TXU Option Will Tie Rates to Changes in Natural Gas: Power Company Says Customers Could Benefit If Fuel Prices Decline
Posted on: Thursday, 23 February 2006, 00:00 CST
By Elizabeth Souder, The Dallas Morning News
Feb. 23--TXU Energy will launch a new pricing plan March 1 that tracks natural gas prices, cutting electricity rates 5 percent even if fuel prices remain unchanged.
TXU Energy, the retail electricity arm of TXU Corp., announced a plan Wednesday that it says is designed to let customers benefit immediately when natural gas prices drop, if they will risk rising rates when fuel prices climb.
"In a market where consumers believe prices will trend down, they might be interested in this product," said TXU Energy chief executive Jim Burke.
"I don't think this product would have had much appeal last fall, if people thought the trend was largely up."
On Wednesday, natural gas futures closed at $7.22 per million British thermal units, less than half the price of natural gas in December, when the market closed above $15.
In January, TXU completed a 25 percent increase to its base price, known as the price to beat.
The price to beat is calculated using natural gas prices and must be approved by the Public Utility Commission, which regulates electricity companies.
TXU Energy and other former monopolies may adjust their standard price-to-beat rates only twice annually, so rates don't respond very quickly to natural gas price fluctuations, and there's no incentive for companies to adjust rates if gas prices fall.
The new offering from TXU comes as PUC Chairman Paul Hudson is suggesting resetting the price to beat at the end of this year, to reflect lower natural gas prices.
The commission is scheduled to discuss the idea at a meeting on Thursday.
TXU's new Market Tracker plan includes a price cap and a floor.
Rates cannot rise more than 7.5 percent higher than the price to beat, which stands at 15 cents per kilowatt hour.
The Market Tracker rate also cannot drop more than 15 percent below the price to beat.
Further, the Market Tracker price cannot change more than 1 cent per kilowatt hour from one month to the next.
Signing up for the Market Tracker plan involves a two-year commitment, and the monthly fee is $3 more than TXU Energy's standard plan.
Mr. Burke said his company will continue rolling out new pricing plans and products this year. His strategy to retain customers is to offer more choices.
E-mail esouder@dallasnews.com
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Source: The Dallas Morning News
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