Texas urged to stay with deregulated power market

Texas will require 2 percent more energy every year, which means it will need dozens more natural gas, coal and nuclear plants and more wind power to maintain a safety margin, the council said. Texas also needs plants to replace older ones that will be mothballed.

The recommendations were among 37 designed to keep the state attractive to business and globally competitive. "America must be much more independent on the energy side," Gov. Rick Perry told several hundred business leaders. "And Texas is going to lead us all."

Higher natural gas prices this year combined with the state's dependence on natural gas plants for much of its electricity have soured many consumers on the deregulated market because of high monthly bills.

The council's report noted that among states with mostly natural gas power, Texas' electricity costs are actually lower than seven other states.

"Our retail market is the most successful retail market in the world," said Barry Smitherman, chairman of the state's Public Utility Commission. "We have 25 retail electric providers fighting against each other every day for your business," he said. "Natural gas prices have increased 400 percent while electricity costs have risen just 30 percent."

Part of consumer frustration over high rates has come from the shutdown of several electricity providers; the council's report recommends changing the certification process for new power retailers.

The council predicts that any federal attempt to set caps on carbon emissions will hurt Texas's energy-intensive economy disproportionately compared with other states. The report urged a partnership between state agencies to educate the public about the "high cost of carbon regulation" compared with its environmental benefits. Texas must continue to encourage wind power development and explore the economic viability of solar energy, perhaps by establishing innovation prizes. The state should also de-emphasize the preference given to building natural gas plants.

Other recommendations include:

- Streamlining state water permitting to encourage utilities to build more nuclear plants.

- Adding a sales tax exemption for solar generation systems.

- Encouraging the development of offshore wind generation because offshore winds blow during peak demand; the wind in West Texas generally blows early in the morning and at night.