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Residents in many parts of Texas have at their fingertips a dizzying menu of electricity options since the state opted to deregulate the market six years ago.
In Bryan-College Station, municipally owned utilities mean one-stop shopping for local residents. But a lack of competition here generally means lower rates, according to the directors of College Station Utilities and Bryan Texas Utilities.
Texas' deregulated market received national media attention in July, when the Wall Street Journal reported power costs had skyrocketed to $4 per kilowatt hour on a hot day in May.
Dan Jones, who monitors the market for the Texas Public Utility Commission, told the Journal that prices could double this year.
Offers from deregulated retail electric providers hovered in the 10.5-cent to 20.5-cent per kilowatt hour range Monday, according to data reported on the Public Utility Commission of Texas' Power to Choose Web site.
Bryan and College Station utility customers pay between 9.8 and 10 cents per kilowatt hour -- lower than the nation's average of 10.97 cents in late August.
Rate structures differ somewhat between the two utilities. CSU's rates includes the cost of fuel, whereas BTU customers pay a base rate, as well as a slightly fluctuating fuel charge. BTU usually changes its fuel charge annually, but the utility changed it twice this year due to wide swings in fuel costs.
Fuel costs -- usually the most widely varying cost in a utility's operation -- have soared dramatically in the past year, due in part to what many say is an overburdened and inefficient power grid.
Spot natural gas prices also have experienced some wide swings in the past year.
U.S. prices for natural gas used to generate electrical power climbed from $6.35 per thousand cubic feet last September to as much as $9.56 in March of this year, according to data collected by the U.S. Energy Information Administration.
Powering B-CS
Since 2002 -- the year Texas implemented electric deregulation -- Bryan and College Station utility customers have been among the 30 percent of Texas residents served by so-called munis and electric co-ops.
At the time, Bryan and College Station had already been involved in the power business for sine time.
Bryan Texas Utilities got its start in 1911, following complaints about the existing private provider's reliability, according to a report published in a 2004 BTU newsletter.
BTU's predecessor, which operated as an electric co-op in the 1930s, pulled several rural territories into its service area. The utility continues to serve customers outside its city limits, including some in College Station and areas west of the city.
In the 1960s Bryan and the cities of Denton, Garland, Greenville and the Brazos Valley pooled their operations for generating power. The group later became a joint action agency, building the Gibbons Creek lignite plant in Grimes County to reduce future costs of power to the member cities.
The city of College Station formed its utility in 1939 -- a year after the city was incorporated. David Massey, College Station Utilities' director of electric utilities, said the operation has exploded in size since the end of the late 1970s.
When electric deregulation went into effect, the municipally owned utilities opted not to compete, meaning local customers do not have the option of choosing their electric provider. Once a muni or co-op decides to opt into retail competition, the decision cannot be reversed. The cities also could no longer grow their respective service areas.
"The California debacle had just ended with their deregulation experiment, and it was pretty much a failure," Massey said. "We looked at deregulation as something to be cautious about."
Dan Wilkerson, general manager of BTU, said deregulation offered no advantages for Bryan customers.
"Our prices were already so much lower than the retail markets in the rest of Texas," he said.
Wilkerson and Massey say the municipally owned utilities are better for residents and commercial ratepayers because they offer higher reliability than providers in other markets and they do not have to pay dividends to stockholders.
CSU and BTU had about 30-minute average outages per year, per customer in 2007-08 -- roughly one-third of the statewide average.
Rate history
One advantage CSU and BTU tout over deregulated providers is lower rates.
"With deregulation, we really haven't seen prices come down, even though there are new retail electric providers scattered out across the state," Massey said. "In a lot of cases, the prices they're quoting customers really are a lot higher than what we're seeing."
Still, College Station rates have climbed nearly 34 percent since 2002.
"College Station has had a series of rate increases -- because our rates include the fuel -- over the past four years," Massey said. "Because of the situation with natural gas prices having tripled and quadrupled, our rates did go up substantially."
CSU rates will increase to 10.8 cents per kilowatt hour Oct. 1. It was at 7.4 cents six years ago.
BTU's base rates -- which differ among rural and city residential customers --have declined 10 percent since 2002.
BTU -- eyeing its debt load and that debt's potential impact on future rates -- filed suit against the Texas Municipal Power Agency, of which it is a member. The TMPA is owned and governed by Bryan, Denton, Garland and Greenville.
On Sept. 12, the city asked a district court judge to stop TMPA from refinancing more than $360 million in existing debt and commercial paper, currently scheduled to be retired in 2018.
The TMPA board approved the proposal -- extending the member cities' debt from 2018 to 2030 and adding additional interest costs of more than $350 million -- at its Sept. 11 board meeting, over objections from Bryan officials. TMPA originally issued the debt for capital improvements in 1976.
"As reluctant as we are to pursue litigation, we believe that this action is necessary to protect both the agency and all of the customers of the cities that are members of the agency," Wilkerson said. "Refinancing the existing debt of the agency, which can be retired at competitive rates under the present financing terms, and to push these costs out to the future ... places the future competitiveness of the plant in jeopardy."
The TMPA's action could also result in significant rate increases for BTU customers in 2018, Wilkerson said.
Debt is one of several factors figured into BTU's rates. The city pays down its debt after paying fixed and variable expenses and general fund transfers to the cities.
Weatherford woes
While residential rates for many municipally owned utility and co-op customers remain lower than the state average, residents of the city of Weatherford -- about 30 miles west of Fort Worth -- have been battered by high rates in the summer months.
Last week, Weatherford residents filed a recall petition for two City Council members, and the city manager resigned over the issue.
Municipal rates in the city doubled to 20 cents per kilowatt hour in July from the utility's 10-cent rate in November.
Troubles started when the city signed a five-year contract to pull 40 percent of its utility's power from a West Texas coal plant, according to a report in the Fort Worth Star-Telegram. The city then faced a $1.5 million charge to use transmission lines from the region, just as a jump in available wind power caused congestion in the lines.
Officials responded by changing the power contract to all natural gas with a variable rate -- a move that caused the summer rate jump, as natural gas prices spiraled.
Several other municipally owned utilities in Texas have issued rate increases due to high natural gas prices. San Antonio raised rates by 31 percent over the summer, and the Magic Valley Co-op in South Texas had a 42 percent price hike.
Massey said CSU requires that its suppliers hedge its gas -- buying it up front so the utility can lock in gas rates for the year.
"We lock gas rates in and don't allow the floating situation, which is what really got Weatherford," Massey said.
