HomeMy Public PortalAboutResolution No. 359-10 03-09-2010 Exhibit C
RESOLUTION NO. 359-10
Richland Hills 1~FXAS, ENDORSING
A RESOLUTION OF THE CITY OF
CERTAIN LEGISLA"I'IVE CHANGES RELA7"ING TO T'IiE SUNSE"t
REVIEW OF "THF, "TEXAS Pl?BLIC UTILITY COMM[SSION AND THE
S}'ECIAL PURPOSE REVIEW OF THE ELECTRIC RELIABILITY COLTICIL
OF TEXAS.
RICHLAND HILLS
WHEREAS, the City of _ is a member of Cities Aggregation Power Project. Inc.
("LAPP"), anon-profit organization created by cities throughout Texas to secure
affordable energy for its members in the deregulated electric market; and
WHEREAS, affordable and reliable power means economic development for our cities and a
better standard of living for our citizens; and
WHEREAS, by deregulating the retail electric market, Senate Bill 7 of 1999 ("SB 7") was
intended to allow competitive forces to drive down the price of electricity; and
WtIEREAS, CAPP's eight-year experience with the deregulated market, including negotiating
power contracts with several different retail electric providers, indicates that the
Texas electric retail market has failed to develop into a truly competitive market
as envisioned by the Texas Legislature; and
WHEREAS, competition has failed to develop in the deregulated electric market because
certain power generation companies own or control enough generation capacity
to exercise market power to the detriment of customers and non-affiliated retail
electric providers; and
WHEREAS, alleged market power abuse inquiries conducted by the Public Utility
Commission ("PUG") are hampered by the lack of adequate resources because
the parties hurt by the illegal activity, like cities, are not allowed to participate in
the investigations; and
WHEREAS, the managers at the Electric Reliability Council of Texas (ERGOT) have failed to
adequately manage expenses and operations. The most obvious example is
ERCOT's implementation of a nodal market - a project now four years behind
schedule and expected to cost at least eight times original estimates; and
WHEREAS, the Sunset Review Commission is expected to recommend legislative reforms for
the PLC and ERGOT; and
N,'HEREAS, the City supports all such legislative reforms that promote a truly healthy electric
market ~tihere competition can flourish and consumers can save money; and
WHEREAS, the City endorses efforts proposed by LAPP that enhance electric competition,
implement the original intent of SB 7, and reduce costs to the City and its
residents.
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Exhibit C
THEREFORE, BE IT RESOLVEll BY TIME CITY COUNCIL OF THE CITY OF
RICHLAND HILLS TEXAS, THAT:
I.
The City urges reforming the PUC and ERCUT in such a way as to enhance competition in the
deregulated market, to promote consumer protection and to encourage the sale of affordable elecvicity.
Specifically, the City urges the Texas Legislature, as it considers changes recommended by the Sunset
Advisory Commission, to adopt reforms consistent with the following:
• All generators, regardless of size. should explicitly be hawed from the unlawful exercise of
market power.
• Entities such as rnunicipalities, commercial customers or retail electric providers harmed by
wholesale market abuse should be given explicit standing to participate in market power
abuse enforcement actions brought by the PUC.
• Fines should be increased for market abuses in such a way that the PUC can order full
restitution to the market, market participants, or parties injured by the violation.
Activities defined as market abuse by the Federal Energy Regulatory Commission should be
prohibited.
• The statutory purpose of the PUC should be modified to require it to harmonize its pursuit of
competition with the protection of consumers of electricity.
As a condition of conducting business within Texas, competitive Retail Electric Providers
(REPS) should be required to include among their offers one standard electricity package that
has PUC-approved terms and conditions.
• The number of consumer representatives on the ERGO"I' board should he increased from the
current three members, to six.
• The Office of the Comptroller should be assigned a seat on the board as well as on
appropriate budget oversight panels within ERGOT. "I'he Comptroller's office should be
given access to all ERGOT contracting material and be charged with conducting a bi-annual
performance review of ERGOT.
• The PUC should be required to pre-approve all debt financing by ERGOT.
11.
,A copy of the resolution shall be sent to the elected lawmakers representing the City's interests in
the Texas Fiouse and Senate and to the legal counsel of LAPP.
PRESENTED AND PASSf;D on this 9th day o MARCH ~0 a rote of
5 ayes and =0-_ nays at a regular meeting of the C~ C Heil of C of hl~~nd„ ills
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Texas.
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Exhibit B
STAFF REPORT REGARDING THE RESOLUTION
ENDORSING CAPP'S 2010 SUNSET ADVOCACY
PURPOSE
The City of _ is a member of Cities Aggregation Power Project, Inc.
("CAPP"). The CAPP Board of Directors has voted to authorize certain legislative efforts
pertaining to the Sunset Commission's review of the Public Utility Commission ('`PUC") and the
Electric Reliability Council of "I~cxas (`'ERGOT"). The Sunset agency's recommendations
pertaining to both organizations are expected to form the basis of bills during the 82nd Legislative
Session in 2011. As such, CAPP will recommend legislative action related to the Sunset
Commission's examination of both the PUC and ERGOT. In addition, CAPP will offer all
resolutions of its members during Sunset hearings to apprise lawmakers of CAPP Cities'
perspective on how to make the electric market more competitive and beneficial to consumers.
llISCUSSION
Jn 1999, Texas lawmakers adopted Senate Bill 7, the state's electric deregulation law.
The legislation expanded competition in the wholesale electricity market and opened the door to
competition among electric retailers. Proponents of the legislation promised lower electric
prices.
Unfortunately, the reality has been otherwise. Although Texans paid electric pr7ces well
below the national average during the decade before Senate Bill 7 was passed, customers in
deregulated parts of the state now pay prices above the national average. In fact, even the lowest
residential electric rates in deregulated areas of Texas typically exceed rates paid by all residents
of neighboring states, such as those in Oklahoma and Louisiana.
CAPP believes that for deregulation to fulfill its promise, the mazket must become more
competitive. Problems include the ability of some generators to exercise monopoly-like control
in large swaths of the state, and the inability of many consumers to make informed choices
because of confusion in the retail electricity market. Efforts to address market design issues by
ERGOT also have been mismanaged, gone over budget and fallen behind schedule.
As an active market participant, CAPP is in the unique position to identify problems that
have developed in the deregulated marketplace and to provide a consumer's perspective to
legislators interested in fixing those problems.
Based upon this point of view, CAPP has formulated recommendations for the Sunset
Review Commission as it conducts its Pl1C and ERGOT reviews. CAPP's recommendations are
intended to improve competition in the electric market place by making the PUC and ERCOI~
more accountable to consumers, by limiting market power, and by creating competitive options
for all customers. CAPP's recommendations reflect the organization's desire for a truly healthy
electric market where consumers can save and competition can flourish. Such amarket -one
where power remains affordable and reliable wilt mean more economic development for
Texas cities, and a better standard of living fix our citizens.
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Exhibit B
Legislative change is necessary to better protect cities' budgets, enhance cities' ability to
protect their citizens, and increase competition among retail providers. The following changes
are proposed by the CAPP Board:
• All generators, regardless of site, should explicitly be barred from the unlawful
exercise of market power.
• I?ntities such as municipalities, commercial customers or retail electric providers
harmed by wholesale market abuse should be given explicit standing to participate in
market power abuse enforcement actions brought by the PUC.
• Fines should be increased for market abuses in such a way that the PUC can order full
restitution to the market, market participants, or parties injured by the violation.
• Activities defined as mazket abuse by the Federal Energy Regulatory Commission
should be prohibited.
• The statutory purpose of the PUC should be modified to ensure that the agency
harmonizes its pursuit of competition with the protection of electric consumers.
• As a condition of conducting business in Texas, Retail Electric Providers ("REPS")
should be required to include among their offers one standard electricity package that
has PUC-approved terms and conditions. Such standard offer products will ensure
that REPs compete based on price, not on customer confusion.
• The number of consumer representatives on the ERGOT board should be increased
from the current three members, to six.
• T'he Office of the Comptroller should be assigned a seat on the ERGOT board and on
as appropriate budget oversight panels within ERGOT. The Comptroller's office
should be given access to all ERGOT contracting material and be charged with
conducting a bi-annual performance review of ERGOT.
"I'he PUC should be required to provide prior approval of all debt financing by
ERCUT.
The LAPP Board, made up exclusively of City representatives, requests that the Ciry
Council pass the attached resolution endorsing CAPP's legislative/Sunset agenda.
RECUM1ViENDATION
The staff of the City of recommends that the City Council adopt the
attached resolution.
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Exhibit D
(Date)
The Honorable
P.O. Box
Capitol Station
Austin, Texas 78711
Dear Senator/Representative
On behalf of the City of I am writing in support of proposed legislative
reforms of the Public Utility Commission (PUG) and the Electric Reliability Council of Texas (ERGOT}
intended to address continuing problems in the deregulated electricity market. As you know,
recommendations by the Sunset Advisory Commission regarding these two organizations are expected to
form the basis of bills during the 82°d legislative session that begins in 2011. The City of
supports a number of PUC and ERGOT reforms intended to improve competition in the deregulated
market and encourage savings for our citizens.
The City of is a member of Cities Aggregation Power Project ("CAPP").
Together CAPP and its sister political subdivision corporation South Texas Aggregation Project
("STAP"), have more than 150 member political subdivisions, purchasing approximately 1.2 billion kWh
annually. CAPP has served as a vehicle to increase cities' ability to navigate the deregulated market and
bargain for the best electricity rates and contract terms.
As an active market participant, CAPP is in the unique position to identify problems that have
developed in the deregulated marketplace. CAPP wants what all Texans want: a competitive electric
market that works. Unfortunately, it has been our experience that the 1999 electric restructuring law has
failed to live up to its initial promise. Repeated market power abuses have driven up consumer prices.
And while residential rates have declined since last year, they still remain higher than those in
neighboring states and well above those one would expect from a market with healthy competition.
The attached resolution reflects the City's support for legislative proposals relating to the Sunset
Advisory Commission's examination of the PUC and ERGOT. These proposals, if implemented, can
contribute to the establishment of a truly healthy electric market where consumers can save money and
competition can flourish. Such amarket -one where power remains affordable and reliable -will
result in more economic development for our cities and a better standard of living for our citizens.
I also want to offer CAPP, as a resource, as your eyes and ears in the market, while you consider
the Sunset Advisory Commission's review of the PUC and ERGOT. CAPP has gained important first-
hand knowledge about the deregulated electric market. CAPP members understand what works right for
consumers, and what needs to change. We share your goal of creating the best possible market for Texas.
Working together, we know that reform is possible.
The City would very much appreciate your support regarding these issues.
Sincerely,
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