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Shell Energy withdraws from Texas, other retail electricity markets

By Ann de Rouffignac
OGJ Online

HOUSTON, Sept. 4, 2001 — In a blow to the already troubled Texas retail electricity market, Shell Energy Services LLC Tuesday said it will withdraw from the Texas market and will also close out its retail power sales in other states.

The decision by the unit of Shell Oil Co. comes on the heels of scores of filings with the Public Utility Commission of Texas calling for corrections to problems that have plagued the retail market being implemented by the Electric Reliability Council of Texas (ERCOT), the independent system operator.

A retail electricity pilot program was scheduled to begin June 1 but did not get under way until July 31. Shell Energy was the second largest retailer participating in the program. Shell had about 42,000 customers in Reliant HL&P’s and TXU Corp.’s service territories. With 47,000 customers, New Power Co. is the state’s largest retailer.

“Given the interest that Shell had in trying to straighten out the problems at ERCOT, their withdrawal is a bad sign for this market,” said Janee Briesemeister, senior policy analyst with the Consumers Union in Austin. “If there are no big, well capitalized new competitors in this market competing for consumers’ business, what hope is there for consumers to save money?”

Shell Energy said in a statement the decision was made because the pace of electricity deregulation has slowed and the prospects for profits were uncertain. “It is unlikely that Shell Energy will be able to reach adequate size nationwide to be profitable in electricity in a reasonable length of time,” the company said.

There are few national players other than New Power Co., Purchase NY, an affiliate of Enron Corp., Houston, and Green Mountain Energy Co., Austin. Shell’s withdrawal will limit the scope of companies competing to serve consumers. New Power has also complained of quarterly losses directly attributable to problems encountered in the Texas retail market. Further, New Power complained in numerous filings at the PUC about the shortcomings of the retail pilot program in Texas.

Without mentioning any state by name, New Power issued a statement following Shell’s announcement that it remained “committed to retail energy competition and fully intends to continue serving its customers in all of its markets.”

Meanwhile, the Texas PUC appeared unconcerned over the departure of one of the state’s largest electricity retailers. “There are still 26 retail providers certified in Texas with more applications pending,” said PUC Chairman Max Yzaguirre, in a written statement. “The PUC will work with Shell Energy Services to ensure that customers who signed contracts with the company will not experience any interruption in their electric service.”

Fewer than 100 customers of the thousands signed up ever received power from Shell. The Houston energy company filed numerous complaints about ERCOT’s errors in switching customers to Shell from the utilities.

Out of the 26 retailers certified only 6 are actually marketing to consumers in Texas and with Shell’s withdrawal only 5 remain. Concerns about the pilot program and problems at ERCOT have prompted the Electricity Utility Restructuring Legislative Oversight Committee to schedule a public hearing in Austin Friday.

No consumer group or retailer was invited to testify at the meeting. The committee has only invited the PUC and ERCOT to the hearing, oversight committee staffers said. Some key members of the oversight committee, including Rep. Debra Danburg (D-Houston) don’t plan to be there.