Texas Pilot Deregulation Again Fails to Power Up

The power is still off on Texas' deregulation pilot, which was scheduled to finally begin last Friday after its June 1 ramp-up was shut down in late May (see NGI, May 28). Pilot customers now won't have service from their new retail electric providers until at least July 20, and maybe even later, according to the Texas Public Utility Commission.

The second delay got a full public relations spin last week, with the PUC telling pilot customers that it wanted to move "at a more gradual pace than previously anticipated" so that the Electric Reliability Council of Texas Inc. (ERCOT) could continue to test its new systems and market processes to "ensure a smooth transition to full retail competition." Deregulation takes effect across the entire state Jan. 1, 2002.

"This additional time will assure us that our systems are operating reliably and provide all market participants more opportunities to verify that their own systems are ready to mesh with those of ERCOT," said Tom Noel, ERCOT CEO. "Given the size and complexity of the new control systems and market processes, together with the shift to a competitive retail market for electricity in Texas, it is prudent to go the extra mile to ensure that all systems are ready before taking this next step."

ERCOT's systems are designed to transform wholesale electricity operations from the existing 10 utility control areas to a single regional control area, allowing competitors to move electricity across the state to serve their customers. ERCOT has been testing the operating system for weeks, PUC said, but it decided that additional "interactive" testing with the utilities and new market competitors was needed before it began switching.

Because of the additional testing, PUC said that customers would not be switched to new providers until after July 20, but commissioners would not pinpoint an exact date.

"We are working closely with ERCOT to ensure that all systems are ready to go before full launch of retail competition next year," said PUC Chairman Max Yzaguirre, who was only appointed to the commission in June. "This helps to ensure system reliability as we move to an open market with a more favorable rate structure."

Brett Perlman, one of the other three PUC commissioners, said the state would "not compromise the reliability of the Texas electric system. The additional testing will give us needed safeguards for a successful pilot program."

The delay will affect a lot less customers than originally anticipated. Although 5% of the state's utility customers are eligible to participate in the program, sign-ups for the pilot, despite incentives and a statewide public relations campaign, have been less than 1% in some areas, and only as high as 3.5% in the Houston area.

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