House Regulated Industries Chairman Phil King (R-Weatherford) is a critical member of Speaker Tom Craddick’s leadership team. I caught up with King to talk about utilities and other key political matters. Due to the interest in these issues, we are splitting the interview into two parts. In this week’s installment, King discusses electricity issues.

Lutz: Given what happened last session, is there still a need for bills like SB 482 and SB 483?

King: [One of the bills] dealt with how much generation any one company could own or control. I think it’s a little too early to tell if we’re going to need similar legislation, but ask me again at the end of the summer. The market monitor we created seems to be doing a good job at policing price manipulation. The nodal market model which is coming online is going to make the whole pricing system on the grid a lot more visible, a lot more transparent. The more transparent, the more difficult it is for anyone to manipulate prices. I think we’re OK, but ask me again at the end of summer after we see how electric prices do over the hot months.

Lutz: Could the same be said of the retail sides of those bills?

King: Don’t get me wrong. Electric rates are way, way high. But if you look at the growth in electricity rates this year compared to the growth of other commodities — food, gasoline, diesel — the retail market’s been holding its own.

Lutz: What do you make of the way the Public Utility Commission and the Electric Reliability Council of Texas (ERCOT) have handled the CREZ [Competitive Renewable Electricity Zones] docket as well as the PUC’s overall efforts to build more transmission to get wind power to the populated areas of the state?

King: I think the PUC is showing a lot of competence. It’s a tough process. Balance is the key. We want and we need the economic development that wind can bring to Texas. And we certainly need to diversify our fuel mix if we want to bring down the cost of electricity.

Natural gas is what is driving up the cost of electricity. Wind is a good option, but it’s not the silver bullet for prices. There is no silver bullet.

We have a lot of room to expand wind generation, but the expansion has to be balanced against the cost of building transmission and against reliability concerns.

We can turn a power plant on and off when we want to; we can’t control the wind. To bring down retail prices, we need to build wind generation; we need to build coal plants; we need to build nuclear; and we need to encourage other generation sources like solar. The key thing is that the Legislature not specify the technology, or we could end up creating problems the way the feds have with ethanol.

Lutz: Is there anything else the Legislature needs to do to encourage more fuel source diversity?

King: The Legislature has given clear policy directives to the PUC and to ERCOT to maintain an electric grid sufficient to meet Texas’s power needs. The CREZ and the Nodal are all part of that. Reliability must always be our number one consideration, with retail prices being a close second.

We also need to promote advanced metering technologies. That’s where the Legislature can make some advancements. That’s the intelligent grid. It has tremendous potential to reduce [prices] by better managing the load. Basically, the power grid is like a highway system. We have plenty of road capacity in Texas to carry all the cars out there, if everyone just wouldn’t all drive at the same time. The same’s true on the power grid. We have plenty of electric capacity right now, feveryone just wouldn’t use power at the same time. Just as TxDOT has to build highways that can handle rush hour traffic, the PUC and ERCOT have to build for the peak periods of power consumption. That means building more power plants and more transmission lines, and all of that costs a bunch of money.

With smart meters, we could do things like offer consumers incremental pricing. Remember how you used to wait until 9 p.m. on Sunday night to call Grandma? That was an off-peak time for calls, so the long distance rates were lower. So everybody waited until then to make those calls because it was cheaper.

We could see the same thing for retail power consumers. If we could offer incremental pricing — which you can offer if you get grid-wide smart-metering technologies deployed, what you would see happen is retail power consumers would be programming their large appliances to run when prices are lower, thereby reducing peak load demand and their bill all at the same time. You’d see small businesses taking similar steps. A simple example is, if you know you can buy electricity at 8 cents a kilowatt hour from midnight to 5, you’re going to program your pool pump to run from midnight to 5.

The potential is quite staggering in the aggregate for the impact it can make. It can take a lot of pressure off the grid, create more educated consumers, save energy costs, and frankly, it’ll create an explosion in software development and hardware development to help consumers manage their electricity use.

Lutz: Has anyone looked at the cost of smart meters?

King: Well, that’s the issue. Centerpoint and Oncor have some deployment models in place. How you pay for them is a big question. The technology is there. Centerpoint has a research center in concert with IBM in Houston that, once you see it, you walk out saying, “we need this for Texas.”

The question’s going to be how do you pay for it. That’s a policy issue the Legislature needs to deal with. Do we socialize the cost? Do we make it purely market-driven? Do we socialize it so that we have to build [fewer] power plants, [fewer] transmission lines, which you would be paying for in a socialized manner, or do we simply let the market drive the innovation and deployment?

We’re already talking about this in my committee. We’re talking about this in Dennis Bonnen’s committee [the Select Committee on Electric Generation Capacity] ...

Lutz: Will environmental regulations, such as the Warner-Lieberman “cap-and-trade” bill pending in Congress, thwart efforts to lower prices and improve the fuel diversity in Texas?

King: The high price of natural gas is doing more to promote fuel diversification than new regulation could ever do. Just look at the fuel cost for producing a kilowatt hour of electricity with gas vs. coal or wind or nuclear. Price signals and the market are driving the industry to diversify.

That said, I’m an admitted global warming skeptic, particularly with regard to the need to capture carbon dioxide emission from power plants. But even if you agree with everything the global warming proponents are saying, you still have to ask, why punish Texas consumers? Doing what some in the environmental community want us to do will [cause the cost of producing electricity to] skyrocket. And that means much, much higher prices for families and businesses.

The irony is that we could turn off every power plant in Texas, and it would have negligible impact on the worldwide carbon levels. I’ve been told that China is opening a dirty coal plant, on average, once a week. My question is, why should we make Texans’ electricity bills skyrocket when it’s not going to make any difference in global carbon dioxide levels.

Cap and trade, in effect, penalizes the consumption of energy, and energy drives the economy. Texas uses incredible amounts of energy ... Cap and trade could be an economic hit for Texas the likes of which we haven’t seen in a long, long time. And the sad thing is that it won’t really accomplish anything, certainly nothing sufficient to offset the harm to the economy.

Lutz: In addition to the transmission lines for wind in the CREZ docket, do we need to put more transmission in to ensure reliability and does the Legislature need to get involved?

King: The Legislature has given clear policy direction to the PUC and ERCOT, and that policy direction is to maintain a grid sufficient for the needs of Texas. The struggle that Texas is having is multi-fold. We’re growing ... Just look at what’s in your home today [compared with 10 years ago]. Just think how many more things you have in your house today that are gobbling up electricity. And technology continues to push us more and more in that direction. And at the same time, we have such a healthy, fast-growing business climate.

Yes, if you chart out the demand for electricity over the next 25 years and you also add into that the older, less efficient, less clean plants that we want to retire, then we’ve got to build a bunch of power plants and we’ve got to build a bunch of transmission lines. The good news is we’ve always needed to build a bunch of power plants and a bunch of transmission lines, because Texas has always been a dynamic state.

We’ve got a challenge in getting that done. And we want to get that done in the most cost-efficient and environmentally safe manner that we can. We’re going to see a lot of construction over the next couple of decades, bringing power to homes and businesses.

Lutz: What do you make of the management controversies at the Pedernales Electric Cooperative? Do we need legislation?

King: Pedernales seems to be the only coop having problems. I’m concerned about what I’ve read. But we also have to resist the temptation to legislate based on one aberration.

I’m going to keep an open mind, but the cooperative model seems to be working pretty well everywhere else in the state. So we’ll just have to wait and see.

Comments (0)

Comment	smaller | bigger
Name
Write the displayed characters
Subscribe via email (Registered users only) I have read and agree to the Terms of Usage.
	Add Comment