Debate over state's power reserves raises more questions

October 8, 2013
Laylan Copelin

The members of the Texas Public Utility Commission on Tuesday debated how best to provide the reliable electricity reserves necessary to continue the state's robust economy.

The three officials didn't resolve their differences, but the newest member, Brandy Marty, widely seen as the tie-breaking vote, made her first public comments that are sure to be parsed by all sides.

Marty, who until two months ago was Gov. Rick Perry's chief of staff, said companies looking to relocate to Texas frequently ask about reports of the state's projected shortages in electricity reserves.

"In my previous role, it's a question we got a lot," she said.

Since a rolling blackout during the winter of 2011 and near misses during that year's historically hot summer, the utility commission has been debating what to do about forecasts that wholesale electricity prices are too low to encourage conservation or the construction of new power plants.

Owners of power plants are lobbying for the creation of a separate auction to provide extra "capacity" payments as a more reliable revenue stream, instead of relying solely on the existing wholesale market that pays them only for the electricity they sell.

Opponents of capacity payments argue the utility commission can tweak the wholesale market to respond with higher prices to encourage investors to build power plants in Texas.

Commissioner Ken Anderson Jr., who opposes capacity payments, said many Texas employers oppose a capacity market.

"The largest employers of the state are saying that's not what they want," Anderson said.

He also questioned what the state would be buying by "imposing an energy tax" on consumers.

Responding to Anderson's question about what consumers would be paying for, Brandy said: "The economic certainty of the state — whether we have the (electricity) reserves."

Other than that, Brandy said little and asked few questions as the utility commission listened to more than five hours of testimony from 17 witnesses representing the various factions of the power industry, consumer groups, environmentalists and the state's experts.

Out of that wide-ranging discussion, the utility commission was left with some crucial questions still unresolved.

Specifically, is the industry standard of one outage "event" every 10 years the correct standard and is every rolling blackout the same? For example, is one longer outage more damaging to the economy than three that last just a few minutes?

Another issue is how much power reserves are actually needed over the summer's peak demand.

Kenan Ogelman with San Antonio's CPS Energy said the reliability issue can't be resolved without knowing that answer.

"We're talking across each other because we don't know what the end goal is," Ogelman said.

The utility commission is waiting on a study by its consultants, the Brattle Group, that is to determine the "economic equilibrium" for the cost of providing more electricity reserves.

"I don't think any of us want to overpay for reliability," said Donna Nelson, the utility commission chair who favors capacity payments.

The biggest unknown might be the forecast itself.

The Electric Reliability Council of Texas, which forecasts the need for future electricity reserves, is dramatically changing its formula that has relied on economic and weather projections.

Calvin Opheim of ERCOT's generation adequacy task force said the economic data, whether from federal or private sources, has been overly optimistic or frequently revised.

In the future, ERCOT will use multiple computer simulations based on more reliable historical weather and economic data.

The next forecast is due in December.

Even with those changes, another unresolved question is whether EROCT should try to forecast 10 years out because it's harder to know what new plants might be built that far into the future.

"This is the critical issue," Anderson said. "It goes to the heart of whether we have a severe shortage or not."

It could still be months before the utility commission has the answers, but Nelson said she knows there are consequences to waiting.

"Just having this issue open is causing uncertainty," she said.

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