Texas legislators accused power companies of "abusing" their customers by keeping prices at record highs despite a large drop in power plant fuel prices this year.

During a hearing in Austin Thursday, State Sen. Troy Fraser told TXU Corp. Chairman and CEO John Wilder it was "an insult" to the 2.5 million customers the Dallas company served to charge its current prices.

 

Rebates offered

Wilder countered that the company is offering up to $100 in rebates to customers and giving them a variety of plans to choose from, including the security of capping prices for the next two to three years.

 

But Fraser, chairman of the Senate Business and Commerce Committee, was not appeased.

"I'm going to go to the corner neighborhood gas station, and even though his posted price is $2, I'm going to go ahead and sign a contract to pay $3 a gallon over the next 5 years if he will give my wife a package of cigarettes," Fraser said sarcastically.

The hearing, a joint session between the Senate committee and the House Regulated Industries Committee, was held in response to widespread consumer complaints over power prices throughout Texas this past summer.

 

Natural gas blamed

The run-up in power prices reflected high natural gas prices, which spiked last year when hurricane's Katrina and Rita cut off a large percentage of the country's natural gas production. Gas prices have declined significantly since then.

 

Under Texas' electricity deregulation law, the benchmark power price that most customers pay can be increased to match the rise in natural gas because more than half the state's power comes from gas-fired plants.

The law does not require companies to reduce the electricity prices as natural gas prices drop.

"The hope was that competitive forces would cause prices to come down, but that is not what we have witnessed," Fraser said.

Joel Staff, CEO of Reliant Energy, echoed the sentiment of many in the industry when he said he thought the Texas market was working by providing consumers with choice, but like Wilder he did not promise the company would lower power prices.

Rep. Sylvester Turner asked Public Utility Commission officials in attendance if they believed the power markets would see the arrival of a "Southwest Airlines," a low-cost provider that aggressively went after the customers of the higher-priced competitors.

PUC Commissioner Barry Smitherman said it was possible that one of the many smaller retail companies offering power discounts of as much as 20 percent could become something like Southwest Airlines as the market matured.

"I'm anxious for the market to mature rapidly," said PUC Chairman Paul Hudson.

Phil Tonge, president of the state's third-largest electric retailer, Direct Energy, said during the hearing his company planned to lower the rates for the 900,000 customers it serves around the state in the coming months by an unspecified amount.

Tom Smith, director of the Texas office of advocacy group Public Citizen, said many customers of TXU and Reliant have been paying between $25 and $40 per month more than they should, if the price had reflected the falling cost of natural gas.

Smith conceded the companies lot money when natural gas prices shot up last year and state officials pressured them to slowly phase in the higher costs to customers.

"But they're now making a lot of money at the customer's expense," Smith said.

He suggested the state increase its energy efficiency programs to cut into the demand created by growth and allow cities to negotiate on behalf of their residents to get some of the price breaks given to large industrial companies.

Turner said he was concerned that power companies will just lower prices for the 140 days the state Legislature is in session beginning in January.

"I'm very concerned about the 141st day," Turner said.

tom.fowler@chron.com

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