Sam Houston Electric Cooperative

News > Electric Deregulation > Related Articles > Deregulation Delayed in Southeast Texas

Beaumont Enterprise - 3.14.2002

A decision by federal regulators on Wednesday will delay deregulation of retail sales of electricity in Southeast Texas until 2003, a state regulator said. This includes entire Sam Houston EC service territory, with the exception of the Diboll and Huntington areas.

The Federal Energy Regulatory Commission on Wednesday outlined some of the duties that regional transmission organizations should perform as FERC begins a standard design for wholesale power markets.

The commission said it will complete the rules for the regional transmission organizations or RTOs and wholesale markets by the end of the year.

Without a regional transmission organization or RTO, deregulation won't happen in Southeast Texas by the latest deadline of Sept. 15, but rather sometime in 2003, said Jess K. Totten, director of the electric division of the Public Utility Commission of Texas.

A spokeswoman for Entergy Corp., the incumbent electrical utility, said the company could not comment until it had studied the FERC's announcement.

In 2000, the Texas Legislature ordered markets served by investor-owned electrical utilities to deregulate and be open to retail competition by Jan. 1, 2002.

Based on building a vibrant wholesale market, the idea behind the law is that competition in electrical power would spur lower prices and better service much as it does in other segments of the economy.

But four of Texas' investor-owned utilities, including Entergy Corp., which serves Southeast Texas, did not draw competition and deregulation was delayed in those markets.

Because New Orleans-based Entergy also serves customers in Arkansas, Louisiana and Mississippi as well as Texas, it long has had an additional layer of regulation from the FERC.

The Texas utilities that served markets that did deregulate - including Reliant, which serves Houston, and TXU, which serves Dallas/Fort Worth - are located entirely in Texas and don't connect to other states or utilities that serve other states.

These utilities did this decades ago to avoid federal regulations.

When Entergy failed to draw competition by last fall, the PUC and Entergy agreed in October 2001 to work with the FERC in establishing an RTO to get out-of-state competitors to ship electricity into Southeast Texas through a regional transmission organization and offer competition to Entergy for retail customers of varying size.

At that time, the PUC and Entergy agreed that as of Sept. 15, 2002, Southeast Texas could deregulate if a wholesale market was present through an RTO.

FERC had been hosting a series of meetings since that time to get federal and state regulators, and electrical utilities and power providers of all sizes, to agree on how the RTOs should operate.

Tamara Young-Allen, a FERC spokeswoman, said no consensus has emerged as yet on how to form an RTO, although the Midwest region is furthest along in coming to an agreement.

Wednesday's decision to delay the rules governing RTOs thereby delaying competition for Entergy and Southeast Texas did not completely surprise the PUC, Totten said.

"We here at the commission had been skeptical about Entergy making the Sept. 15 deadline anyway because of the complexity of creating an RTO," Totten said.

Totten said some regulators in other states appear to share reservations for their own utilities and markets that the PUC has, while others are concerned that the costs of creating an RTO will outweigh the benefits.

The collapse of Enron Corp., an energy trading firm, is also creating some anxiety among federal as well as state regulators, Totten said.

The PUC also is one of several regulators who are concerned about the ability of utilities to dominate RTOs for their own financial benefit.

In February and January the PUC sent letters to the FERC asking that it limit the power of utilities in establishing RTOs.

New Orleans has sent a similar letter according to FERC records at its Web site.

In November 2001, FERC imposed new price controls on Entergy and two other electric utilities because the power producers dominate their markets.

The PUC also would like any RTO that Entergy is in to also include the Southwestern Electric Power Co., which serves East Texas another of the four markets that failed to draw competition and did not deregulate as a result.

The PUC feels this would help avoid importing regional power problems in other states to Texas.