Open Ped­er­nales co-op to re­tail com­pe­ti­tion

Austin American-Statesman - - VIEWPOINTS -


re­cent an­nounce­ment of a set­tle­ment in the breach of con­tract dis­pute be­tween the LCRA and Guadalupe Val­ley Elec­tric Co­op­er­a­tive pro­vides no com­fort to other LCRA whole­sale elec­tric cus­tomers, like the Ped­er­nales Elec­tric Co­op­er­a­tive, that will bear the cost. As a Ped­er­nales co-op board di­rec­tor, I am con­cerned that a set­tle­ment of the Guadalupe com­plaint will serve as the model to set­tle sim­i­lar law­suits against the LCRA and raise elec­tric rates to our 200,000 mem­berown­ers. In my view, the com­plaints of some LCRA whole­sale elec­tric cus­tomers re­veal in­her­ent flaws in the LCRA’s busi­ness strat­egy for sur­viv­ing in the com­pet­i­tive Texas elec­tric mar­ket.

In 2008, the LCRA of­fered re­vi­sions to its whole­sale power sup­ply agree­ment that gave whole­sale cus­tomers that agreed to the new con­tract terms the flex­i­bil­ity to pur­chase some of their power from other sup­pli­ers — load re­duc­tion — among other things. At first blush, this was an im­por­tant in­no­va­tion for the LCRA. It al­lows whole­sale cus­tomers to shop around for lower prices and has pro­duced sig­nif­i­cant sav­ings for some con­sumers. Ad­di­tion­ally, the LCRA agreed to co­op­er­ate with its cus­tomers in the devel­op­ment of “Pro­gres­sive Power” pro­grams that pro­mote en­ergy ef­fi­ciency and en­cour­age re­tail cus­tomers to adopt de­cen­tral­ized gen­er­a­tion sources, such as rooftop so­lar, fuel cells and ad­vanced bat­tery stor­age tech­nolo­gies.

As the re­cent le­gal dis­putes il­lus­trate, load re­duc­tion is a less than ideal way to let whole­sale cus­tomers take ad­van­tage of the com­pet­i­tive mar­ket. It pits all LCRA cus­tomers against one an­other. By re­duc­ing the amount of their load served by the LCRA, whole­sale cus­tomers shift costs to those that don’t ex­er­cise this op­tion.

Ear­lier this year, the Guadalupe co-op and sev­eral other whole­sale cus­tomers no­ti­fied the LCRA of a breach of the whole­sale power agree­ment and said they in­tended to ter­mi­nate the con­tract.

Set­tling the dis­putes with the Guadalupe co-op and other cus­tomers that have not agreed to the re­vised con­tract would raise fresh ques­tions for the Ped­er­nales co-op and other cus­tomers that have. Re­gard­less of the im­pact on Ped­er­nales of the cur­rent dis­putes and their res­o­lu­tion, load re­duc­tion and other pro­vi­sions of the whole­sale power con­tract re­main prob­lem­atic. For this rea­son and the ap­peal of re­tail open ac­cess, I be­lieve that it is in the in­ter­est of Ped- er­nales’ mem­ber-own­ers to be­gin the tran­si­tion to full re­tail com­pe­ti­tion. Un­der the re­tail com­pe­ti­tion regime in Texas, Ped­er­nales could de­cide to be one of the sup­pli­ers from which our mem­bers could choose to pur­chase elec­tric­ity, or we could de­cide to exit that busi­ness. In ei­ther case, Ped­er­nales would con­tinue to de­liver the elec­tric­ity our mem­bers pur­chase from which­ever sup­plier they may choose.

The tele­phone and com­puter in­dus­tries pro­vide ex­am­ples of how tech­no­log­i­cal in­no­va­tion and com­pe­ti­tion trans­form busi­nesses for­ever.

The in­cum­bent mar­ket lead­ers ei­ther at­tempted to ex­er­cise their for­mi­da­ble mar­ket power to main­tain their mo­nop­oly po­si­tions or un­der­es­ti­mated the sig­nif­i­cance of the in­no­va­tions that ul­ti­mately re­sulted in the devel­op­ment of the cell­phone, the per­sonal com­puter and the In­ter­net. In the end, they had to adapt to the new tech­nolo­gies and com­pet­i­tive mar­kets to sur­vive.

In the elec­tric in­dus­try, whole­sale and re­tail com­pe­ti­tion and tech­no­log­i­cal in­no­va­tion are driv­ing the in­tro­duc­tion of new prod­ucts and ser­vices, and de­cen­tral­iza­tion sim­i­lar to that of the tele­phone and com­puter in­dus­tries. New jobs, busi­ness op­por­tu­ni­ties and whole new in­dus­tries have emerged as a re­sult of in­no­va­tion and mar­ket struc­tures that en­cour­aged com­pe­ti­tion.

I be­lieve it is time for the Ped­er­nales co-op to open its sys­tem to re­tail com­pe­ti­tion and pro­vide our mem­berown­ers ac­cess to new choices for their elec­tric­ity sup­plier and re­lated prod­ucts and ser­vices, in­clud­ing the de­cen­tral­ized tech­nolo­gies that en­able con­sumers to pro­duce and sell elec­tric­ity into the mar­ket.

The steady pace of cost re­duc­tions in so­lar en­ergy tech­nol­ogy, for ex­am­ple, is mak­ing small, on-site so­lar in­stal­la­tions in­creas­ingly af­ford­able.

Th­ese new tech­nolo­gies and the com­pet­i­tive mar­ket struc­tures that al­low them to flour­ish will lead to in­creased en­ergy se­cu­rity and de­moc­ra­ti­za­tion of our en­ergy sup­ply, giv­ing rise to new busi­nesses and jobs in the com­mu­ni­ties we serve.

Hopefully, the adop­tion of re­tail com­pe­ti­tion by the PEC would be seen as an op­por­tu­nity for the LCRA to hone its busi­ness strat­egy and open a new era at that great pub­lic power or­ga­ni­za­tion, which has been and will con­tinue to be a vi­tal part of the en­ergy pic­ture in Cen­tral Texas.

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