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TXU abused Texas power market, report says |
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TXU Corp. abused its dominant position in the Texas energy market in 2005 by overcharging customers $70 million in rate increases while earning itself $20 million in extra profits, according to a report commissioned by the Texas Public Utility Commission.
The report concluded that TXU repeatedly offered its power to the market during peak periods at extremely high prices. The sales increased the overall costs of the power to consumers by $70 million and earned TXU $19.6 million more profit than it would have earned if it had bid for the sale of its electricity in a competitive manner, the report said.
The report identified TXU as the generating firm previously known only as "Company C," which may have withheld power from the market during four months in 2005, leading to higher prices.
Electric utilities generally buy most of their power for their customers through contracts with generators and the Texas grid operator also runs an auction to ensure that supply meets demand in real time.
During the summer months, when demand on the grid is highest, Texas grid officials use the real-time market to serve about 10 percent of the state's needs. Companies enter the auction by offering power from their plants at a price they want to receive. The lowest offer price that meets the demand on the market wins, but if utility suppliers decide not to offer their plants for the sale of the power, then prices in the auction can rise quickly (Sudeep Reddy, Dallas Morning News).
The finding marks the first time that TXU has been found to have intentionally abused the deregulated market.
In a statement, TXU said it was reviewing the monitor's report and was "obviously disappointed in the findings." The company said it has "thoroughly reviewed" its conduct and believes "it is consistent with the commission's rules and policies."
The finding next goes to the PUC for action, and the commission could recommend penalties of $25,000 per violation per day (Rebecca Smith, Wall Street Journal [subscription required]).
Meanwhile, Rep. Joe Barton (R-Texas) urged TXU customers yesterday to switch to other electricity providers in the wake of the utility's recent buy out. "In this proposed buyout, nobody is looking out for the ratepayer, and I mean nobody," Barton said (AP/New York Times). (All cites March 13.)
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