Is the Texas Legislature Raising Utility Rates?

Several bills working their way through the legislative process are likely to send Texans' utility bills up, consumer advocates say.

On Monday, the House approved a bill that would allow electric utilities to raise rates to pay for projects like building electric poles and wires — without first going through a lengthy regulatory review process, as is customary now. The Senate has already passed a slightly different version.

Similar legislation on the gas side is pending in both the House and Senate; it would streamline the rate-raising process for those utilities, which help heat Texas homes. A House bill that would make water rates easier to adjust has — so far — made little headway. 

During the floor debate on Monday about electric rates, state Rep. Sylvester Turner, D-Houston, tried to attach an amendment that would have limited the amount by which utilities could raise their rates under the new, expedited process. "Once the bill takes effect, your electricity bill is going to go up," said Turner, arguing that his amendment would create a "reasonable cap." But the House voted down his amendment.

Currently, if utility companies like Dallas-based Oncor or Houston-based Centerpoint want to raise rates to pay for building electric lines, they go ahead and build them — and later ask the Public Utility Commission for permission to get their money back from consumers through a rate increase. The bill would allow the utilities to go ahead, build and raise rates — without going through a long and contentious process at the Public Utility Commission before the rate increase. (The PUC will still have to approve these "expedited rate increases," and upon the fourth instance the utility would still need to go through a more comprehensive proceeding. The bill expires in 2017.)

 

Those in favor of the legislation argue that the rate-adjustment process harms utility companies, which must often endure long and costly legal battles in order to raise rates, and do not recover their costs until well after they have spent the money. "This will streamline the process," said Rep. Dan Huberty, R-Houston, who said he supported the bill because he represents a fast-growing area where utilities should be encouraged to build infrastructure quickly.

But opponents say it effectively gives the utility companies carte blanche to raise rates.

Tim Morstad, a spokesman for the AARP, which opposes the bill, said that it would not save money for consumers.

"Whenever you stack up the legal expenses for a full rate proceeding against the historical savings achieved by full rate proceedings, the cost is dwarfed by the savings," he said. In addition, he said, although rate reviews are possible after the fact, they would not be nearly as effective as rate reviews before the rate increases. "It becomes extremely difficult to determine what was reasonable seven to eight years prior," Morstad said.

The gas bill, HB 2435 and SB 1309, would also streamline some gas rate increases handled through the Texas Railroad Commission. It "will tend to increase charges on natural gas utility bills," said Jay Dogey, co-chairman of a coalition of cities that lobbies to keep utility rates down, in a statement.

A water bill, HB 2400, a committee substitute, was sent back from the House on a point of order but could still, conceivably, be attached to another bill. Consumer advocates say it would also make it easier to raise water rates. 

Consumer groups have not given up on a bill that thus far has failed to advance that would require electricity providers in much of the state to provide an easier-to-understand, standardized rate offer. In "deregulated" areas of the state — including places like Dallas and Houston but not San Antonio or Austin — companies compete with each other to sell electricity. As a result, consumers must pick from a list of different electric-rate plans that are laden with hard-to-understand terminology. The legislation, sponsored by Sen. Wendy Davis, D-Fort Worth, and Turner, would have required the Public Utility Commission to help develop a standard rate plan that consumers could pick.

"It's the idea of having one choice out there ...where you know that all the fine print's the same," said Morstad of the AARP.

An amendment could be offered on the House floor today that would attach the legislation to a Sunset bill for the Public Utility Commission, if that bill is taken up for consideration.

Utility bills are unlikely to be affected by a different bill favored by environmental advocates. Rep. Drew Darby, R-San Angelo, had introduced legislation that would have raised ratepayers' bills by $1 per month (with an opt-out option) to pay for solar power projects. But momentum for the bill appears to have stalled.

Editor's Note: An earlier version of this story incorrectly stated that legislation under consideration would allow electric utilities to raise rates without getting approval from state regulators. They must still get permission from regulators, but the review process is considerably shorter.

 

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