Editor Jake Silverstein received the following letter from Public Utility Commission chairman Barry Smitherman concerning my proposal to zero out funding for the PUC. My response will follow Mr. Smitherman’s letter.
Dear Mr. Silverstein:
Thank you for sending me an advance copy of “The Eighteen Billion Dollar Man,” by Paul Burka, which will appear in your October issue. I appreciate Mr. Burka’s theoretical exercise to reduce the state budget; however, I disagree with his recommendation to eliminate the Public Utility Commission. Electricity and telecommunications are basic services that allow Texans to achieve our current high standard of living. The PUC’s mission is to protect customers, foster competition, and promote high quality infrastructure;” clearly contrary to Mr. Burka’s statement that the PUC “has essentially nothing to do.” Elimination of the PUC would jeopardize consumers, competition, and our existing and proposed electric and telecom infrastructure.
The claim that the PUC is spending $250 million on “something that has already been accomplished through deregulation” is incorrect. Of the PUC’s $266 million biennial appropriation (already reduced by 5% from its budgeted amount), about $239 million, or 90%, is earmarked to provide electric bill discounts to low income customers. The remainder of PUC’s appropriation, about $14.3 million, is used to pay the PUC’s 185 employees and our various programs.
Ironically, the PUC actually makes momey for the state. For example, under state law, utilities are charged a “Public Utility Gross Receipts Assessment, which brings in approximately $60 million per year to General Revenue. In addition, since January 1, 2007, the PUC has assessed over $31 million in administrative penalties, all of which is also paid into GR.
Despite Mr. Burka’s assertion, the PUC still has much to do in Texas. When the Texas Legislature restructured the electric industry in 1999, the generation and retail segments were “deregulated,” but remain subject to PUC oversight to guard against market power abuse and protect customer interests. The transmission and distribution companies are still fully regulated monopoly providers and must come to the PUC for permission to build power lines and charge customers. Right now the Commission is reviewing over two dozen permits to build more than 2,300 miles of high-capacity transmission lines, from West Texas and the Panhandle to the I-35 corridor, to facilitate the delivery of renewable energy to Texans. The PUC also oversees the operation of the wholesale market and ERCOT, the grid operator for 85% of Texas. Some parts of our state, primarily East Texas, the Panhandle, and El Paso, have not been deregulated–the PUC continues to fully regulate the electric utilities that provide service in these areas.
While a lighthearted attempt at cutting billions of dollars from the state budget is perhaps a worthy task, purported budget figures for teh PUC and the job it performs for Texans includes factual inaccuracies, incorrect assumptions, and ultimately could lead your readers to erroneous conclusions. It is frustrating (and to some degree embarrassing) to read Mr. Burka’s tome when ten minutes of discussion with me or my colleagues would have informed him of what we really do at the PUC. Perhaps had he been better informed, he would have reconsidered his choice to eliminate an agency that ensures the protection of vital services to all Texans. For a more concrete way to save money, the article could have highlighted how the PUC instituted an expense policy, in July 2009, which has saved almost $500,000 (vs. budget) this past fiscal year. An example of our cost-cutting efforts is “cancel or eliminate periodical subscriptions.” [Signature follows]
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I have to admire that line about canceling and/or eliminating periodical subscriptions. Good shot.
Now, let’s go over what PUC actually does, taken directly from the two-year budget:
* Foster and monitor market competittion: $9,262,204
* Conduct rate cases for regulated electric and telephone utilities: $6,551,834
* Conduct investigations and initiate enforcement: $3,931,101
*Provide information about changes in electric and telephone industries: $2,364.678
I trust that knowledgeable readers will understand that an appropriation for conducting rate cases for regulated electric and telephone companies that totals $6,551,834, is hardly enough to pay for court reporters. These cannot be important or difficult cases if that is all the money that the Legislature is providing. In the larger scheme of the state budget, these expenditures are tiny. They speak volumes about how little the PUC has to do in the post-deregulation era.
As I pointed out in Texas Monthly, the vast majority of the money that is part of PUC’s budget comes from dedicated funds: assessments against electric utilities that are collected in the System Benefit Fund. (There is also around $21.5 million in general revenue.) Chairman Smitherman, in his letter, says that the SBF funds are earmarked “to provide electric bill discounts to low income customers.” Some low-income customers do receive the discounts, but the main thing that happens to the money in the system benefit fund is … nothing. It sits there and accumulates, session after session. All this happens automatically. The System Benefit Fund has become an unofficial Rainy Day Fund, a holding place for money that can be used to certify the budget in hard times. The electric companies pay the fees, the money goes into the fund, and the discounts are paid out of the fund, and eventually budget writers use the excess money in the fund to balance the budget. State Representative Sylvester Turner, a frequest PUC critic, told me that the System Benefit Fund will probably be worth about $650 to $700 million by the time lawmakers return in January. PUC is not needed to make these discount payments work. You could turn the whole thing over to the Comptroller’s office.
As with any of the agencies that I have recommended cutting, I do not intend to suggest that they do not have some important functions. What I do intend to suggest, in the case of PUC, is that they are not nearly as essential today as they were before deregulation of electricity. Their next responsibility is likely to be the oversight of ERCOT, which will have the responsibility of moving electricity around the grid. How well the PUC performs that function – and its long history of siding with the industry does not make me optimistic – will determine the agency’s future.
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