Confused about deregulation?    

Here are answers to some common questions
...and links to more information.

Q. What do all these terms mean?      Electric Utility Restructuring      Retail Wheeling     Electric Utility Deregulation     Direct Access      Electric Utility Re-Regulation     Retail Access      Electric Utility Competition        
A. All these general terms refer to the situation in which residential customers are able to choose an electric utility, much as consumers now choose telephone service companies.

Q. Will electric utility competition help or hurt the average residential customer?
A. It depends on the laws that each state adopts to achieve a competitive market. Competition could mean higher rates for small consumers, and it could easily mean lower quality service and more air pollution unless state laws provide protection.

Q. What is the current status of the deregulation process in Texas?
A. Competing for retail electric utility customers is illegal in Texas at the present time. During the 75th Legislature, which adjourned June 2, 1997 there were several bills introduced but none were passed. Lieutenant Governor Bob Bullock formed the Texas Senate Interim Committee on Electric Utility Restructuring in September 1997. Commitee members are Senator David Sibley, Chairman (Waco), Senator Ken Armbrister (Victoria), Senator Gonzalo Barrientos (Austin), Senator Teel Bivins (Amarillo), Senator David Cain (Dallas), Senator Troy Fraser (Horseshoe Bay), and Senator Jane Nelson (Flower Mound). The Commitee will submit its recommendations to Lieutenant Governor Bullock by October 1, 1998. Many people are predicting that the Texas Legislature will take steps to deregulate the industry in 1999.

Q. How can I stay informed?
A. Hearings are currently scheduled on the following dates:
December 12, 1997 in Amarillo
February 4, 1998 in Austin
March 25, 1998 in Grapevine.
Another hearing is planned in Southeast Texas in May.
Mark McCleod, is the staff contact for the Committee. He can be reached at the Senate Economic Development Committee, (512) 463-0365.ATTEND PUBLIC HEARINGS AND TELL THE COMMITTEE WHY YOU SUPPORT OR OPPOSE ELECTRIC UTILITY DEREGULATION

Q. Can input from people like me really make a difference?   
A.   It is vitally important that individuals communicate their preferences to the members of the Texas House of Representatives and Senate. Everyday, your elected officials hear from paid lobbyists for utility companies, electric cooperatives, municipalities, independent power producers, large industrial utility customers, and other businesses that are making profits off regulation or want to make profits in a deregulated market. The only reason that small consumers, regular everyday people, are not a priority topic in the debates is because small consumers are not speaking up on the issue.

Q. How did we get to this point of the debate?   
A.   In 1995 and 1996 the Public Utility Commission of Texas (PUC) studied the issues involved in a move to retail competition. Written comments were filed by 74 parties (Texas ROSE was one) and a series of public workshops and open meetings were held. The process culminated in a three volume report (over 1,000 pages) which can be accessed from the Texas PUC.

Because of both federal and state law, utilities in Texas operate in what is known as a competitive wholesale market. What this means is that businesses other than a regulated utility can build power plants and sell power to a regulated utility to resell to its customers. Wholesale competition works through a process called integrated resource planning.

Q. What is "stranded cost", and why is it such a big money issue?     
A.   "Stranded cost" or "excess cost over market" is the cost of electricity supplies -- mostly nuclear -- that command high prices. Gulf States Utilities, TU Electric, Houston Lighting & Power Company, Central Power & Light Company, and El Paso Electric Company are currently carrying $24.5 billion in debt on nuclear plants -- almost $1,400 for every man, woman and child in Texas. Natural gas plants produce power at about a third the cost of a nuclear plant. In a competitive market, customers with a choice will naturally buy power first from the gas plants. Consequently, the owners of the nuclear facilities may have a revenue deficiency.

The utility companies claim their stranded costs are over $20 billion and they want to start collecting it even before competition starts. $20 billion is a lot of money. If you could spend $100 million a year it would take you 200 years to spend $20 billion. The utility companies believe that stranded cost should be paid by customers, not utility stockholders and investors. Industrial customers don't want to pay. No one wants to pay. Stranded cost could be an expensive proposition for residential ratepayers.

Q. Why are industrial and other large consumers so eager for deregulation to occur?      
A.   Large customers will have tremendous leverage to bargain for lower rates. If a large consumer is not satisfied with the rate offered, it may choose another supplier, leaving residential customers stuck with the tab for the South Texas Nuclear Project, Comanche Peak, River Bend, and Palo Verde nuclear plants. It is profitable for large commercial and industrial customers to leave the system for lower electricity prices. But no one has figured out how to make it profitable for residential customers.

Q. What are some of the issues that residential customers like me should be concerned with?    
A.   Residential customers could be refused service because of the neighborhood they live in, because they have no credit rating, or because they use low amounts of electricity. Electricity is essential to life. Every Texan needs electricity for refrigeration, lighting, fans, cooling and in some instances heating. Laws must be established to require every electricity suppliers in a competitive market to meet standards that will prevent situations such as redlining of neighborhoods where electricity service would be unavailable or prohibitively expensive and customers being refused electric service. Texas ROSE has developed a Consumer Bill of Rights to address residential and small business consumer concerns.

Q. What about electric utility service to low income households?      
A.   There are 1.2 million low-income customers who spend almost a billion dollars a year on electricity. Low-income customers spend from 13 to 44 percent of their total household income on utilities while average income Texans spend a little over 4 percent. Any laws to allow electric utility competition should guarantee affordable service for low-income customers because low-income customers will be the first to be discriminated against in a competitive market. California, New Hampshire, Pennsylvania and Massachusetts have established service standards for low-income customers that include rate relief, billing assistance and weatherization programs. Texas must do the same.

Q. As companies compete for our business, isn't it possible that the quality of service could improve?      
A.   This is another question that can only be answered as we see what kind of safeguards the states build into the laws that guide the deregulation process. The size of the utility workforce could be cut making customers wait longer for service connections and repairs. There will be fewer safeguards to protect customers from changes in rates and unexpected disconnections. Rates may increase more for customers who live in sparsely populated areas. These are some consumer protections that any retail competition plan should include:

! guaranteed service to customers without established credit when a security deposit is paid

! guarantee that electricity is available at all times

! security deposit limits

! third party guarantee of security deposits in the event of default

! the amount of interest a customer must be paid on the deposit held by the utility company

! standards for how often you receive a utility bill and how long you have to pay it after it is received

! special payment plans (even monthly payments, deferred billing) are available to customers who want or need them

! adequate notice of termination of service (a termination notice must be prominently displayed at the customer's home, notice must be written in English and in Spanish, the utility must honor a waiting period before and after final notice is mailed).

Q. Will the PUC have any jurisdiction at all?    
A.   Electric utility competition laws must establish standards that every retail supplier must meet. If every supplier is required to meet the standard, quality service providers will not be at a cost disadvantage to "fly by night" utility companies. Retail suppliers should be licensed and the PUC should be given the authority to fine retail suppliers for violations and revoke licenses.

Q. What are the expected environmental consequences of deregulation?     
A.   According to the U.S. Environmental Protection Agency, power plants are responsible for 72% of all sulfur dioxide emissions, 33% of nitrogen oxide emissions, 32% of particulate matter and 36% of carbon dioxide emissions. Old polluting plants, like Martin Lake, Big Brown, W.A. Parish, Mendaciously, Limestone, Talk Station, Sam Seamer, Harrington, Welsh, Sandow Station, J. T. Dealy, and Gibbons Creek that have little or no debt will reap the highest profits.

Competition threatens the development of clean, sustainable energy resources and environmental protection. There will be no investments in energy efficiency or renewable energy to help lower bills and reduce pollution unless the law requires it.

Texas needs laws to establish power production planning standards and environmental reviews of power plant siting proposals. Without a statewide policy standard, power producers will seek the lowest short-term price regardless of long-term impacts on local communities. A simple standard for a competitive market is portfolio standard which requires every power producer to obtain a minimum share of power from renewable resources and energy conservation programs.

Q. What is the national status of electric utility deregulation?      
A.   There are several federal bills in Congress to restructure the electric utility industry. For the most part, the federal bills encourage states to pass their own restructuring bills. The federal legislation would, however, force a state to restructure.    A handful of states -- California, Massachusetts, Pennsylvania, New Hampshire and Rhode Island -- are getting ready to offer retail access or are operating pilot programs to study how the markets work.

Everybody's got something to say in the deregulation debate.
Use these links to find out more:

Links to the Public Utility Commission of every state:      http://www.citimall.com/power/reg3.htm
Overview of deregulation issues:      http://www.kilowatt.com/
A compilation of public, private, and consumer organizations    http://www.local.org/links.html
   with interests in the deregulation debate: