By Ann de Rouffignac
OGJ Online

HOUSTON, Sept. 27, 2001 — Two big oil companies, Conoco Inc. and BP Energy, a unit of the UK's BP PLC, filed applications to become retail electric suppliers when the Texas electricity market is deregulated in January.

Both companies plan to buy and sell electricity mostly for their own plants in Texas. In its application with the Texas Public Utility Commission, BP said serving other industrial loads is also a possibility.

Large petrochemical complexes and refineries on the Gulf Coast mostly self provide electricity through their own cogeneration power plants. But sometimes they don't produce enough power to be totally self-sufficient. Many buildings owned by the companies don't have power plants at all.

Before deregulation was scheduled to begin in January 2002, the companies simply purchased electricity not self-provided from the local utility. They paid posted and approved industrial and commercial tariffs. But Jan. 1, the existing tariffs, including industrial tariffs, disappear. Industrial customer in most of Texas must arrange for electricity.

Conoco still hasn't selected a supplier, a spokesman said. The company has a large gas field in South Texas and its headquarters facilities in Houston to consider. Conoco could act as its own retail provider, procuring the power directly from a wholesaler or marketer, or it might sign a contract with another retail electric provider.

"We have not done this yet," said Conoco spokesman John McLemore. "Our application is just a precautionary step in case a competitive price structure can't be found." McLemore explained. Having a retail license expands the company's options.

BP Energy submitted its application to the PUC last week to become a retail electric provider too. The application wasn't submitted in time to satisfy all of the Electric Reliability Council of Texas' (ERCOT) protocols. But a source close to BP Energy said the company would be able to act as a retail provider, despite the paperwork snafu. BP Energy will funnel any transactions through a third party that has satisfied the testing requirements, the source said.

He said the arrangement satisfied ERCOT and was acceptable to all parties. If the rest of its application is approved by the commission, BP will be able to buy and sell electricity for its own facilities and maybe others starting in January.

"We want to be able to provide electricity services for ourselves. Why get someone in the middle?" a source at BP said.

To day, no other large oil company has filed as a retailer in Texas. Companies will have to negotiate new contracts with other suppliers or renegotiate with current providers for electricity starting in January.