Power consumers in ERCOT should keep an eye on PUCT rulemaking project 34577

Michael Giberson

Earlier in July, the Public Utility Commission of Texas issued a proposed amendment to its CREZ regulations (the regulations governing the building of transmission to better support development of renewable energy in Texas). The main focus of the proposal is to refine and clarify the process by which the Commission ensures sufficient renewable energy development will take place to justify construction of the planned transmission lines.

A secondary purpose is to revise a section of the regulations addressing the concerns of renewable energy developers that too much wind power development will occur, overwhelming the capability of the transmission system. Consumers should keep an eye on this part of the proposal.

Some developers have been advocating some sort of priority system under which, when transmission-capability is constrained, the newer projects get curtailed first. That sort of system would help discourage overinvestment in a region.

The problem with that kind of rule from an efficiency standpoint is that it isn’t obvious that the older projects are likely to be the most efficient (and likely the opposite is the case). In any case, the forthcoming nodal market design is designed from the ground up to address just this kind of problem using prices.  Wind farm operators that don’t want to be curtailed just need to offer power at a low enough price to ensure their offer is lower than the competition.  When there is “too much” wind power, prices may go very low (or even negative when wind power production is subsidized).

Of course, wind power operators don’t like rationing the excess by price, because that means the price sometimes will go very low. They would rather have a rule to curtail their competition without having to cut prices. Consumers, on the other hand, benefit when suppliers have to compete through cutting prices.

The proposed amendment looks good from the consumers point of view. The regulation was initially written in a way that suggested the commission should discourage ‘excess’ interconnection and curtail some suppliers by non-price methods.  The proposal would change the language to first have the commission assess whether market prices do an adequate job of managing congestion – which the new nodal market design should do – and then. if the commission finds that the market isn’t doing an adequate job, the commission may initiate a proceeding and may consider limiting interconnection or non-price priority methods.

Wind power developers do face a real problem coordinating investments in renewable power capacity with the buildout of transmission capability. Since wind power developers are simultaneously and independently making investment plans, it is possible that too many will pursue options in location A and too few in location B, just because they are acting like competitive companies should act (i.e., non-collusively).

But enough information about what competitors are up to is available through public documents at ERCOT or the PUCT that companies can avoid getting into too much difficulty, as long as they do there due diligence work diligently.  Once the investments are made, and especially if these investments are made with taxpayer subsidies or electric consumer fee support, consumers should have every expectation that renewable power producers compete in the market just like everyone else is suppose to.

If the price goes negative, that is just the power consumers’ way of getting some of the tax subsidy back.

NOTE: The PUCT rulemaking project number is 34577.

Documents in the proceeding can be found via the PUCT Interchange site – click the login button, enter 34577 as the control number, and press “Search Now.”

HT to the Caprock Plains Wind Energy Association blog.