Texas – You have a problem (with the cost of electricity)

Texas has a major problem and TXU – one of the largest electricity generating companies in the state – has an investment plan designed to help fix the problem. The difficulty is that the solution may raise some serious questions in the minds of people that live and work in the state.

Here is the problem – Texas generates about 72% of its electrical power by burning natural gas. The price of natural gas has increased by a factor of four or more in the past four to six years. With natural gas fired electrical power plants, the cost of fuel represents between 80 and 95% of the cost of electricity.

Trends in Texas’ Electricity Retail Prices Fact Sheet, which is posted on the Energy Information Agency web site, states that Texas deregulated its electrical power market with some protections for consumer prices through January of 2007. At that point, the rate protection ends.

According to that sheet, the average price paid by residential consumers in 1999 was about 7.55 cents per kilowatt hour, and the deregulation deal required that price to be dropped by 6% and “frozen” through January 2007. The reason for the quotes around the word frozen is that there were provisions in the deal to allow for price adjustments to reflect changes in the price for fuel.

The current price for electricity, seven months before the end of the price freeze is about 15 cents. I found that using a nifty service called EnergyShop.com which allows people to find out the price of electricity in rate deregulated areas of the world.

Back to the solution. TXU has announced that they plan to spend $10 billion to build 11 new coal fired power plants with a total capacity of 8,600 MW of electrical power. These plants will replace a number of natural gas fired power plants.

Depending on your perspective, the projects will:

A) – Enable TXU to “make electric power more reliable and affordable in Texas.”

B) – Allow TXU to “capitalize on wide margins the plants earn in the state’s deregulated power market.”

C) – Cause this response from the future plant neighbors – “If these plants are permitted, their carbon emissions will cook our climate. Their mercury will cause brain damage to our unborn children. And the fine particles will choke the neighbors.”

D) – Cause this response from the leaders of certain communities near the proposed plants –

“A $10 billion investment is big, even for Texas,” said Jim Vaughan, president of the Greater Waco Chamber of Commerce, who moved here from Atlanta two years ago. “This has the potential to make Texas competitive for industry again, and likewise would benefit consumers. Obviously it will have a significant impact in terms of jobs and the tax base of McLennan County.”

Neither of my favorite power solution words – “nuclear” or “atomic” – showed up in any of the articles that I read today about Texas’s electrical power price problem. There is, however, some discussion in the articles about building wind turbines in addition to the coal plants to help meet renewable portfolio standards.