DATELINE: 28 July 2004
Going up: TXU takes second allowed rate hike
By SUDEEP REDDY
The Dallas Morning News
TXU Energy received state approval Wednesday to raise electricity rates for its North Texas customers by about 5.7 percent, marking its second and final increase of the year as the hottest summer months arrive.
The change takes effect as most consumers face their highest bills of the year. A TXU Energy customer using 1,000 kilowatt-hours of electricity a month will see an average bill rise by $5.87 to $109.82 a month.
The rate hike, which affects more than 2 million residential and small-business customers, comes as state lawmakers evaluate the effectiveness of electric competition ahead of January's legislative session.
Though customers have had the option of moving to lower-cost providers since January 2002, switching rates have inched forward. About 85 percent of customers are still served by incumbent utilities.
After five increases, TXU rates have risen 33 percent since January 2002. Most alternate providers have also raised their prices due to higher costs. But competitors still offer rates that are as much as 20 percent lower than TXU's new prices.
Former monopolies such as TXU Energy, a subsidiary of Dallas-based TXU Corp., can change their rates twice a year based on fluctuations in the price of natural gas, used to generate more than half the state's electricity.
TXU filed to change its rates on June 10, based on a natural gas price of $6.52 per million British thermal units, up from the $5.79 that was set with TXU's previous rate increase in May.
Over the past 2 1/2 years, natural gas prices have risen 127 percent, said TXU spokesman Rand LaVonn.
"There has to be some kind of response because natural gas is such a key component of electricity generation," he said.
TXU has said the rate increase would result in additional monthly revenue of about $20 million.
Consumer-advocacy groups have long argued that the formula used to determine TXU's rate, known as the price to beat, is flawed.
They say the price to beat doesn't reflect actual costs in the market because other fuels are also used to generate electricity.
Because a utility can request rate changes up to twice a year, TXU Energy's rates will remain fixed for at least the next five months - even if natural gas prices drop.
Consumer groups have called for a more stringent review of rate increases by the Texas Public Utility Commission and the ability for outside groups to request a price decrease if gas prices fall.
A review of statewide rates by Consumers Union showed that average bills from other utilities in Texas - including municipal utilities, cooperatives and investor-owned utilities that are still regulated - have increased between 6 percent and 11 percent from January 2002 through May.
For the four largest investor-owned utilities under deregulation, the average bill increased by more than 23 percent during that period.
Rates at other utilities "have had to go up, but not nearly as much as we've allowed with the price-to-beat rates," said Tim Morstad, a policy analyst at Consumers Union in Austin.
"There's huge padding in the price to beat," he said. "Should these customers pay such a high rate as to force them to switch? We're really worried about that."
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