TRC Wants E&P Tax Breaks, More Customer Oversight
Acknowledging there was no way for the Texas Railroad Commission
to change high natural gas prices, the three-man board instead has
unanimously recommended that the Texas Legislature act to lessen
the impact of high prices by, among other things, offering industry
tax breaks to encourage exploration and production. TRC also
recommended it be given oversight over statewide customer service
standards for public gas utility companies.
Following two days of hearings, which allowed industry, consumer
groups and municipalities to address their concerns about natural
gas prices, TRC forwarded its recommendations to the Texas
Legislature's Senate Natural Resources Committee and the House
Committee on Energy Resources last week.
The recommendations "are the first step in addressing the
problem of high natural gas prices," said Commissioner Charles
Matthews. Noting that the TRC "intends to fully address more broad
aspects of the natural gas industry during a conference later this
year," he said, "now we must work with the legislature in enacting
these short-term solutions."
Commissioner Tony Garza, who also serves as vice chairman of the
Interstate Oil and Gas Compact Commission, said the TRC and the
Texas legislature "should operate from the premise, 'first, do no
harm.' There's simply no easy or quick fix that we can legislate or
enact to solve the high natural gas prices." But he said 'there are
clearly opportunities to inform, educate and assist consumers in
dealing with dramatic price fluctuations."
In a package of natural gas proposals forwarded to legislators,
the commissioners noted they "will help to send market signals to
consumers faster and more efficiently, will help to dampen extreme
month-to-month price fluctuations, and will help to standardize
billing information and service rules throughout the state."
However, to "influence the market price of the commodity, Texas
must create an atmosphere to encourage the development and
continued production of its natural gas resources. Testimony
received at the hearings, from both suppliers and consumers,
reiterated over and over that additional natural gas supply is the
only answer to stabilizing market prices at a lower, more
Noting that Texas drilling rig activity is "now at its highest
level since 1985," the commissioners said they wanted to "strongly
encourage the legislature to consider severance tax incentives as a
tool to assist in the development of additional natural gas supply.
If your purpose is to reduce the price of the commodity to
consumers, then you should reduce tax burdens when prices are
high." The commission noted that Texas supplies about one fourth of
the U.S. natural gas supply and "changes in Texas policy concerning
natural gas production can have a significant influence on the
entire North American natural gas market."
Recognizing that local distribution companies (LDCs) have "no
incentive to minimize their cost of gas," TRC has recommended it be
allowed to annually review each utility's gas supply portfolio
plan. "On a regular basis, the commission would audit the
utilities' natural gas purchases to ensure that gas costs were
properly collected from customers. If necessary, the commission,
through its existing regulatory authority, could investigate the
prudence of the natural gas costs incurred by a utility based on
specific customer complaints or commission action."
Because Texas allows split jurisdiction, with cities have
initial jurisdiction over gas utilities operating within their city
limits, TRC said there are 1,191 incorporated cities in the Texas
that could set their own rates and service provisions for gas
service. Instead, TRC is recommending that it be given the "general
power to regulate and supervise the business of each gas utility
within its jurisdiction."
TRC wants the legislature to give it the authority to determine
statewide customer service standards for all investor-owned
utilities, too, "regardless of whether they currently fall under
the original jurisdiction of a municipality" or the commission.
Without the changes, the commission noted that each individual city
"would have to take identical actions to accomplish statewide
uniformity in service standards."
Matthews said he believes that if the state legislature enacts
TRC's recommendations, it "could help lower the cost of gas to
Texas consumers. While natural gas prices are market driven, we can
continue looking at policy and regulatory solutions that will
benefit consumers and assist the industry in producing the natural
gas needed to meet increasing energy demands."
Carolyn Davis, Houston