TXU, In The News
Posted on Wed, Sep. 27, 2006
Texas power play is alleged
By R.A. DYER
STAR-TELEGRAM AUSTIN BUREAU
AUSTIN — Although not named specifically, TXU Corp. appears to be the subject of an expert’s findings that a top Texas energy supplier engaged in anti-competitive market manipulation similar to that associated with Enron during the California power crisis.
The recent report, issued by a consulting firm hired by the Texas Public Utility Commission, noted that a company with at least 13,000 megawatts of capacity withheld some generation during key periods in 2005. The result would have been higher wholesale electric prices, potentially more revenue for the company and the likelihood of higher electric bills for consumers.
The only company in Texas with 13,000 megawatts of capacity is TXU. The findings parallel a report issued last year by the same consultants. “Based on these analyses, we find patterns that are suggestive of economic withholding that raise competitive concerns,” the most recent report says.
TXU spokesman Chris Schein called the report “Monday morning quarterbacking” but also said he didn’t know whether TXU was the company it referred to.
“They are looking back with the benefit of 20/20 hindsight as to what could have been done, while ignoring consideration for the real-world information,” Schein said. “The report assumes that generators have perfect foresight.”
The report — issued in July by Potomac Economics of Fairfax, Va. — references wholesale market activity from 2005. In one section it examines the potential for companies to drive up wholesale electric prices by holding back energy from more efficient generators during key periods.
It describes three companies only with the initials A, B and C and states that “given the large size of Company C’s portfolio, the pattern observed . . . raises significant concerns.” It notes that regulators should take a closer look at Company C’s activities during 2005.
Terry Hadley, a spokesman for the PUC, said the agency would not identify Company C without first beginning an “enforcement action,” which can lead to sanctions or fines. Hadley would not say whether the PUC was contemplating such action. “We are always monitoring the market . . . but I’m not going to speculate where we are” with regard to a formal investigation, Hadley said.
But evidence within the report points to TXU, several experts say.
Tim Morstad, an official with the Office of Public Utility Counsel that represents consumer interests, said the Texas electric company with the second-largest generation capacity is Houston’s NRG Energy. According to a company Web site, it has less than 11,000 megawatts of capacity, Morstad said.
So it appears that TXU, which owns or leases more than 18,000 megawatts of capacity, is the only Texas company that could meet the description of Company C. “If found true, this type of behavior both raises prices and erodes consumer confidence in the market,” Morstad said.
Two years ago, the PUC issued a similar report from Potomac Economics that also concluded that TXU can unilaterally drive up wholesale power prices. It noted that if left unchecked, the utility could use such monopolistic power to block out competition.
Although it then found no evidence of undue profits, “TXU clearly had the ability to substantially increase . . . energy prices,” the earlier report said. It characterized TXU’s trading practices during a six-week period in 2004 as “non consistent with competition” and said the company sometimes acted as a pivotal supplier of electricity — meaning it had the “absolute” ability to substantially increase prices.
It called for additional monitoring but stated that it appeared that TXU had reduced or eliminated the questionable trading practices. At the time, TXU’s Schein said that “there’s a lot of innuendo in the report that isn’t fair” and that the company never engaged in improper activities.
The company’s trading practices also came under regulatory scrutiny after a cold snap in February 2003, when energy that typically sold below $50 a megawatt-hour shot up to $990.
But the latest report comes at a particularly awkward moment for the company. TXU is seeking permits to build a batch of new coal plants — an initiative that has become an issue in the Texas governor’s race.
The new plants would increase its generating capacity by half, but environmental groups also say the facilities would dramatically add to the type of air pollution that causes global warming.
Separately, an Aug. 27 report by a Michigan State University researcher has noted the potential for market manipulation in deregulated markets across the country. It noted that electric prices have gone up faster in deregulated states that have lifted price caps than prices in states that remained regulated.
Under the Texas electric-deregulation law, the “price to beat” — a regulated price paid by most Texans — will expire at the end of December.
“The evidence suggests that, at least so far, no discernable benefit can be seen for customers in restructured states once the rate caps have expired,” Kenneth Rose wrote in the report drafted on behalf of the Virginia State Corporation Commission.
Staff writer Dan Piller contributed to this report.
R.A. Dyer, 512-476-4294
rdyer@star-telegram.com
source: http://www.dfw.com/mld/dfw/15624161.htm
<< Home