Texas Regulators, Utilities Reduce Electric Rates 6%

- NEW YORK--Texas energy regulators and affiliates of the state's investor-owned utilities agreed Tuesday to reduce electric rates 6% for residential customers when retail competition begins in the state.

Retail deregulation, which will allow residential and small industrial and commercial customers to receive power from a company other than the utility serving their area, appears on schedule to start Jan. 1, Terry Hadley, a spokesman for the Texas Public Utility Commission said.

The reduced rates resulted from lower prices for natural gas, which is used to fuel the bulk of power plants in Texas.

Customers that choose alternate power suppliers could see even lower rates, as companies must offer prices below than the incumbent utilities' to attract consumers.

The PUC and an affiliate of TXU Corp. also negotiated lower rates for default power the utility unit will provide to customers whose electric provider is unable or unwilling to serve them.

Rates for residential customers who receive power from this so-called provider of last resort will fall to 9.5 cents per kilowatt-hour in summer, down 3 cents from the rate negotiated earlier this year when natural gas prices reached historical highs. Rates at other times of the year will be 7.5 cents per kilowatt-hour, a 2-cent reduction from earlier this year. These rates don't include transmission costs.

These default rates are likely to be higher than those charged by the utilities or other competitive power providers due to uncertainty over the number of customers the TXU unit will be serve and the amount of power they'll consume. The higher rates will also encourage customers to select an alternate power company, Hadley said.