Step Right Up

El Paso Electric didn’t want to be last in the line of people asking El Pasoans for more money. From El Paso’s English language daily:

El Paso Electric Co. is seeking a rate increase that would add $8.41 to an average residential customer’s monthly bill in El Paso, according to documents filed Monday with the Texas Public Utility Commission.

Although the documents state that new rates would go into effect Sept. 14, utility spokesman Eddie Gutierrez said the rate case could last several months, and any new rates might not appear on customers’ bills until the second quarter of 2016.

The average residential customer uses 625 kilowatt hours and pays $71.16 per month, Gutierrez said. Under the rate increase request, the average customer would pay 11.78 percent more, or $79.57 per month.

To put it into perspective, that price increase is like five and a half quarts of Busch. That got your attention, didn’t it?

Electric utilities are dinosaurs. From the New Yorker:

Scientists insist that in order to forestall global warming we need to quickly change the way we power our lives. That’s perhaps most easily done by giant companies with big budgets for new technology; Google, Apple, and IKEA have all announced major plans to switch to renewable energy. For average Americans, however, the biggest source of carbon emissions is their home, so the utilities’ help is crucial in making the transition. And, even without climate change, utilities face a combination of threat and opportunity from disruptive new technologies.

. . .

Power utilities now face uncertainty of a kind that traditional phone companies faced when cellular technology emerged. A few utilities welcome the challenge; others are resisting it; and the rest are waiting for someone to tell them what to do.

. . .

Arguably, the era’s most disruptive technology is the solar panel. Its price has dropped ninety-nine per cent in the past four decades, and roughly seventy-five per cent in the past six years; it now produces power nearly as cheaply as coal or gas, a condition that energy experts refer to as “grid parity.” And because it’s a technology, rather than a fuel, the price should continue to fall, as it has for cell phones. Solar power is being adopted most rapidly in places where there is no grid—it’s cheaper and quicker to stick panels on the roofs of huts in villages than to build a centralized power station and run poles and wires. In Bangladesh, crews install sixty thousand solar arrays a month. Even in the U.S., where almost everyone has been connected to the grid for decades, solar prices have fallen to the point where, with the help of a federal tax credit, an enterprising company can make money installing solar panels.

One morning in March, I stood on the roof of a suburban ranch in Surprise, a suburb of Phoenix, with Lyndon Rive, the co-founder and C.E.O. of Solar City, the biggest and the fastest-growing installer of rooftop solar in the country. Around us, a five-man crew was laying out a grid of solar panels, following a plan designed by an employee in California who had looked up the roof on Google Earth and measured it. The crew had assembled at the house at seven that morning, and by 5 P.M. the new solar array would be ready to be turned on. The homeowner, like the Borkowskis, was paying nothing up front, and within the first month would see her total electric bill decline. Glancing around the neighborhood, I counted fourteen solar arrays on a hundred or so houses. “It’s like e-mail in 1991,” Rive said. “When I look out at this street, there’s no reason every one of these houses can’t have solar in ten years.”

The revolution isn’t coming, it’s already here. It’s just not evenly distributed yet.

Technology isn’t the only squeeze power utilities are feeling these days. At least everywhere else but El Paso.

Most of the rest of Texas is deregulated, and consumers can pick their electricity provider. They can choose a plan that best suits their needs. El Pasoans aren’t so lucky, and the reason isn’t clear. According to this blog post dated June 1, 2011, from a website called TexasElectrictyRatings.com

Even though Texas electricity is widely considered by everyone outside of Texas to be a deregulated market as a whole, not every area of Texas is deregulated. And that’s going to remain changed for the near future. The Texas Legislature recently passed a postponement to the Governor for the transition of El Paso Electric from a regulated utility to a deregulated electricity market. In short, El Paso Electric will remain a market without electric choice for the foreseeable future. Outside of Austin Energy and CPS in San Antonio, and Entergy in Southeast Texas, El Paso Electric is the largest remaining regulated area of Texas. The postponement that was sent to the Governor states that a regulated entity needs the following to become deregulated:

– Commencement of a regional transmission organization by the Federal Energy Regulatory Commission for the power region containing EPE

– Development of a balancing energy market, a market for ancillary services, and a market-based congestion management system for the wholesale market in the power region in which the regional transmission organization operates

– Implementation of a seams agreement with adjacent power regions to reduce barriers to entry and facilitate competition

– Certifying a qualified power region, which includes conducting a formal evaluation of wholesale market power in the region, in accordance with PURA 39.152

– Approval of a business separation plan for EPE

– Approval of unbundled transmission and distribution rates for the utility

– Establishment of price-to-beat rates for the utility

– Establishment of a retail choice pilot, and evaluation of its results

– Initiation by the electric utility of a capacity auction in accordance with PURA 39.153

That being said, it appears that the main reason that El Paso Electric isn’t moving forward into becoming a deregulated electricity market is because they were apparently unable to offer fair competition for residential customers. Which isn’t that uncommon, 80% of Illinois(the Southern Half) is regulated for the very same reason. In short, either they couldn’t offer competitive rates to everyone in the market or they can’t offer consistent and reliable service to everyone in their footprint. Which of those two things it is, or both, isn’t exactly clear. But the point is that this huge bubble of West Texas is going to remain devoid of electricity choice for the foreseeable future.

Ciphering from the story in the El Paso Times, the local price per kilowatt hour is 11.4 cents. In San Antonio, which is also regulated, residential electricity costs 9.24 cents per kilowatt hour. And in Dallas, which is unregulated, and where the consumer has lots of choices, the cost of a kilowatt hour of electricity runs from about 9 cents to a little more than 10 cents a kilowatt hour.

El Pasoans pay about a twenty percent premium for the privilege of being served by El Paso Electric.

I’m sure El Paso Electric has brilliant economists who can justify their rates. I’m sure because I used to work alongside some of them. On the other hand, maybe we’re getting hosed, eh? I think El Pasoans must be getting used to that.