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Retail Choice Rides Again: A Mixed Market in The Lone Star State

Texas wins raves from the big players for its rules and systems, but the small consumer, as in other states, sees little reason to switch.
Fortnightly Magazine - July 15 2002

business in the entire area of ERCOT with one set of rules, one control system, one back office," says Dave Cenedella, marketing manager for Xcel Energy's deregulated group, which operates in Texas under the name Xcel Energy Retail Services. "When you go into somewhere like Illinois, Pennsylvania, etc., you're dealing with different rules for each transmission delivery company."

Xcel Energy, the Minneapolis-based diversified energy and utility company, owns Southwestern Public Service Co., which serves power customers in the panhandle of Texas. The Texas panhandle, however, is situated in the Southwest Power Pool, outside of the ERCOT control area, and is exempt from Texas' restructuring law.

Gillan Taddune, president of the Texas region for Austin-based Green Mountain Energy, a renewable energy retailer, says another important element of a healthy energy market is whether it has standard electronic transactions and uniform business rules. These standards would need to apply to every utility in the region, "not like in New York, where if you're going to deal with one utility you've got to adjust your systems one way, and if you want to go into another service territory you've got to rebuild your systems."

Green Mountain began offering its wind-generated power to residential and small commercial customers in TXU's and Reliant Energy HL&P's service territories during the Texas retail competition pilot. That pilot began last summer and then expanded into Texas-New Mexico Power's service territory in January and Central Power and Light's service area in April. The premium for Green Mountain's "green" power usually runs $4 to $5 a month.

Whether Texas' restructured market, if it continues to thrive, can and should be used as a model for other states thinking about injecting competition into their electric power industry is open to debate. Green Mountain's Taddune firmly believes the basic concepts from Texas-uniformity in business rules, standardized electronic transactions that apply to every utility, not requiring a "wet signature" for a customer to switch suppliers-can be transferred to any state.

Texas also has shown how to move quickly on building new generation and addressing transmission issues, says Tom Rose, vice president of public policy for TXU. Another important factor in Texas' success, Rose suggests, is the fact that state authorities made sure to allow the establishment of a robust wholesale market before opening the retail side to competition.

"If you don't have the wholesale infrastructure in place-and that's both power plants and transmission lines-you're not going to have a successful retail market," Rose says. "We will tell any state that that's the most important thing is to get that infrastructure in place as you move into these retail markets, and make sure you've got that going in the right direction before you open the retail market because they're new markets."

Xcel Energy's Cenedella says the way Texas structured the market and its single control area made it possible for many new players to enter the market and be successful. "I think there are some unique things about Texas, which allow this market to work," Cenedella says. "But I also think it's a good model for