Texas competitive retailers Tuesday said the price of electricity must be higher than what was previously agreed to in Reliant Energy’s service territory so they can undercut it and compete.

Retailers, represented by the Alliance for Retail Markets (ARM), convinced the Public Utilities Commission of Texas to set a Dec. 3 hearing to reconsider a settlement for the price-to-beat fuel factor. The price-to-beat is the base price of electricity charged consumers who don’t choose an alternative supplier when competition begins in January. The fuel factor includes the estimated costs of fuels to operate power plants, plus other fees and charges.

Reliant’s fuel factor was heavily disputed by consumer groups, the utility, and retailers. Electricity sellers urged regulators to adopt a high fuel factor, making it easier for nonutility retailers to compete with the incumbent utility. Reliant had urged a fuel factor in early October of 2.8¢/kw-hr.

On Nov. 16, everyone but ARM agreed to a compromise fuel factor of 2.5¢/kw-hr, resulting in price-to-beat electricity rates that would be 17.5% below current rates.

Consumer representatives agreed to the compromise but not happily. “We were urging 2.1¢/kw-hr – 2.2¢kw-hr. It was a stretch to sign on to 2.5¢/kw-hr. But we did,” said Clarence Johnson, director, regulatory analysis, the Office of Public Utility Counsel. Johnson said OPC will consider its legal options if the commission agrees to raise the fuel factor.

Consumers Union also is wary of any move to increase the base price of electricity to foster a competitive market. “If Reliant agreed to the [2.5¢/kw-hr] fuel factor, they are obviously not selling electricity at a loss,” said Janee Briesemeister, senior policy analyst for Consumers Union. “If the PUC has to increase the price of electricity so retailers can compete, you have to conclude that deregulation is not a good deal for consumers.”

ARM members complained Monday the fuel factor of 2.5¢/kw-hr does not allow its members enough profit after costs to serve customers in Reliant’s territory. “This rate reduction will create a market in which competitive retailers cannot profitably serve price-top-beat customers,” ARM said, “given the various costs that nonaffiliated REP’s (non-utility retailers) must incur to serve such customers.”

ARM said it will present details of costs members must incur to serve price-to-beat customers. Because of the competitive sensitivity of trade secret information, portions of ARM’s testimony will not be public, ARM said.