The Galveston County Daily News

Edith Garzas electricity was turned off at her Lake Jackson home when she had to decide between paying her bill or buying food for her family. Rising electricity rates that hamstring many have contributed to record industry profits.

John Wilder insists that electricity deregulation is working for Texans. And it has been — for Wilder and his company.

Wilder was chairman and CEO of TXU, Texas’ largest electric utility, until a buyout was consummated last month. He walks away from the company with at least $277 million in stock.

Assuming he worked 60 hours a week, that means Wilder made $11,200 an hour during his three years and seven months at the company. And that doesn’t count his $1.25 million annual salary, or the millions in performance bonuses Wilder got.

In other words, Wilder made more before lunch than most families make all year.

Wilder declined to be interviewed for this article, and his company refused to discuss his pay. But after he signed on in 2004, he was the highest-paid executive in the entire electricity industry.

But for Texans like Edith Garza, deregulation has been a different story. The 43-year-old cares for a disabled husband, two daughters and the baby of a son who suffers from depression so severe that he’s attempted suicide five times in the past two years. Until last year, Garza also cared for her mother, who died of Alzheimer’s disease.

As last summer heated up, Garza saw the monthly electric bills for her three-bedroom house in Lake Jackson climb from $200 to $400 and up.

In September, her bill from Reliant Energy reached $798. Reliant, a retail electricity provider, buys power from a wholesale market that state regulators accuse TXU of manipulating to increase both prices and profits.

TXU denies it has manipulated the market and is fighting a proposed fine. With monthly household income of only $1,200, Garza and her family couldn’t keep up.

“We’re spending money we don’t have,” she said.

By October, she owed Reliant more than $2,000.

Garza’s high power bills don’t leave much for such essentials as clothing or groceries.

“Sometimes we don’t have enough meat,” Garza said. “Sometimes, we don’t have enough fruit.”

DEEP SACRIFICE

Deregulation isn’t just putting the bite on poor Texans like Garza. Gary Luedecke Sr. retired after a career working as an instrument-maintenance technician at the University of Texas Medical Branch.

Since he handled heating and cooling on the massive campus, he’s something of an expert on making buildings energy efficient. Even so, the 72-year-old watched last year as electricity bills for his three-bedroom Galveston home climbed to almost $400 in some months.

That’s more than triple what they had been.

“It’s gotten out of sight,” Luedecke said in an interview earlier this year. Luedecke’s wife, Jerry, is a retired nurse. He said the greater cost of power has come at the expense of their middle-class pleasures.

“We’re on a fixed income,” Luedecke said. “Our retirement doesn’t go up, but everything else does. Very seldom do we eat out. We very seldom go anywhere anymore.”

Skyrocketing power prices might put one local group out of business altogether. The Texas City building that houses the local chapter of the Disabled American Veterans only gets used about once a month.

Theo Baudoin, the commander, said that’s when a dozen or so members — most of them World War II veterans — gather for a meeting. When they get together, the vets, who were disabled in war, discuss such issues as how best to get medical care out of the U.S. Department of Veterans Affairs.

The rest of the time, a refrigerator is about the only thing running in the 1,500-square-foot building, said Baudoin, who got the Purple Heart after being a Korean War prisoner for 33 months.

The group’s power bills had run $50 or $60 a month, until some shot up tomore than $200 last summer. Then last April, the bill was $258. In May, it was $230 and summer hadn’t even started yet. By August, they were approaching $300. With his group’s aging membership, dues have slowed to a trickle.

The high power prices could force it to sell the building it’s had since 1961, Baudoin said. The timing couldn’t be worse.

Baudoin, 75, said he’s trying to keep the chapter intact for the newest generation of disabled veterans who are now returning from Iraq and Afghanistan.

“I’m just trying to save the chapter,” he said.

WIDESPREAD INFLATION

The high cost of power had become such an issue for retirees that the Texas Chapter of the American Association of Retired Persons named it the No. 1 issue the past year’s legislative session.

Most ratepayers in the deregulated market have seen prices go up between 67 percent and 114 percent since retail deregulation took effect five years ago.

And for many, the increases come amid stagnating wages, exploding insurance costs, skyrocketing health care expenses, deep household debt and rising gasoline prices.

By the end of 2006, most customers were still getting power from their old companies — firms such as TXU and Reliant. The vast majority of them were paying more than 15 cents a kilowatt hour for their power.

By contrast, Kerrville ratepayers — who aren’t part of the deregulated market — are paying 8.7 cents.

Residents of cities such as New Braunfels and Kerrville are served by regulated municipal utilities. But even they are taking a hit because of deregulation, officials say.

Bill Taylor, president and CEO of the Kerrville Public Utility Board last spring estimated that deregulation and the high cost of natural gas combined to inflate city power prices there by 25 percent.

That’s so because the generation cooperative from which Kerrville and New Braunfels buy much of their power gets some of its electricity from the same energy market TXU is accused of manipulating.

Even if deregulation is indirectly inflating their prices, ratepayers in areas that aren’t part of deregulation are paying far less than those who are.

For the average customer, paying 15 cents a kilowatt hour as opposed to 8.7 translates into almost $900 in extra annual electricity costs, based on state consumption data.

And the deregulated electricity market is so big that every penny that the price of a kilowatt hour is inflated translates into an additional $2 billion in revenue for the power industry.

POWERFUL PROFITS

Much of that money has been pouring into the bank accounts of electricity generators. From government filings, it’s clear that as Wilder’s wealth has grown, so has his company’s.

TXU’s stock price quintupled — from $12.24 to more than $69 — since he took the helm at the beginning of 2004. Late that year, the company started using a pricing strategy that state regulators now say amounts to market manipulation.

Whatever the reason, TXU has been charging higher prices for its power and it hasn’t been hurt in the marketplace. Profits increased 33 percent in the last quarter of 2006 even though the company sold less electricity. That brought profits for the year to $2.5 billion.

In just the three hottest months of 2006, when demand for electricity in Texas is highest, TXU reported more than $1 billion in profits.

The company has blamed the rising prices on the cost of natural gas and other factors. But in government filings and in statements to stock analysts, TXU has attributed part of its profits to rising rates.

Those are rates that people like Garza have to pay.

“I hope God gives me the intelligence to figure out how to make it through this year,” Garza said.