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Houston’s Electric Utility Reaping Windfall Profits, Asking For More

The Texas Coalition for Affordable Power (TCAP), a consumer advocacy group, reports that Houston company CenterPoint Energy is pulling in tens of millions of dollars in excess profits, and Houston’s electrical customers are the ones paying the bill.

Texas is a “Power to Choose” state, in which deregulation has opened the electric utility sector to commercial competition. The thinking is that if providers have to compete for customers, the market will decide whether a company sinks or swims, depending on how much customers like and trust them. If customers feel that they are not being treated fairly or that prices are unreasonable, they can switch to a different provider. However, CenterPoint Energy is exempt from this fray: Because it does not provide power directly to customers but is instead a transmission and distribution provider, CenterPoint is not subject to the market and is in fact a monopoly, with no competition. Texas’s Public Utility Commission allows charges to be automatically added to the electric bills of over 2 million customers to cover CenterPoint’s expenses–and allow a profit.

How much of a profit is supposed to be controlled, but CenterPoint has exceeded the authorized rate of return, currently 10%, instead seeing returns in excess of 11 – 12% or more. That may seem like a small difference, but in fact it translated to $46.5 million in excess revenue just in 2013 and may have exceeded $175 million in excess proceeds over the past three years, according to TCAP. CenterPoint is making no attempt to downplay this windfall, boasting to its investors in a June 30th meeting about the company’s profits and freely acknowledging that they were in excess of the allowable amount. When asked about the excess profits by the Houston Chronicle, a company vice president acknowledged the amount, stating that they wanted to earn as much as they could for their investors.

CenterPoint is so enthusiastic about turning profits for its investors that, despite the large amount of profits that it has recently received, the company is seeking a rate increase for 2015. TCAP reports that CenterPoint’s lobbyists have additionally been pushing for less municipal oversight, as cities have traditionally been a regulatory watchdog for the rights of utility consumers. CenterPoint is known to be a top political contributor to the Texas legislature and is reported to have spent around a million dollars on lobby contracts during the legislature’s 2013 session.

 

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