PUC punts on rule opposed by consumers

One-way Ratemaking would lead to One-Way Rate Hikes

The Texas Public Utility Commission has pressed the pause button on new rules that would have made it much easier for electric utilities to hike rates.

A favorite of utility lobbyists, the proposed rules would have opened the door to quick hikes associated with the poles and wires that connect the transmission system to individual homes and businesses. Consumer groups have been united in their opposition.

Some Commission watchers had predicted the rules would get the go-ahead this month. But then in an unexpected change of course, the Commissioners on Dec. 16th instead indicated they would wait for direction from the Texas Legislature, which convenes in January.



Commissioner Anderson

In explaining the decision, Public Utility Commissioner Kenneth Anderson said he had talked with several legislators who indicated they “wanted to take a crack” at considering the rule. “We should set this aside until June, to give the Legislature time to look at it,” he said.

Numerous interested parties — including the office of the Texas Attorney General — have argued at the PUC that the agency lacks the statutory authority to enact the rules. And while Commission Anderson stated he had not heard much opposition, multiple consumer groups nonetheless have warned that the rules would lead to rate hikes — even during periods when electric utilities don’t need extra money because overall profits are on the rise, or when the utilities’ overall expenditures are going down.

The rules are technically known as the “Distribution Cost Recovery Factor” (or “DCRF”) rules, although the electric utility industry euphemistically refers to them as “streamlined” ratemaking. Consumers call it “one-way” ratemaking because under the rules, rate adjustments likely will flow only in one direction: up.

Consumers also note that the alleged benefits of the regulatory gimmick have never been demonstrated. For instance the office of the Attorney General Greg Abbott, who has sided with Texas consumers in the case, notes in a regulatory filing that advocates of the rule have failed to produce any analysis showing it creates litigation savings.

-- R.A. Dyer

Over-budget Nodal System In the News

In December Texas is expected to shift over from its already complicated system for managing the wholesale electricity market to one that’s even more complicated. If the new system works the way it’s supposed to work, computers will spit out distinct prices for wholesale energy sold at thousands of separate locations all across the state. These prices eventually will trickle down into home electric bills.

When this new “nodal” system for managing the electric grid goes live, it will be one of the most expensive and complex of its kind ever created in America.

Copelin

What’s unclear, however, is whether consumers will ever benefit.

Two of the state's largest daily newspapers explore that question and others in articles over the Labor Day weekend about the proposed nodal system. The articles outline the troubling implementation delays, the cost overruns and the lax oversight.

Patel

Industry supporters say the new system will bring new efficiencies to the wholesale electricity market. But Geoffrey Gay, a Lloyd Gosselink attorney who represents cities in utility issues, told the Austin American-Statesman it also could open the door to a new sort of market manipulation. "The guys who can deal with the complexity are not you and me . … It's companies with computer models,” Gay told Statesman reporter Laylan Copelin.

Another troubling issue is the price tag. When first proposed, the nodal system was supposed cost less than $100 million. But as Purva Patel of the Houston Chronicle notes, it’s now expected to exceed $500 million. Texas consumers will end up footing that bill.

Power Line Dispute in the Hill Country

A massive transmission line proposed for Central Texas is causing big headaches for the mayor of Kerrville, who fears it could harm his community's economic development.

Speaking to KENS Channel 5 in San Antonio, Mayor David Wampler said his community could lose a half billion dollars because of the line.

“The City of Kerrville has spent about $14 million in infrastructure improvements to bring utilities and roads to areas that would be affected by this line,” he said.

State Rep. Harvey Hilderbran also expressed concern. In letters written to the Public Utility Commission and the Lower Colorado River Authority, Hilderbran called for a change in the proposed route. “We want that line to move away from the Kerrville corridor,” he said.

The PUC already has given the green-light to several transmission projects associated with so-called "Competitive Renewable Energy Zones." The CREZ lines will criss-cross West Texas, the Panhandle and Central Texas -- and potentially harm scenic views and lower property values along the way.

It's possible for affected landowners to block individual routes, but only if they intervene in a complicated legal process at the Public Utility Commission. More information about CREZ and the proposed transmission lines can be found at the PUC website.

Wind farms to pick up some reliability costs

A contentious new measure that will require wind generators to install devices that help control voltage levels on the grid has been approved by the ERCOT Board of Directors.

The devices produce what is known as "reactive" power, which is different from the “real” power used to light homes and businesses. But while not actually consumed by end-users, reactive power must always be present on the grid in order to maintain voltage levels and reliability. Another characteristic of reactive power is that it does not transport well, which means it must be produced near where it is needed.

Unlike traditional generators and even wires companies, very few wind farms are equipped with full reactive power capabilities. As a result, other parties end up making up the difference. When regulated wires utilities (like Oncor, for example) provide these devices, the cost gets shifted to all their customers in the form of higher transmission rates. Since reactive power cannot be transported effectively, the wires companies are the only market participants with the ability to place reactive devices in close proximity to wind farms.

Protocol Revision Request (“PRR”) 830 — which was adopted during the November ERCOT board meeting — requires that wind generators provide full reactive capability on par with requirements for traditional generators. Cities Served by Oncor supported the measure, arguing that it fairly allocated a portion of the cost of maintaining the integrity of the grid to wind generators. Wind developers opposed the PRR, and a coalition of such generators is widely expected to appeal to the PUC.

CREZ, Community and Rights of Way

The preservation of community values, recreational areas, and the environment are just three of the factors that the Texas Public Utility Commission must consider as it adopts routing plans for the hundreds of miles of new transmission lines going up in West Texas and the Panhandle.

The lines themselves will be massive: they're the 345 KV variety with poles that stand over 115 feet tall and right of way that can extend 150-180 feet. The lines could end up cutting through ranch land, residential subdivisions and city property. They're contemplated for numerous areas around West Texas, Central Texas and North Texas -- including areas around Killeen, Kempner, Holliday, Sweetwater, Roscoe and Snyder.

It's all part of the Competitive Renewable Energy Zone process that calls for $5-6 billion in new transmission investment to encourage wind energy development. When complete, the CREZ lines will substantially increase transmission connections to parts of the state where the wind blows the heaviest.

But the process is complicated and it's important to know your rights. First the Commission must decide on specific routes, including the designation of priority projects. Transmission service providers like Oncor must also conduct routing studies and conduct public meetings in affected areas. Local residents concerned about the new lines can inquire about the public meetings and can also intervene at the Public Utility Commission.

According to PUC rules, "the line shall be routed to the extent reasonable to moderate the impact on the affected community and landowners unless grid reliability and security dictate otherwise." The PUC must consider historical and aesthetic values, environmental integrity and whether the routes parallel existing compatible rights-of-way.

Some information can be found at the PUC website, under Docket No. 36801. A word of warning: this stuff can be complicated.


-- Lambeth Townsend