TXU and Texas Generation |
Within most regions in Texas, retail customers had the right to purchase power from energy providers other than the monopoly transmission and distribution companies that delivered the electricity, read the meter, and sent the bills. A description of the market for end-use customers, created by the Public Utility Commission of Texas, is here.
The 2004 State of the Market Report, issued by the Federal Energy Regulatory Commission, described ownership of generation in the ERCOT region, which covers most of Texas, as follows (p. 135):
The top 10 owners provided 78% of capacity and 76% of generation in ERCOT in 2003. Six of the top 10 generation owners in ERCOT are regional utilities, their affiliates, or large municipals and cooperatives. The other four are independent power producers or utility affiliates that have built or acquired generating assets outside of their traditional service territories.
TXU was the largest, with over 20 percent of both the generation and capacity market for electricity. (The 2006 Report did not provide detailed regional information.)
Most wholesale market participants traded electricity through bilateral contracts, using brokers and market exchanges. For the most part, both physical and financial markets used ERCOT hubs as pricing points. The marginal source of power was almost always natural-gas fired generation, and thus natural gas set the marginal price in most arrangements.
Arguments against TXU's Proposed Coal-Fired Plants
Although generation was deregulated as to price, there were other regulatory hurdles facing TXU and its potential buyers. The Texas commission on Environmental Quality, the TCEQ, had to issue air-quality permits to allow new plants to be built and operate. The Public Utility Commission of Texas (PUCT) continued to approve retail rates for the wire company (transmission and distribution of the electricity). And the legislature could certainly step in if it chose to do so. Jim Marston's thoughts on regulation are in the video below.
TXU was seeking air quality permits for seven power plants in six locations. As part of the permitting process, hearings with the Texas Commission on Environmental Quality (TCEQ) were scheduled to start the day after Marston's meeting with TCG and KKR. Both Environmental Defense and the Texas Clean Air Cities Coalition (TCACC) had filed testimony opposing the permits. The subtab Testimony against the Plants, under the tab labeled War over New Coal Plants, links to selected chapters of the prefiled direct testimony, along with key summaries of proposals made in each witness's testimony.