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Texas Sierra Club Lone Star Chapter State Capitol E-Report
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October 28, 2010:

Sierra Club Makes Energy Policy Recommendations to Senate Committee

The Texas Senate Business and Commerce Committee met this week to discuss competition in electric retail markets, including the impact of the “nodal” transition on electric customers. On December 1, 2010, the Texas ERCOT electricity market will officially transform from a “zonal” system – based on five geographic zones – to a “nodal” system, based on some 4,000 nodes. As a result electricity pricing should become more varied, with local factors of generation, transmission and congestion impacting the wholesale and ultimately retail price.

Cyrus Reed, Conservation Director for the Lone Star Chapter of the Sierra Club, testified, however, that we do not actually know what impact the nodal market will have on retail electric prices. He called instead for a series of state actions to promote energy efficiency, demand side management, and onsite renewable energy. As Reed pointed out, while we can’t know how the nodal market will impact retail rates, we can reduce electric bills through the promotion of such efforts.

Several invited panelists at the Senate interim hearing expressed concern about the potential for problems in the transition to the nodal marker, at least as the system is rolled out. However, Trip Doggett, President and CEO of the Electric Reliability Council of Texas (ERCOT) and the operators of the electric grid that covers roughly 80% of the Texas market expressed confidence that testing had worked out must of the bugs in the system. Public Utility Commissioner Donna Nelson emphasized that the nodal system was already being paid for through a surcharge on electric bills and that prices would not increase as a result of the software and infrastructure needed to change to nodal. In addition, she noted that the PUC had passed rules to establish some ceiling prices during the transition.

Much of the morning’s testimony centered on whether the deregulation of the wholesale, generation and retail markets in much of Texas had actually led to lower prices for consumers. While everyone admitted that today’s current low prices were heavily influenced by the historically low natural gas prices, most representatives of the electric power industry felt that competition had led to more efficient generation and lower prices and felt that companies that had done their homework would be able to thrive in the “nodal” market.

Taking a different tack, Jake Dyer, representing the Cities Aggregation Power Project, argued strenuously that “public” power provided by municipal utilities and electric cooperatives had represented a better deal for most residents, and presented information based upon prices reported by the Energy Information Administration to prove up his case. However, when asked by Chairman John Carona (Dallas) whether his group would favor re-regulation of the electric market, Dyer said it wanted reform, not re-regulation.

Similarly, Bee Morehead, with the interreligious non-profit organization Texas Impact, said the market was not working for most people – particularly Texans with lower and moderate incomes – and suggested a major overhaul of the “Power to Choose” website which people rely upon to choose their electric provider among other fixes. Tim Morestead with AARP said a workshop of some 140 older Texans given the chance to compare and choose contracts from different electric providers resulted in much confusion.

Among the suggestions made to the Senate Committee from the Sierra Club for ways to promote energy efficiency and renewable energy and reduce electric power rates were the following:

• Create a Texas Energy Efficiency Coordinating Council which would monitor the different energy efficiency program offered or overseen by the Texas Department of Housing and Community Affairs, the State Energy Conservation Office and the Public Utility Commission, among others.

• Raise the energy efficiency goals that investor-owned utilities must meet, but allowing such utilities to more directly interact with customers.

• Allow retail electric providers, investor-owned utilities, municipal utilities and electric cooperatives to provide on-bill financing for energy efficiency and solar projects.

• Allow aggregators and others to “bid-in” demand-side management – where individuals and companies voluntarily turn down their power use for payment – into the ERCOT nodal market.

• Establish a statewide fair market price on the sale of surplus electricity from solar rooftops;

• Clarify the rules for when Homeowner Associations can prevent – if at all -- a homeowner from putting up solar panels.

The State Capitol E-Report is a monthly electronic update from the Lone Star Chapter of the Sierra Club reporting on Texas environmental policy issues of statewide interest. Contact us at: lonestar.chapter@sierraclub.org ...Header photo of Devils River State Natural Area copyright Texas Parks and Wildlife Department donate
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