Texas OKs big boost in wholesale electricity rate

Texas officials say the state must boost generating capacity to meet growing demand in the next few years to help avoid rolling blackouts during peak periods such as hot summer days.

Supporters of the increase hope the lure of new profits will spur power companies to build more power plants. But consumer groups warn it could raise costs by billions of dollars, leading to higher electric bills for Texas households with no guarantee of new construction.

The vote by the three-member commission, all appointed by Republican Gov. Rick Perry, raises the wholesale rate cap on Aug. 1 from the current $3,000 per megawatt-hour to $4,500. And there could be more to come. Commissioners are already considering tripling the price to $9,000 in 2013.

The commission approved the increase on a 2-0 vote with commissioners Donna Nelson and Rolando Pablos in support. Commissioner Ken Anderson, who said he agrees with raising the cap, abstained because of concerns that this summer is too soon for some electric providers to adjust.

The cap increase affects wholesale rates within the Electric Reliability Council of Texas grid, which covers most of the state.

Texas AARP and other consumer and conservation groups say the commission hasn't studied the impact the rate increase could have on Texas households. Texas Industrial Energy Consumers, which includes refineries and chemical manufacturers, warned that a rate increase could create instability in pricing and drive smaller retail power providers out of business.

"Raising the cap this August will raise energy prices on home and business owners," said Cyrus Reed, conservation director for the Lone Chapter, Sierra Club. "It makes no sense to raise energy prices today when new generation will not result until 2014 anyway. By doing so we are just giving over our checks to electric utilities."