Acknowledging there was no way for the Texas Railroad Commissionto change high natural gas prices, the three-man board instead hasunanimously recommended that the Texas Legislature act to lessenthe impact of high prices by, among other things, offering industrytax breaks to encourage exploration and production. TRC alsorecommended it be given oversight over statewide customer servicestandards for public gas utility companies.

Following two days of hearings, which allowed industry, consumergroups and municipalities to address their concerns about naturalgas prices, TRC forwarded its recommendations to the TexasLegislature’s Senate Natural Resources Committee and the HouseCommittee on Energy Resources last week.

The recommendations “are the first step in addressing theproblem of high natural gas prices,” said Commissioner CharlesMatthews. Noting that the TRC “intends to fully address more broadaspects of the natural gas industry during a conference later thisyear,” he said, “now we must work with the legislature in enactingthese short-term solutions.”

Commissioner Tony Garza, who also serves as vice chairman of theInterstate Oil and Gas Compact Commission, said the TRC and theTexas legislature “should operate from the premise, ‘first, do noharm.’ There’s simply no easy or quick fix that we can legislate orenact to solve the high natural gas prices.” But he said ‘there areclearly opportunities to inform, educate and assist consumers indealing with dramatic price fluctuations.”

In a package of natural gas proposals forwarded to legislators,the commissioners noted they “will help to send market signals toconsumers faster and more efficiently, will help to dampen extrememonth-to-month price fluctuations, and will help to standardizebilling information and service rules throughout the state.”

However, to “influence the market price of the commodity, Texasmust create an atmosphere to encourage the development andcontinued production of its natural gas resources. Testimonyreceived at the hearings, from both suppliers and consumers,reiterated over and over that additional natural gas supply is theonly answer to stabilizing market prices at a lower, morereasonable level.”

Noting that Texas drilling rig activity is “now at its highestlevel since 1985,” the commissioners said they wanted to “stronglyencourage the legislature to consider severance tax incentives as atool to assist in the development of additional natural gas supply.If your purpose is to reduce the price of the commodity toconsumers, then you should reduce tax burdens when prices arehigh.” The commission noted that Texas supplies about one fourth ofthe U.S. natural gas supply and “changes in Texas policy concerningnatural gas production can have a significant influence on theentire North American natural gas market.”

Recognizing that local distribution companies (LDCs) have “noincentive to minimize their cost of gas,” TRC has recommended it beallowed to annually review each utility’s gas supply portfolioplan. “On a regular basis, the commission would audit theutilities’ natural gas purchases to ensure that gas costs wereproperly collected from customers. If necessary, the commission,through its existing regulatory authority, could investigate theprudence of the natural gas costs incurred by a utility based onspecific customer complaints or commission action.”

Because Texas allows split jurisdiction, with cities haveinitial jurisdiction over gas utilities operating within their citylimits, TRC said there are 1,191 incorporated cities in the Texasthat could set their own rates and service provisions for gasservice. Instead, TRC is recommending that it be given the “generalpower to regulate and supervise the business of each gas utilitywithin its jurisdiction.”

TRC wants the legislature to give it the authority to determinestatewide customer service standards for all investor-ownedutilities, too, “regardless of whether they currently fall underthe 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 statewideuniformity in service standards.”

Matthews said he believes that if the state legislature enactsTRC’s recommendations, it “could help lower the cost of gas toTexas consumers. While natural gas prices are market driven, we cancontinue looking at policy and regulatory solutions that willbenefit consumers and assist the industry in producing the naturalgas needed to meet increasing energy demands.”

Carolyn Davis, Houston

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