Texas Slows Down Pilot Deregulation

The expected roll-out of the Texas pilot deregulation program, originally scheduled for June 1, has been moved to mid-July so that the state's grid operator, the Electric Reliability Council of Texas (ERCOT), can work out computer glitches. Retail competition begins across the state Jan. 1, 2002.

The Texas electric restructuring law of 1999 required investor-owned utilities to offer customer choice for up to 5% of their electrical load beginning June 1, and the law established the pilot program to evaluate the ability of investor-owned utilities and power regions to provide customer choice.

In preparation for the pilot, several new retail electricity providers (REPs) have been marketing electricity at discounted prices to both residential and commercial customers for service beginning next month, and so far ERCOT estimates that almost 50,000 Texas households are signed up for the pilot project.

The number signing up for the pilot program is lower than expected, but state officials said consumers are more wary about the program following the problems in California, which they noted had nothing to do with deregulation.

To build a new power plant in Texas requires only an air permit, and construction takes about three years from concept to completion. In California, ERCOT pointed out that more permits are required and the process may take three or four times as long. In Texas, 22 new plants have come online since 1995, with another 15 under construction and expected to be commissioned before 2002. Thirty-three additional plants are in the development stage.

The Texas Public Utility Commission (PUC) and ERCOT also have been working with utilities to ensure a seamless transition.

"The pilot program was designed to give everyone --- customers, retailers, utilities, generators and ERCOT --- time to test our retail systems to make sure everything works well," said PUC Chairman Pat Wood III. "When a switch is made, the only thing we want customers to notice is the new provider and the new bill level."

ERCOT manages the delivery of electricity for most of the state and will control the process of switching, overseeing the merger of 10 operational control areas into the single control area.

"We're making progress every day," said Tom Noel, ERCOT CEO. "We want to be fast, but we insist on getting it right. These are complex computer and communications systems, and we need to take some time to test and debug them."

PUC Commissioner Brett Perlman said, "Customers as well as providers need complete confidence in the system. The pilot program will earn that confidence without compromising Texas' electric system adequacy and reliability."

The timetable to phase in the customer switching process is as follows:

Beginning June 1, ERCOT will accept a limited number of requests from each REP to switch customers. ERCOT will manually monitor the computer system processes during this phase. By July 6, the system is expected to handle approximately 21,000 switches a day.

A switch request takes approximately two weeks to process, including the customer notification mandated by PUC customer protection rules to prevent unauthorized switching, or slamming.

Beginning in mid-July, customers who enrolled in the pilot program (and whose REP requested they be switched during June) will be switched at their next meter reading.

The new REP will bill customers after the next meter reading.

For some pilot customers, service from their new REP along with its new rates may not go into effect until late July or August. Most pilot customers will receive a June and July bill from their current utility and will receive a bill from the new REP in August or September.

To learn more about the pilot and the deregulation process in the state, visit the web site at www.powertochoose.org.

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