Lower Corporate Taxes Mean Lower Electricity Rates For Texas

Texas electricityThe Texas PUC is pushing the state’s utilities to pass through some of the benefits of the recently passed corporate tax cuts in the form of lower electricity rates.

Retail electricity is deregulated in Texas. However, the transmission and distribution utilities that deliver electricity around the state are still subject to the state’s oversight.

Oncor, the state’s largest distribution utility which covers Dallas, Fort Worth and much of North Texas, has already agreed to pass all of the millions of dollars of expected tax savings along to consumers.  Oncor agreed to pass the savings along to customers as part of a rate review which is a formal process in which the PUC reviews the appropriateness of rates being charged by the utility.  No exact details have been determined with respect to how the savings will be passed along. The rate review was actually completed before the tax reform bill was passed but there was a commitment in principle to passing along the savings.  It’s not yet know exactly how much Oncor will save from the lower corporate tax rates but with a $245 million tax bill in 2017 future saving are likely to be in the tens of millions of dollars.

Several of the state’s other electrical utilities have also agreed to pass along the savings to consumers.  These include Southwestern Electric Power Co., and El Paso Electric.  Centerpoint, which is responsible for delivery to the Houston area, has yet to specifically commit to lowering electricity rates in response to the tax cuts.

TDU fees in Texas appear as a pass thru item on consumer’s electric bills.  They are the same for any consumer within the delivery area regardless of the Retail Electricity Provider serving the address.  Lowering these pass thru fees will lower the effective electricity rate for millions of Texas rate payers.

Buffett May Be Buying Oncor

Legendary investor Warren Buffett may be close to buying Texas’ largest electricity utility according to reports.   Once part of the giant energy concern that included the retail arm of TXU, Oncor Electric Delivery has been up for sale for some time since the bankruptcy of its parent holding company Energy Future Holdings.

There have been numerous attempts to sell the unit already.  Offers by Hunt Consolidated Inc and NextEra Energy have both hit roadblocks thrown up by Texas regulators.  Buffett’s company Berkshire Hathaway is said to be offering $17.4 billion for the utility.

ONCOR is responsible for the transportation and distribution of electricity for a large portion of the Texas electricity marketplace including the Dallas and Fort Worth areas.  It is one of a handful of regional monopolies allowed to transmit the electricity that retail electricity providers sell to residential and commercial end users.   10 million electricity users in Texas are served by ONCOR.

Oncor Proposes Electricity Rate Increase for Many Texans

Oncor-Electricity-MapOncor Electric Delivery Company has filed a request with the Texas Public Utility Commission to increase electricity rates for those in its delivery area.  This is primarily North Texas which includes Dallas, Fort Worth and surrounding cities.  It also includes parts of Central Texas including Temple and Killeen as well as parts of Western Texas including Midland and Odessa.

According to the company, the proposed rate increases are necessary to offset nearly $8 billion dollars spent by the company on upgrading and operating the electric grid as well as expansion into newly covered areas.

Oncor is one of a handful of regulated Transmission and Distribution Utilities (TDUs) in the state of Texas, each of which holds a regional monopoly on the transmission of electricity which is bought by retail electricity providers such as TXU and Reliant and resold to consumers.

ONCOR doesn’t bill consumers directly.  The flat and usage based fees charged by Oncor for electric delivery are passed through to consumers on their electric bills which come from Retail Electricity Providers in Texas.

If the proposal is approved, a typical residential consumer would see their electricity rate go up about .5 cents per kWh.

See Also: Texas PUC Agrees To Electricity Fee Rate Hike


Oncor Proposes Battery Storage for Texas Electricity Grid

Texas energy storagyTexas’s transmission and distribution utility, Oncor, which manages the largest power line network in Texas, has proposed an infrastructure upgrade plan to invest 5.2 billion dollars in a network of large storage batteries that will be connected to the power grid. The plan, which calls for the purchase and installation of up to 5 gigawatts’ worth of energy storage, is proposed by Oncor to be implemented in 2018.

How Can Batteries Enhance the Power Grid?

Power demand in Texas is uneven. Because most Texans power down when they go to sleep at night, demand drops considerably, and power plants can sit idle. During the day, demand increases so greatly that its potential to outstrip capacity–resulting in the occasional power outage–is an ongoing threat. Power generation is uneven, as well, as Texas gets a growing amount of its energy from alternative sources, like solar and wind power. It’s clean and green, but unfortunately these sources can be intermittent. Sometimes the sun shines and the wind blows, and sometimes, not so much.

With their ability to store a surplus of energy and then feed it back into the grid when necessary, utility-scale batteries can solve the problems of both intermittent supply and cyclical demand. Power plants can operate on a more smoothed-out schedule of 24 hours, instead of cranking frantically in the daytime and foundering listlessly at night. Solar arrays and wind farms, such as Duke Power’s Notrees wind farm, with its 36-megawatt battery facility, can store power generated at peak weather to help ease demand on the grid even in non-ideal conditions, such as those hot summer days with nary a breeze to alleviate a jump in air-conditioning use.

One of the main supporting factors behind Oncor’s push to get batteries into the grid is that the cost for the batteries is forecast to be lower by 2018 than previously projected. Electric car manufacturer Tesla, with whom Oncor is in talks, will be producing industrial-sized batteries at its new “Gigafactory” battery production facility in Nebraska, scheduled to open in 2017. A study conducted by The Brattle Group estimates that the lower outlay of costs, along with the ability to bring in revenue by renting storage space on the batteries and a reduction in power prices, would likely result in a savings for power customers of 34 cents per month off the average bill. Consumers would benefit both from a more consistent and reliable source of energy and a small reduction in their utility expenses.

Oncor is responsible for transmitting power to most North Texas including the Dallas and Fort Worth areas.

See Also: New Transmission Lines To Bring West Texas Wind To Dallas And Austin


Group Claims Oncor Unnecessarily Charged Fees to Texas Electricity Consumers

According to a report commissioned by a group called Texas Coalition for Affordable Power (TCAP), Oncor has collected around a half billion dollars in fees from Texas electricity ratepayers in the past several years in order to pay federal income taxes.  This money, according to TCAP, was never actually paid to the federal government.  Texas regulations allow utilities such as Oncor to collect fees from customers to pay federal income taxes but don’t actually require the fees to be used for that purpose.

Texas is a “Power to Choose” state which means that consumers in most parts of the state are free to select their Retail Electric Provider.  However, the transmission utilities, including Oncor, are still regulated monopolies.  They are responsible for delivering electricity to consumers regardless of who the retail provider is.  The electric company whose name appears on the bill charges consumers pass-through fees that go back to Oncor to pay for the cost of delivering the power.

Oncor is owned by the same parent company that owns the retail electric provider TXU.  The parent company, Energy Future Holdings (EFH), has been in financial trouble since an ill-fated leveraged buyout in 2007 left the company with an unsustainable amount of debt.  The buyout amounted to a massive bet on the direction of natural gas prices by a group of large investors.  Soon after the buyout the bottom feel out of natural gas prices and never recovered. 

As a result EFH has been losing money since 2008 and consequently has not paid any federal income taxes.  According to the report, the money collected by Oncor ostensibly to pay federal income taxes has simply gone into the pockets of EFH and used to help service their massive debt payments.  The report further contends that since EFH appears to be heading towards bankruptcy or some other form of restructuring, the money collected for taxes will likely never be paid to the federal government.

See Also: A New Fee On The Electric Bill of Dallas / Fort Worth Customers


A New Fee On The Electric Bill of Dallas / Fort Worth Customers

If you live in the Oncor area, which is largely the D/FW area, you may have already began seeing a new charge on your electricity bill.  Oncor Electric Utility, the company that operates the electric lines and equipment that move electricity from the power plants to your home, is owned by the same parent company that owns TXU.

The new pass-through fee will allow Oncor to recover the cost of investments in new projects and infrastructure including a project to build large transmission lines to help transmit electricity from West Texas, where the bulk of the state’s wind energy capacity sets, to North Texas Power consumers.

You will see the new charge appear on your light bill regardless of who your retail electric provider is.  The exact amount of the fee will depend on the amount of electricity you use but for the average retail customer it will amount to about $5 per month.

The fee is subject to review by the Texas PUC; but only after the fact.  The PUC reviews such charges only two times per year and will disapprove the charge if they don’t feel it’s justified.  However, that doesn’t seem likely to happen in this case. 

This is the largest such cost recovery fee in quite some time.  Ironically, according to an Oncor spokesperson, part of the reason the charge will be so large is because cooler temperatures caused North Texans to use less power this summer.  This resulted in less revenue for Oncor.

Fortunately, most Texans have the right to compare electric providers to find the cheapest rate.  Although this won’t get you out of paying the Oncor pass-through fee, you could easily save more than enough to offset the new charge by switching providers at a low rate.

See Also: Texas Electricity Rates Going Up – Again


TXU Reports Abysmal First Quarter 2012 Earnings

TXU EarningsIt comes as no surprise that TXU’s parent company, Energy Future Holdings, reported a massive loss for the first quarter of 2012.

In accordance with GAAP, EFH reported a net loss of $304 million for the quarter, and an adjusted net loss of $280 million — significantly worse than lass year’s Q1 loss.

EFH is the holding company that owns Oncor (electricity transmission and delivery), TXU Energy (electricity provider) and Luminant (electricity generator).

EFH has been making headlines recently because of their worsening debt issues.  EFH’s debt is now rated 8 levels below junk, and most of the street believes that bankruptcy is now unavoidable.

EFH has lost almost $5 billion over the last two years.  EFH debt now totals $41.7 billion — a staggering sum.  With revenue of only $7 billion, EFH is in dire straits.