Companies asking to change fixed-rate contracts

Several retail electric providers are asking whether changes to wholesale power prices could allow them to break current fixed-rate contracts with consumers.

TXU Energy, a unit of Energy Future Holdings, and NRG Energy, which owns Reliant and Green Mountain, have asked the Public Utility Commission whether they can legally break the contracts due to the changes in the wholesale prices.

“The proposed changes may negatively impact the credit or collateral obligations of some retailers and would likely trigger the ‘change in law’ provisions in existing retail contracts,” according to a Consolidated Edison Solution filing.

The PUC has been exploring raising the wholesale cap of $3,000 per megawatt hour to $4,500 as a way to give power generation companies an incentive to build more power plants to feed the growing demand in Texas.

A new study by Brattle Group reaffirmed that idea by recommending the state triple its wholesale price later this decade to avoid potential blackouts.

The Electricity Reliability Council of Texas, which manages the grid for the bulk of the state, has warned of potential electricity shortages in the coming years due to growing demand and tight generation supplies.

Companies are now asking whether those changes could spark changes to fixed-rate contracts.

Under the current guidelines, companies are unable to break fixed-rate contracts unless power lines fees or new laws that impose costs beyond the retailers’ controls.

While the companies are asking, it doesn’t mean the electricity providers could go ahead and break existing contracts.

TXU wrote in its filing that it doesn’t intend to break contracts because of the “negative customer experience,” but the company might have to reassess its situation if Texas sees extreme weather or extreme price volatility.

Direct Energy said in a filing to the PUC that it doesn’t think fixed-rate contracts should be altered

“The negative impacts, if any, on longer term, fixed price contracts are avoidable in a market where hedging all or a portion of sales is essential to prudent risk-taking and practice,” the company wrote.

So what will that mean for consumers?

If the PUC allows companies to break fixed-rate contract, you might keep a close eye on that electric bill.