TXU seeks a lock on the market
By Mitchell Schnurman, Star-Telegram Staff Writer
2/21/07
In a deregulated market, the government isn't supposed to pick winners and losers. But TXU's request to build 11 coal-fired power plants puts Texas in the position of kingmaker.
So far, the debate has been mainly about the plants' effects on air pollution and global warming, which will be the focus of state hearings.
But let's not overlook the impact on competition and innovation. TXU is already the state's largest power producer. Add $10 billion worth of low-cost coal plants in one fell swoop, and the Dallas utility may lock up much of the market before anyone gets the chance to experiment.
"We could have excess power capacity for at least 10 years, and that would pretty much exclude all the new technologies from entering Texas," said David Litman, a Dallas entrepreneur who founded hotels.com.
Litman leads a large group, Texas Business for Clean Air, that opposes the TXU plan and is lobbying the Legislature to delay TXU's request. Dozens of prominent business leaders are on board, including developer Trammell S. Crow and the chairman of The Container Store, Garrett Boone.
Usually, those are the kind of guys who support TXU and any business expansion, particularly something as crucial as electricity. But they say the plants would be bad for business because more air pollution threatens federal funds, discourages corporate relocations and makes it tougher to recruit talent to the area.
Not surprisingly, TXU says rejecting the plants would be bad for business. It would lead to higher prices and an uncertain energy supply, keeping more companies away.
So which is worse, expensive electricity or dirty air?
In Texas, unfortunately, we already have both. Toyota and Boeing scratched North Texas off their lists of possible manufacturing sites because of air quality. And electricity prices have been among the country's highest since deregulation began early in the decade.
Something isn't working, and consumers have been complaining loudly. That's why lawmakers in Austin are considering ways to improve deregulation. One suggestion: figure out a way to encourage innovation in clean technologies in addition to watching prices all the time.
Advances in technology hold the most promise for a long-term solution -- a power plant that generates affordable energy without harming the environment.
Those breakthroughs are important to more than Texas. The biggest threat to global warming comes from developing countries that are building coal plants rapidly as more of their people get electricity for the first time.
Why can't Texas try to become a hotbed for new power plant technology and then try to export that to China and India? The state is already a leader in wind power.
With a growing population and expanding economy, it should be able to attract all kinds of players with new ideas as long as there's room to operate.
TXU getting its way would suck the oxygen out of the market because TXU's price basis would be so low, Litman says. Others couldn't match its costs because they wouldn't build as many plants or have the same kind of existing environmental permits.
Many critics also say that TXU is rushing the timetable so the plants can be approved before Congress imposes carbon restrictions. That would make facilities more expensive, adding a burden for potential rivals.
Simply proposing 11 new plants might dissuade some competitors from exploring the market, says Clarence Johnson of the Office of Public Utility Counsel, which represents residential and small commercial customers in utility cases.
"It's an issue of market power," Johnson said. "Even if there might be a market for others, there may be too much risk to try to compete."
TXU's proposal is too audacious for most companies to attempt, as evidenced by the surging opposition from business leaders, mayors and environmentalists. But TXU has serious clout in Austin, where it consistently ranks No. 2 in spending on lobbyists, according to Texas Ethics Commission records compiled by Texans for Public Justice, an Austin research group.
TXU currently has 59 people, including employees, registered to lobby the Legislature. Two of the hottest issues this session -- deregulation and coal plants -- involve TXU directly.
One lawmaker has proposed a cap on a company's generating capacity in any single region rather than for the state as a whole. The Legislature imposed a statewide cap earlier, hoping that would prevent market dominance and the risk of manipulation.
If a new limit were approved on a regional basis, TXU would have to divest plants in North Texas, where it's the dominant provider.
There's also a proposed amendment that would exclude coal gasification plants from the cap as a way to encourage investment in cleaner but unproven technologies. That's moving in the right direction.
If Texas sanctions some old-style coal plants for the short term, it should push hard for investments in the future, too.
