Texas state senator kills utility bill that would return billions to consumers

Texas State Sen. Tom Haywood (R-Wichita Falls) effectively killed a closely watched bill that would return millions of dollars in utility excess earnings to consumers in Houston and Dallas.

Haywood tagged House Bill 2107 in the Senate Business and Commerce Committee. The tag means it will not be scheduled for a hearing in time to meet a Friday midnight legislative deadline, said Alison Brock, aide to the bill’s sponsor Sylvester Turner (D-Houston). To override the tag would require a four-fifths vote of the senate, she said.

The bill passed the Texas House of Representatives earlier this week and was supposed to be sponsored in the Senate by Sen. David Sibley (R-Waco). But sources close to Sibley said he was not enthusiastic about the bill and would “not cry in his beer if it didn’t pass.” Utilities have fought vigorously against HB 2107.

Haywood’s aide says consumers should not receive a refund because the original electricity restructuring law did not provide for it. “It took 4-years to negotiate that bill [SB 7],” said Patrick Fortner, aide to Haywood

Instead, Fortner said stopping refunds to consumers now will “protect” them in 2004 from a possible huge jump in rates. He said gas prices are volatile, and could suddenly fall. In that case, the companies would be entitled to the funds.

The bill provided that half the $3.7 billion collected from ratepayers in excess earnings by Reliant HL&P, a unit of Reliant Energy Inc., and TXU Electric, a unit of TXU Corp., and others would be returned to ratepayers in a one-time credit to September bills.

The money was collected from ratepayers since 1999 when it was presumed the utilities would have stranded costs for nuclear power plants that were not competitive with coal or gas-fired power plants. Recent increases in natural gas prices changed those economics.

Utilities were allowed to collect the money years before competition was to start so they could compete with other companies entering the market to sell power to retail consumers after the market deregulated in Jan. 2002.

Utilities were allowed to accumulate the excess earnings by the Public Utility Commission. The commission also allowed the utilities to redirect depreciation from transmission and distribution assets to the stranded assets to pay down debt. Since they were not paying down transmission and distribution assets during the last 3 years, transmission and distribution rates are higher than they would have been.

After months of hearings and studies, the Public Utility Commission determined in late April that utilities did not have the anticipated stranded costs and should return the excess earnings to consumers through a credit on transmission and distribution bills.

But consumer advocates such as the Office of Public Utility Counsel and Consumers Union say the legislation (Senate Bill 7) that governs deregulation may not allow the PUC to return the money directly to consumers. New retail providers would have to voluntarily pass it through to their customers and utility affiliate customers would not get the refund at all until 2004. That’s why Turner’s bill was important, they said.

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