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Texas PUC Enacts Power Auction Rules

Texas PUC Enacts Power Auction Rules

Dismissing the criticisms of a few of the expected competitors in Texas' coming deregulated electricity market, the Public Utility Commission has adopted rules that require affiliate power generation companies unbundled from current integrated utilities to sell entitlements to their power generation. PUC said the rules would benefit electric customers by proving a more competitive wholesale market when it begins Jan. 1, 2002.

PUC adopted rules that will require the state's resident utilities to auction a certain amount of generation to competitors - but not the utility's retail affiliate. The utilities also will be separated into generation, retail and transmission and distribution units.

Specifically, Senate Bill 7, the electric restructuring bill passed by the Texas Legislature last year, requires the power generation company of each unbundled investor-owned utility to sell entitlements to at least 15% of its installed generation capacity. The new PUC rules establish the scope of entitlements and how auctions will be handled for affiliated power generators to sell their capacity.

The four types of capacity products will be auctioned that represent energy production over periods from one month to two years. Capacity entitlements will be sold for the period of Jan. 1, 2002 through Jan. 1, 2007, or until 40% of the residential and small commercial electricity use within the affiliated transmission and distribution utility's area is provided by new competitive retailers. Only utilities that own less than 400 MW of installed generation capacity are exempt.

An open bidding process is required under the new rules, and will be conducted over the Internet by the auctioning generator. The rules also explain how a generator will designate the quantity of the different products to be offered, and how opening bid prices are established. The Texas PUC designated Sept. 1, 2001 as the cutoff for the first auction, with subsequent auctions four times a year.

Several companies voiced objections to the new rules, including AES NewEnergy, a subsidiary of AES Corp., and Enron Energy Services, a subsidiary of Enron Corp. However, PUC, utility affiliates and large wholesale marketers and traders supported most of the language in the rules.

To review the rules, visit the PUC website at

Carolyn Davis, Houston

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