April 13, 2007

Amarillo Globe News
House votes for electric rate cut

The Texas House voted Thursday to cut electric rates 15 percent for some residential customers paying the highest prices and to give state regulators the power to reject future sales of some electric utilities.

The regulatory provision would not affect the pending $32 billion sale of TXU Corp.

House members approved the bill containing the rate cut 132-1 Thursday night but sent a companion bill back to committee. The fate of the bills is uncertain because House members must negotiate with the Senate, which passed different versions last month.

The rate-cut provision would apply to about 2 million Texans who are still paying the so-called price-to-beat — the basic rate charged by former monopolies such as TXU and Reliant Energy Inc.

Many customers have gotten lower rates by changing electric companies or signing up for long-term contracts with the former monopolies. They would not be helped by Thursday’s vote.

The House approved the rate cut, but many lawmakers had wanted instead to give state regulators the power to reduce rates that seemed unreasonably high.

A vote to kill the 15-percent cut failed on a 66-66 tie.

Beginning after Sept. 1, customers paying the highest rates would see a 15-percent cut of the rate they were being charged Dec. 31. After the reduction, the Public Utility Commission would review those rates every six months and could raise or lower them if the cost of providing electricity changed.

It could be a short-lived provision. House leaders favor requiring consumers to choose options to those higher-rate plans by the year’s end, which could make Thursday’s vote moot.

The House also voted to give the PUC more power to review the sale of regulated electric-distribution companies.

The measure would not cover the sale of power-generation companies or electricity sellers. It was also applied only to deals made after April 1 so it wouldn’t cover any part of the pending sale of TXU to private investors led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group.

TXU is the state’s largest power generator. It also sells electricity and distributes power, but only the distribution business is still regulated by the PUC.

Rep. Phil King, R-Weatherford and chairman of the House committee that writes utilities laws, had resisted the PUC-review amendment offered by Rep. Charlie Geren, a Fort Worth Republican. King said the PUC was not qualified to decide whether to approve or reject the sale of a utility.

“For 32 years until this one event with KKR (buying TXU), the system has worked fine,” he said.

But King dropped his opposition, and the proposal passed on a 132-1 vote.

Lawmakers killed another King proposal to let existing electric companies buy electric-distribution utilities without prior approval of the PUC.

The PUC provisions are far from becoming law, however. The Senate passed tougher versions last month, letting the PUC kill the sale of a majority interest in a utility or impose other conditions.

One Senate-passed bill would also force TXU to sell generating capacity in its stronghold of North Texas. The House on Thursday night sent that bill back to King’s committee for the second time.

King strongly opposes the approach taken by his Senate counterpart, Troy Fraser, R-Horseshoe Bay.

It will be up to House and Senate negotiators to work out a compromise. If legislators can settle their differences, final legislation would go to Gov. Rick Perry.

Aides have said the governor will work with lawmakers to boost competition for electric service and drive down rates. Aides said Perry was concerned about giving the PUC new authority to review the TXU sale but would consider changing the rules for future deals.

The House actions were praised by consumer and business groups.

Tom Smith, state director of Public Citizen, said the rate-cut vote made Thursday “one of the best days for electric utility consumers in eight years.” Tony Bennett, chairman of the Texas Association of Manufacturers, said PUC review before electric-distribution utilities are sold would help ensure reliable power.

Electric markets in Texas were deregulated in 2002, but some lawmakers complain that rates in Texas have since risen from among the lowest in the country to among the highest. Supporters of deregulation blame the price of natural gas, which is used to generate most power in the state.

The Legislature is considering several bills that sponsors say are needed to increase competition and prevent electric companies from manipulating prices.