Regulators Approve Hike in Wholesale Electric Prices

The highest wholesale prices on the Texas electrical grid will be allowed to rise by 50 percent starting in August, following a vote by state regulators. 

The Texas Public Utility Commission voted 2-0, with one abstention, to raise the "wholesale price cap," which electricity prices sometimes hit on hot summer afternoons. (The most recent such case was Tuesday.)

The idea is to allow power plant owners to make more money on electrical generation — which could give them an incentive to build more plants to supply the state's growing population. Right now they are not building new plants because of low power prices — linked to cheap natural gas — and the strain is evident on the grid when hot weather causes air-conditioning use to spike. But consumer and environmental advocates fear that the higher wholesale prices will translate to significant price hikes for ordinary Texans.

“The one thing that we can’t do is ignore the situation and move forward blindly based on a faith and a hope that we’re going to have enough electricity," said PUC Chairwoman Donna Nelson, one of the two commissioners to vote in favor of increasing the price cap. "We have to hope for the best and plan for the worst."

Commissioner Roland Pablos also voted for the increase, while Commissioner Kenneth Anderson abstained. The price cap will rise from $3,000 per megawatt-hour to $4,500 per megawatt-hour.

Anderson said that he was "just not convinced" that the increase should be implemented this summer, though he said that "we absolutely need" a higher price cap in the long-term. In an April commission meeting, he said, in a widely quoted phrase, that increasing the prices this summer would mean that power companies would be "carting away money, not in wheelbarrows, but in Mack trucks."

In a recent PUC filing, a Texas industrial group warned that had the new price cap been in place last year, with its hot summer, the total cost of raising the price cap would have amounted to $4.7 billion. The Sierra Club echoed such concerns in its response to the vote on Thursday.

Raising the cap this August will raise energy prices on home and business owners," Ken Kramer, the Texas head of the Sierra Club, said in a prepared statement. "But it won’t lead to any new investments in electric power generation because power plants take 18 to 24 months to build." A better idea, he said, would be to encourage more energy-saving programs.

Nelson descried what she described as the perception that electric rates for households will rise 50 percent as a result of the PUC decision.

"I think that there are people out there who are not stating that it increases rates by 50 percent, but they are certainly implying it," she said. "And I don’t appreciate that. Because all it does is send panic through electric customers in Texas."