During DNV GL's Energy Executive Forum, several representatives from retail energy suppliers bemoaned the fact that Texas was the last electric market to open to retail choice, and said that suppliers, with years of success in lowering costs for retail choice states, need to go on the offensive.

Florida and Arizona were cited in particular as targets. Arizona already has enabling legislation from an original attempt at deregulation, and Florida is being pursued via a proposed ballot initiative, which offers some benefits in terms of being able to force policy by winning the minds of voters, rather than trying to convert a captured legislature.

However, especially for states that don't have any legacy statutes (such as Arizona) or for which a ballot initiative isn't feasible, and for which electric choice would need to be pursued as it had been 25 years ago, retail suppliers should target the Entergy Texas region (and, to a lesser extent, El Paso Electric and Southwestern Public Service in Texas) to prove out whether electric choice can be brought to previously unopened areas.

As has been exhaustively documented by EnergyChoiceMatters.com previously, Entergy Texas represents the lowest hanging fruit for choice expansion, and the continued disinterest among suppliers in opening Entergy Texas calls into question whether choice can be opened in areas without all of the built-in advantages that a transition to competition at Entergy Texas would have

Notably:

• A customer using 1,000 kWh at Entergy Texas pays an average of 11.3¢/kWh (April 2019). While the cost advantage in the ERCOT choice market is not as wide as it once was, long-term fixed rate offers on Power to Choose for the CenterPoint Energy Houston Electric region are about 9.5¢/kWh.

• Entergy Texas is currently a member of an RTO, and specifically an RTO (MISO) which already accommodates active retail choice jurisdictions and which has an existing resource adequacy construct

• To the extent a transition of Entergy Texas to ERCOT was considered as part of retail choice, such transition would free Texas customers from various costly federal transmission policies, including subsidization of out-of-state, west-east transmission facilities built to access renewables which do not benefit Texans

• Entergy Texas will have territory-wide AMI by the time any transition to competition would be complete

• Much of the existing Texas choice infrastructure could be leveraged for any transition to competition, and regulation and oversight is already in place for the existing retail market

• Legislators are already familiar with the mechanics of Texas' successful ERCOT retail market, as opposed to having to initially educate legislators in vertically integrated markets on the basics of competition before even being able to make a case for choice

While not as large as opening a full state to competition, Entergy Texas has over 450,000 customers (and is a growing market in terms of customers), including many in the Houston area.

The comparative advantages of Entergy Texas also apply to a lesser extent to El Paso Electric and Southwestern Public Service. Both have rates in the high 10¢/kWh range for residential customers using 1,000 kWh per month. SPS is in an RTO that now has a day-2 market (SPP). While El Paso Electric is not in an RTO, this is no different than Arizona or Nevada.

If choice advocates can't convince Texas policymakers to transition Entergy to competition, we don't see a high likelihood for success of choice advocates, themselves, convincing legislators in other jurisdictions. In such case, choice will be left to the vagaries of the ballot box (see Nevada), or on riding on the political capital of other groups which may favor choice who have more sway with lawmakers - large industrial customers or environmental groups. However, the problem with relying on the latter two groups to open states to choice is that they can easily be co-opted by regulated utilities. Many industrials who have, at times, called for choice, would be more than satisfied if the utility receives authority to offer discounted rates to large C&Is, or if a limited buy-through program were established, rather than full choice. As seen in Florida and Nevada, many environmental groups will support the existing monopoly utility structure if certain carve-outs are provided for clean energy -- utility mandates to build renewables, net metering mandates, etc.

So if retail choice advocates want to back up their talk about going on the offensive, they should start talking to Texas lawmakers representing constituents in the Entergy service area about choice, for the 2021 session. We'd note that the author of the 2009 bill (SB 1492) that directed the cessation of transition to competition activities at Entergy is no longer in the legislature, and that the bill itself did not create a statutory prohibition on a future transition to competition (and only set forth requirements not dissimilar from the other applicable provisions in PURA). While the PUC retains jurisdiction to move Entergy to competition under such requirements, it would be prudent to pursue the policy at the legislature rather than administratively, given the stated concern of lawmakers over the prior transition to competition

-By Paul Ring

Tags:
Texas   Deregulation   Electric Choice   Entergy Texas  

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