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Texas Panhandle electric utility could be excluded from deregulation

Southwestern Public Service Co. (SPS), one of the lowest cost utilities in Texas, will not be a part of the deregulated retail electricity market come January 2002, if legislation passes as expected.

The utility, a unit of Minneapolis-based Xcel Energy Inc., serves the Panhandle region of Texas as well as parts of New Mexico, Kansas, and Oklahoma and is supporting House Bill 1692. The legislation exempts SPS from deregulation and electric competition that is getting under way in Texas.

The bill sponsored by Rep. Warren Chisum and cosponsored by Rep. James “Pete” Laney, speaker of the house, passed out of committee last week.

“It is very unusual that a speaker sponsors a bill,” said Brett Perlman, commissioner with the Public Utility Commission of Texas. “With Laney signed on, it is a foregone conclusion that the bill will pass and the Panhandle will not be moving to competition.”

Perlman addressed the Gulf Coast Power Association members at their annual spring conference Tuesday in Houston.

The bill exempts SPS from the requirements of deregulation spelled out in Senate Bill 7, the landmark electric restructuring law adopted in 1997. The utility was scheduled to sell 80% of its generation assets to unregulated companies and to unbundle its generation company, according to a bill analysis.

“A lot of our customers are conservative out here. It [the legislation] fits our culture. We’ll let the rest of Texas do it [deregulate] and see how it works first,” said Wes Reeves, spokesman for SPS.

With transmission facilities constrained in the Panhandle, potential competitors would have trouble transporting power into the region to serve customers. Power consumed in the region must be generated there until the constraints are remedied. The area is simply not ready for a competitive market, according to the bill.

The legislation expressly prohibits full retail customer choice in SPS’s service territory in Texas until the PUC finds rates will not rise to levels higher than those in effect under regulation..

SPS residential and industrial customers have consistently enjoyed some of the lowest rates in Texas. In August 2000, the utility had the second lowest rates in Texas at about 6௿½/kw-hr. Rates have since risen to 7௿½/kw-hr because of increased natural gas costs. SPS rates are now the third lowest out of 10 investor-owned utilities in the state, according to data from the PUC.

“They do like their low rates,” said Reeves.

SPS is supporting legislation to keep its entire customer base under similar regulatory rules. New Mexico has rolled back plans for deregulation for another 5 years, said Reeves. And deregulation in Kansas has stalled.

Reeves also said its industrial customers and rural cooperatives expressed concern about the future of rates under deregulation. Among its generation assets, SPS owns two coal-fired power plants that will not have to be sold if the bill is passed by legislators.

“We don’t have to sell off the plants now. We’re kind of glad to hang on to those plants,” said Reeves.