn, will mean that the benefits of many companies competing will be further eroded through time.
Re-regulation is sounding better and better to me.... |
