Several electricity providers that participated in the Texas pilot deregulation program last summer admitted Wednesday to the Texas Public Utility Commission (PUC) that they had overscheduled power in the first few weeks of the pilot, costing the state $29 million. Reliant Energy Services, TXU Electric, American Electric Power Service, Mirant Americas Energy Marketing, Constellation Power Source and another unnamed company are being investigated by PUC to see whether they should be fined for hedging — even though it apparently was allowed at the time.

Reliant Energy Services estimated it earned $3.5 million by overscheduling, company officials testified. Bottlenecks were created, said officials, as companies moved power from generator-heavy South Texas locations to North Texas during peak demand. A lack of generating capacity and transmission lines led to the overscheduling, they said.

David Manceor, Reliant Energy Services’ vice president for energy supply, also told the commissioners that for three days in mid-August 2001, the company’s traders were speculating on price by overscheduling load in North Texas. He said when he learned about the trade speculation, he notified management, which ordered them to stop.

“Senior management made the decision to stop immediately in spite of the fact that the rules allowed for that,” Manceor said. “We didn’t think that activity would be perceived well by the marketplace.” Reliant also thought that more of its customers had switched to its service than actually had at the time, he said.

Although the power company officials argued that they had been operating within PUC rules at the time, PUC’s staff attorney Terri Eaton said she “strongly disagreed” with the hedging protocols. At the time of the pilot, the PUC provided a financial incentive for companies to overschedule to guarantee there would be enough electricity in peak periods. Those rules have since been modified.

During the pilot period, the PUC estimates that overscheduling by just a few companies contributed to price spikes of up to 100 times the normal rate after the test began Aug. 1. As a result, overpayments of about $29 million were made to Reliant and several other companies operating in the state. Other providers needing more power paid higher prices to companies that had overscheduled.

PUC staff now is considering whether to fine the companies that took advantage of the pilot market rules. However, the companies told the PUC that they might consider refunding the money to entities that had to pay inflated prices during the pilot. For now, the PUC staff has a working group of representatives from the companies involved, electric cooperatives and municipal utilities to negotiate a settlement to redistribute the $29 million.

The unnamed sixth company under investigation by the PUC has argued in court that its identity is not public information. That company is awaiting a ruling on its argument from the Texas attorney general. However, information released by the PUC indicates that the company’s address is the same as Enron Corp., which also operated in the state during the pilot period. The unnamed company, according to PUC, frequently scheduled loads that were more than 100 times greater than its adjusted metered load in North Texas. It has offered no explanation, said PUC staff.

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