Texas OKs big boost in wholesale electricity rate

AUSTIN, Texas — The Texas Public Utility Commission voted Thursday to raise the wholesale electricity price cap by 50 percent this summer in a move it hopes will spur construction of new power plants.

Texas officials say the state must boost generating capacity to meet growing demand in the next few years to help avoid rolling blackouts during peak periods such as hot summer days.

Supporters of the increase hope the lure of new profits will spur power companies to build more power plants. But consumer groups warn it could raise costs by billions of dollars, leading to higher electric bills for Texas households.
Thursday’s vote by the three-member commission, all appointed by Republican Gov. Rick Perry, raises the wholesale rate on Aug. 1 from the current $3,000 per megawatt-hour to $4,500. Commissioners are already considering tripling the price to $9,000 in 2013.

The cap increase would affect wholesale rates within the Electric Reliability Council of Texas grid, which covers most of the state.

Texas AARP and other consumer groups say the commission hasn’t studied the impact the rate increase could have on Texas households.

Although electric providers typically sign long-term contracts for electricity at a set price, they often fill in gaps on high-usage days buying wholesale on the “spot market” where prices are set several times an hour. That market can be compared to buying and selling on the stock market, where prices can be determined by sharp increases in demand and shortages.

Texas Industrial Energy Consumers, which includes refineries and chemical manufacturers, warned that a sudden rate increase could create instability in electric pricing and drive smaller electric retail providers out of business.