April 1, 2019

House Committee on State Affairs

Mr. Chairman and members,

My name is Josiah Neeley and I am the
Texas Director and an Energy and Environment Senior Fellow with the R Street
Institute. R Street is a nonprofit, nonpartisan, public-policy research
organization with a mission to engage in policy research and outreach to
promote free markets and limited, effective government. I am here today to
speak in opposition to HB 3995.  

In many areas, the Texas electricity
market has been a model for the rest of the nation, as it demonstrates the
advantages of market competition as a means to provide affordable, reliable
power. Yet, when it comes to competition for electricity transmission, Texas
has lagged behind. This is because while generation is left to market
competition, the costs of transmission are socialized.

It is important to keep in mind that when we
talk about competition for electricity transmission, we are not talking about the
multiple lines of wire and poles that run parallel to houses. Transmission is
different from electricity generation, and it’s understandable that the Texas
legislature does not apply the same system of regulation to both parts of the
grid. Nevertheless, it is still possible to use competitive auctions and allow
private involvement to increase efficiency and reduce costs.

To allow a limited form of competition in
transmission can have substantial benefits. For example, a recent study by the
Brattle Group found that the winning bidders in competitive projects were 40
percent cheaper than the initial cost estimate for the project, whereas
non-competitive projects ended up costing 34 percent more than initial

HB 3995 is a step in the wrong direction in
this regard. As applied to the non-ERCOT areas, the bill goes against the trend
in other ISO/RTOs. In 2013, the Federal Energy Reliability Council (FERC)
implemented Order 1000, which promoted greater competition in transmission
planning to achieve “more efficient or cost-effective transmission
development.” Since then there have been 15 transmission projects selected via
competition. And, in ERCOT, even if the bill would not substantially change
current practice, it would freeze-in-place a system that is in need of real

I would be happy to answer any questions.

Thank you for your time,

Josiah Neeley

Texas Director

R Street Institute


[email protected]

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