Sam Houston Electric Cooperative

News > Electric Deregulation > Frequently Asked Questions > How Deregulation Affects Members

A. ERCOT, or the Electric Reliability Council of Texas, is the body that oversees the electric grid that covers the majority of the state. ERCOT facilitates the selling of power on the wholesale level, manages the flow of electricity on transmission lines and ensures that customers switching service providers are processed appropriately. Less than 2 percent (near Diboll and Huntington) of Sam Houston EC's service territory is in ERCOT. An outline of the territory is below.

A. During the 2007 Texas Legislative session, Sam Houston EC worked with state lawmakers to induduce House Bill 2818, which would stop Entergy Texas' proposed move into EROCT. It passed in the Texas House and died before it got a Senate committee hearing.

Entergy's proposed move before the Public Utility Commission of Texas in the summer. On Oct. 2, 2007, the PUCT ruled in favor of Sam Houston Electric Cooperative, the cities served by Entergy Texas and various other consumer groups.

This decision saved Sam Houston EC and nine other neighbooring East Texas cooperatives more than $15 milllion per year in increased rates. It also save Texas ratepayers $1 billion in infrastructure costs.

The PUCT urged Entergy to consider joining the Southwest Power Pool, which would allow Sam Houston EC to still access low cost generation in neighboring states while still providing for needed infrastructure costs.

While this issue seems to be settled for the moment, Sam Houston EC will continue to look out for its members best intrests at upcomming PUCT hearings and the 2009 Legislative session.

A. From January 1, 2002, when the restructured electric market was implemented in ERCOT, to January 1, 2006, retail electric rates have increased by as much as 80 percent.

According to Power To Choose, the PUC's Web site that allows consumers to compare retail electric rates, the average cost for 1,000 kWh in the ERCOT region ranges from $118 in Dallas and Lufkin to $123 in the Greater Houston Area as of Nov.1, 2007. That's a tremendous increase over the $85 per 1000 kWh that those same customers were paying before deregulation began in 2002 and higher than the price the state's five regulated investor owned utility's consumers pay in East Texas, the Panhandle and El Paso.

While consumers of cooperative and municipal utilies in the ERCOT region have seen price increases, they continue to pay less than ratepayers that must chose among 40 different service offers.

The main cause for the high prices has been the increase in the price of natural gas, which has more than tripled in the same period, and that the majority of electric generation in ERCOT relies on natural gas as its primary or only fuel source. For these reasons, should deregulation ever come to our part of Texas, Sam Houston EC's Board of Directors will continue to take a "wait and see" approach.

A. Increased demand, high summer temperatures, robust economic both at home and abroad along with natural disasters such as Hurricanes Katrina and Rita have put tremendous pressure on an already tight natural gas market. According the Energy Information Administration, domestic production of natural gas has decreased slightly since 2002. While imports have increased, there are only four terminals in the United States capable of receiving liquefied natural gas, or LNG. Until new LNG terminals are built, in addition to proposed pipelines connecting gas field in Alaska to the contiguous United States open up, supply and demand will continue to perform a delicate dance at the expense of the consumer.

While Sam Houston Electric Cooperative can't control the price of natural gas, we do combine purchasing power with other cooperatives to buy in bulk and diversify fuel sources. This helps to minimize the effects of rising fossil fuel prices.

A. The Cooperative's rates are set to cover the expenses of wholesale cost of power generation, transmission of power over the electric grid and the distribution services we provide.

Currently, 60 percent of the power supplied by Sam Houston EC is produced from coal, 35 percent from natural gas and hydroelectric and other renewable energy sources accounting for the remainder.

We make it our focus every day to keep costs down. Sam Houston EC is working in conjunction with nine other East Texas co-ops to secure additional sources of generation that will mitigate high costs on the open market. Two 160-MW peaking facilities to be located near Kountze and Shepherd will help the Cooperative stabilize costs during periods of high demand. Sam Houston and the other nine ETEC co-op are also developing a 24-MW hydroelectric generating facility at Lake Livingston, which will be capable of supplying power to 12,000 homes.

A. Temperature extremes during winter and summer can tax even the most efficient heating and cooling system. By enrolling in Sam Houston Electric's Even Monthly Payment plan, your electric costs are spread evenly throughout the year, allowing you to budget your energy needs accurately for the next 12 months.

For more information, click here or call a Member Services Representative at (936) 327-5711 in Livingston, (936) 653-5400 in Coldspring, (409) 283-8251 in Woodville or toll free at (800) 458-0381.

Additionally, home improvement projects not only add value to your home, but also keep your heating and cooling dollars inside. To learn more, please review our Conservation and Efficiency Tips.

Q. How are electric cooperatives different from investor-owned utilities (IOUs)?

A. Locally based and democratically managed, cooperatives have, for decades, provided their members the lowest cost power and dependable local service. Operating as non-profit entities, cooperatives return unused capital to their members. This is in stark contrast to the IOU business model, whose bottom line goal is profitability. Understanding the fundamental differences between IOU and cooperative businesses, Texas lawmakers granted cooperatives and municipalities the choice to opt-in or opt-out of the deregulated market.

For 65 years, Sam Houston Electric has been looking after the best interests of our members. Under the member-owned cooperative business model, our incentive is not to gain a profit; it is to find the best deals possible and pass the savings on to our members. Unlike IOU customers, our members can rely on us to do the shopping for them. Furthermore, we leverage our expertise to negotiate prices and team up with other cooperatives to purchase power in bulk – another benefit only enjoyed by Co-op members. Being part of a member-owned cooperative is the best way to ensure you get the lowest price – and best service.

Q. What do Sam Houston Electric Cooperative member-owners say about deregulation?

A. In collaboration with nine other East Texas cooperatives, we commissioned a survey to determine how our member-owners prefer us to approach deregulation. Via hundreds of interviews and scores of group discussions with residents throughout all service areas, the ten cooperatives (representing nearly 277,000 members) learned the following:

64 percent of members surveyed believe that letting their co-op “do the bargaining” in the new market will ultimately give them more negotiating power and lower prices.

Only 16 percent of those surveyed expressed a desire for their cooperative to opt-in to the
competitive marketplace.

The potential drawback to participating in a deregulated market that most concerned 36 percent of members was that consumers in rural areas could be abandoned or forced to pay higher rates.

Q. Will Sam Houston Electric member-owners become part of the deregulated market?

A. Because our members recognize that being part of a cooperative means that membership gives them a bargaining power that most Texans do not have, Sam Houston Electric’s Board of Directors has decided to continue doing business the way we always have – by pursuing our goal of finding the best deals on power available and supplying it to our members. Like 130 other Texas cooperatives and municipalities, Sam Houston EC will maintain our “wait and see” position with respect to deregulation.

A. Currently, there is no set date at which the decision must be made regarding whether or not to opt-in. Careful consideration must be taken before making a decision to opt-in, however, as the decision cannot be reversed. Because we take our members’ best interests very seriously, the Co-op’s management and Board of Directors will continue to monitor the progress of electric competition in other parts of the state and will not participate in a deregulated electricity market until or unless we determine it to be beneficial to our members.