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Texas Expects 'Supply Glut' After Deregulation

Texas Expects 'Supply Glut' After Deregulation

Predicting that Texas will have the most competitive and the most successful retail electric market in the country, Texas Public Utilities Commissioner Brett A. Perlman said last week that the state is on track to meet its deregulation date of Jan. 1, 2002.

"Our strong merchant plant development is the key to success for a vibrant retail market," Perlman told participants meeting at the Energy Economy 2000 meeting in Houston.

Despite the fact that Texas has just gone through its highest heat demand on record - 57,731 MW peak demand in the past month - Perlman said that the state would actually have a "supply glut" when the retail era begins.

"We're going to have lots of excess capacity looking for homes when the retail market opens," he predicted. With new power plants in the design or construction stage, the PUCT commissioner said that by 2002, the state would have more than 88,321 MW total.

"All summer long, we've been asked the same question, 'will Texas be like California,' and I say the numbers speak for themselves," he said. He said that California had "made mistakes in the way its retail market was structured," mistakes that Texas regulators have been able to realize and learn from.

Perlman explained that PUCT is keying in on several areas to ensure that the state's deregulation plan is a success. Among them is $12 million customer education campaign, which he said would be in "several languages" to reach Texas' diverse ethnic customer base of 7.9 million. PUCT also plans to maintain its regulatory authority over transmission and distribution lines, and also promote renewable energy.

Customers will benefit under the Texas plan, said Perlman, because of price benefits, a 6% base rate decrease through 2005, expanded choice and structure and a structure to fuel economic growth. For utilities, Perlman said they would be able to look forward to a "more certain industry framework, broader opportunities for growth and full stranded cost recovery.

PUCT had set a goal of having about 2000 MW of renewable energy in place by 2009. "Some people thought that would be a tough figure to pull off, but we've already met it," he said.

Just last week, TXU Electric & Gas announced it will purchase 82.5 MW of wind energy from National Wind Power Ltd.'s and Orion Energy LLC's Indian Mesa Wind Farm in Pecos County. In July, TXU announced a contract to purchase renewable wind energy from a 160 MW farm in West Texas. It already purchases about 40 MW of wind energy from a facility near Big Spring.

Carolyn Davis, Houston

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