The Texas Public Utility Commission has agreed to a rate hike that will affect almost every electricity user in the state. The rate increase comes in the form of an increase in the “System Administration Fee” collected by ERCOT. ERCOT is the entity responsible for maintaining the state’s electricity grid.
The fee isn’t charged directly to consumers. Rather, it is assessed on every kilowatt of electricity purchased from the wholesale electricity market in the state. Retail electric companies such as TXU, Reliant and Cirro, purchase power from the wholesale market and resell that electricity to end users in the retail market. Any increase in the wholesale cost of electricity will ultimately be pass through to consumers.
While the Texas electricity market is the largest deregulated market in the country, parts of it are still subject to public oversite. The PUC must approve fee increases requested by ERCOT. The system administration fee will be going up 19.4%; taking it from 46.5 cents per megawatt to 55.5 cents per megawatt.
Although the actual impact on Texas electricity rates will be small, consumer groups are still less than thrilled to see rate increases of any kind. The Texas Coalition for Affordable Power points out that because the fee is based on usage, an increase in the rate along with an increase in the state’s power consumption will result in a net gain in revenue for ERCOT of more than 50% in less than 10 years.
The justification given for the rate increase was the need to finance new technology, comply will new (federal) regulations, and keep pace with inflation. ERCOT says it hopes to hold the fee steady at least through 2020.
The 3 member panel in charge of the PUC warned ERCOT against getting too comfortable with large rate increases.
“I don’t want to see double digit increases in the future,” said Commissioner Kenneth Anderson. “This is a one-time deal.”
The increase will go into effect in 2016.