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Power companies face grim reality as commodity bets expire

By JAMES OSBORNE
Staff Write, Dallas Morning News

Five years ago, electricity prices were climbing fast and with them, the profits of some of Texas’ largest power companies. But already there was a sense that the high times might not last forever.
Financial trading desks at companies like NRG Energy and Energy Future Holdings Corp. were designing elaborate bets to protect themselves when prices came back to earth. Natural gas prices largely set the price of electricity in the United States.
So they bet on the price of natural gas falling, what traders refer to as shorting. And when it did, executives had a new revenue stream worth billions of dollars a year to make up for the shortfall in electricity sales.
In recent years, hedging programs have aided the power industry through a period of sustained cheap electricity prices brought on by the boom in natural gas drilling. But those hedges are now expiring, leaving power companies exposed to power prices half what they were in…

Is the sky falling?

rechargetexas.com
That’s what state Sen. Troy Fraser wants to know. The chairman of the Senate’s Natural Resources Committee told regulators during a meeting this week that they may be stirring up unwarranted anxiety about the risk in Texas of future blackouts.
This, in turn, has led to an aggressive and unwarranted push to subsidize generators with ratepayer money, said the lawmaker. The Public Utility Commission has been considering such proposals for several months, and last month took a clear step toward authorizing them.

But during a committee meeting in Austin on Monday, Sen. Fraser questioned the cost of the proposals, whether they marked a step away from electric competition — and even whether regulators had the legal authority to take such action.“You give an agency authority and sometimes they forget the Legislature is over here, and we have oversight (authority),” said Sen. Fraser, a Republican from Horse Shoe Bay. “I’m a…