Dismissing the criticisms of a few of the expected competitorsin Texas’ coming deregulated electricity market, the Public UtilityCommission has adopted rules that require affiliate powergeneration companies unbundled from current integrated utilities tosell entitlements to their power generation. PUC said the ruleswould benefit electric customers by proving a more competitivewholesale market when it begins Jan. 1, 2002.

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

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

The four types of capacity products will be auctioned thatrepresent energy production over periods from one month to twoyears. Capacity entitlements will be sold for the period of Jan. 1,2002 through Jan. 1, 2007, or until 40% of the residential andsmall commercial electricity use within the affiliated transmissionand distribution utility’s area is provided by new competitiveretailers. Only utilities that own less than 400 MW of installedgeneration capacity are exempt.

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

Several companies voiced objections to the new rules, includingAES NewEnergy, a subsidiary of AES Corp., and Enron EnergyServices, a subsidiary of Enron Corp. However, PUC, utilityaffiliates and large wholesale marketers and traders supported mostof the language in the rules.

To review the rules, visit the PUC website atwww.puc.state.tx.us.

Carolyn Davis, Houston

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