HB 2133, giving the Public Utility Commission (PUC) authority to order disgorgement of revenues from electricity companies, is set on the House General State Calendar for Thursday, April 21.
HB 2133 gives the PUC the ability to “order disgorgement of all excess revenue resulting from [a] violation … of the statutes, rules, or protocols relating to wholesale electric markets.” This is in addition to any penalties the PUC might impose.
What this means is that the PUC could order a generator to return any revenue from the sale of electricity into the wholesale market that the PUC determines was earned because of a violation, such as market power abuse. While this sounds reasonable on the surface, there are significant problems with this.
In fact, the authority to order disgorgement would be a significant expansion of the PUC’s ability to regulate the electricity market, and is a major reversal of almost two decades of public policy of the state of Texas. Since at least 1995, the Texas Legislature has moved the Texas electricity market towards less-not more-regulation.
The results have been nothing less than spectacular. Texas has the most competitive electricity market in the U.S., if not the world. This has brought tremendous economic benefit to the state through billions of dollars of investment and lower electricity prices, helping make Texas the best state in the country for living in and creating jobs.
The major shift in policy contained in HB 2133 would put these advances and benefits at risk, and should be based on evidence that there is a significant problem in the electricity market that needs to be addressed. However, that is not the case. There is no evidence of market power abuse or other significant violations in the Texas electricity market that would justify this level of re-regulation. Additionally, each year the market is becoming more competitive, with far less opportunity for such activity to take place. As the ERCOT market monitor reported recently, “the ERCOT wholesale market performed competitively in 2009, with the competitive performance measures showing a trend of increasing competitiveness over the period 2005 through 2009.” And with the introduction of the new nodal system this year, that trend is improving.
Another problem with disgorgement is that there are already remedies in place to deal with any violations that might occur. The PUC can impose large penalties on violators, and any company that believes it has been defrauded in a market transaction can seek redress and refunds in the courts. It is important to remember that any transactions regulated under HB 2133 would be between corporations who have the resources to litigate such issues if they arise.
Since the move toward deregulation began back in 1995, there have been numerous attempts to re-impose regulations on the market. HB 2133 follows down that path, and would harm Texas consumers and the Texas economy by disrupting the market and creating regulatory uncertainty. The result will be higher-not lower- electricity prices for Texas consumers. There is simply no need for the added regulation on the market imposed by this bill.