Texas utility regulators expect to open investigation on wind ‘cost apportionment’

Source: SNL

With a new report showing robust wind energy development and production in the Lone Star State, Texas utility regulators are expecting by month’s end to open an investigation into how the renewable resource’s growth is expected to impact ratepayers.

During a May 16 business meeting, PUCT Chairwoman Donna Nelson said she expected to file a memorandum that will clarify the agency’s aims for the investigative proceeding unveiled at her agency’s last meeting held April 17. At that time, Nelson described the proceeding as one that would look into the “cost apportionment” of the Electric Reliability Council of Texas Inc.‘s work tied to managing greater wind energy resources given the recent completion of the Competitive Renewable Energy Zone transmission build-out in the state. She expected a decision on opening a proceeding at her agency’s next meeting, set for May 30.

Nelson at the latest meeting said that as she delved into defining the investigation, she realized the issue has “lots of moving parts.” And noting that markets and stakeholders have been reacting strongly to movement by her agency on energy issues, she delayed unveiling her goals to “make sure we are not sending up a red flag.”

The PUCT’s interest in wind energy comes as the resource is making major strides in the state’s overall energy portfolio. ERCOT on May 15 filed a report saying that the total amount of energy generated by renewable resources tracked by the state’s renewable energy credit trading program grew by 12%, to 38.1 million MWh, from 2012 to 2013. Wind energy production alone rose 13% and accounted for 36.9 million MWh of the total reported production. Solar production, meanwhile, rose 33% to 178,326 MWh.

Having seen record wind output of more than 10,000 MW in March, ERCOT in the report also noted that Texas has gone well beyond its 10,000-MW capacity goal and far earlier than the 2025 target established in the state’s Public Utility Regulatory Act. Registered capacity under the voluntary REC program rose in 2013, with capacity currently at 13,358.5 MW covering 146 accounts, it said. Wind energy has 106 of the total accounts, with a registered capacity of 12,824.1 MW.

And while wind energy continues to boom in Texas, the PUCT has been working with ERCOT on ensuring a reliable power grid amid wholesale prices that are not encouraging new fossil-fuel plant construction. After setting aside contentious talk of installing a forward capacity market earlier this year, the agency has opted to encourage work being done in the ERCOT venue, including the June 1 implementation of a power scarcity pricing proposal revolving around an operating reserve demand curve, or ORDC. “My desire is that ORDC works exactly as it is intended to work. Keep chopping wood out there,” Nelson said during the meeting. (Project No. 40000)

Meanwhile, ERCOT is facing another summer of potentially tight power supplies. And looking longer term, the grid operator in its latest capacity, demand and resources report forecast an improvement in planning power reserve margins, but still shows margins falling below its 13.75% planning target starting in 2018. And Texas continues to see strong economic growth, with Gov. Rick Perry in a May 16 statement noting that the state’s unemployment rate for April dropped to 5.2%, the lowest rate since September 2008, and that over the year the state has added 348,000 jobs.

With Commissioner Brandy Marty absent from the meeting, Nelson and Commissioner Kenneth Anderson did not discuss a proposed investigation into ERCOT’s 13.75% target margin based on a one-in-10-year loss-of-load event. At their last meeting, from which Marty also was absent due to the recent birth of her baby, the two commissioners supported but did not green-light a staff plan for the investigation. The first option would have the PUCT direct ERCOT to work with The Brattle Group and commission staff to update existing loss-of-load analyses, calculating required reserve margins for “several alternative reliability standards.” The second option would direct ERCOT to proceed with a new loss-of-load study. (Project No. 42302)

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