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Texas Legislative Update: Cloudy with a Chance of Rain or Sunshine

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On January 26th, the Texas Legislature convened several committees to discuss a wide range of policy issues. 

Public universities are dealing with policies to adopt the newly passed law on “campus carry” of handguns, elderly continue to suffer from financial abuse by shady businesses and relatives, alcohol consumption while tubing on the San Marcos River may be prohibited due to naughty behavior by tubers on shoreline properties, and the state budget gained attention because of the precipitous and rapid fall in energy prices. The hearings were instructive for the next legislative session set to begin in January 2017.  

The most sweeping issue that directly impacts Direct Energy is the state budget. In 2015, the legislature passed its two-year budget that exceeded $200 billion, larger than many countries. A portion of that budget is funded with revenues from oil and gas royalties and interests, but that share is fairly limited. Sales and property taxes cover most of the needs. Thankfully, Texas has a more diverse economy than it did in the oil crash of the mid-1980s. State coffers will be short of the estimated budget by next year, but the shortfall will be managed through various budget cuts and should not cause any shocks to Texans. Of note was the Comptroller’s statistics that Texas lost 30,000 energy jobs and 36,000 manufacturing jobs, but gained 176,000 other types of jobs, which is great news.

However, as the Comptroller indicated, the extent of the shortfall depends on how low and how long energy prices will sag. His original budget last year forecast an average price of $60 for oil (yes, we were closer to $60 only a year ago), and current prices are around $30. Nobody expected this hard of a fall. The longer these low prices remain, the deeper the financial impact will hit businesses in Texas and elsewhere. In fact, low energy prices are negatively impacting the world economy. So, while we are not in the middle of a violent storm or even suffering a rain shower today, we can hear thunder in the distance.

How do we support the good ol’ American way and jumpstart the world economy? Should we turn up the heat in our homes, drive faster, and cook out on the grill more? Well, you can if you like; this is America. But it won’t help. Budgets may become a bit strained as the job market softens, so the best thing we can do is help homes and businesses consume less of what we sell. By keeping prices affordable and offering innovative products and solutions, we can help customers save significant energy and money. 

For more regulatory and policy updates, please visit our Regulatory Update page. And to learn about the U.S. Supreme Court's recent ruling on demand response, please check out this blog post. 
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Ned Ross is Director of Government and Regulatory Affairs for the South and West at Direct Energy.

Posted: January 28, 2016

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