The Electric Reliability Council of Texas (ERCOT) says its plans to enhance power imports into the Houston area, despite the criticism of in-zone generators Calpine Corp. (NYSE: CPN) and NRG Energy (NYSE: NRG), is the best way to meet a looming capacity need around Houston.
ERCOT on June 10 filed with the Texas Public Utility Commission its response to the complaints of Calpine and NRG, known collectively in the filing as the “Houston Generators.”
“Electricity consumers in the Houston area increasingly rely on imported power to meet their needs,” ERCOT pointed out. “As consumption in the Houston area grows, the amount of power that must be imported threatens to exceed available transmission capacity. Looking forward to the summer peak of 2018, ERCOT’s independent analysis, which was performed in accordance with all applicable planning requirements, found that this import capacity limitation will cause reliability criteria violations and excessive congestion costs for Houston area consumers. This conclusion is validated by numerous sensitivity analyses performed by ERCOT during its independent review and is the culmination of a series of planning studies that have consistently shown a reliability need since 2006.
“After considering ERCOT’s recommendation and comments from stakeholders (including generators and consumers), the ERCOT Board of Directors (‘ERCOT Board’) found a need to address this critical reliability issue and endorsed ERCOT’s recommended Houston Import Project.”
Calpine and NRG in many instances complain not that ERCOT failed to follow applicable transmission planning requirements but rather that those requirements should be changed, ERCOT added. As stated at the April 2014 ERCOT Board meeting, ERCOT said it welcomes the opportunity to discuss the assumptions and methodology used for future transmission planning analyses.
“But discussion of broader policy changes should not be used to delay this critical reliability project,” ERCOT wrote. “ERCOT respectfully requests that the Commission expeditiously deny the Houston Generators’ complaint and allow this critical reliability project to move forward so that it may be placed in service before the summer peak of 2018.”
Drawing from the need identified by ERCOT in 2006 and 2008, both CenterPoint Energy Houston Electric LLC and Sharyland Utilities LP submitted proposals in 2009 to expand the import capacity into the Houston area. The ERCOT Board in August 2010 endorsed ERCOT’s recommended import project into the Houston area from the west under the energy revenue economic planning criteria in effect at the time. While the commission subsequently removed the energy revenue test from the economic planning criteria and the project was not completed, ERCOT’s independent review of the project nevertheless recognized the coming reliability need for the project, ERCOT noted.
This means that the ERCOT Board’s endorsement of the Houston Import Project in April 2014 was the culmination of a series of transmission planning analyses beginning in 2006 that identified a reliability need for additional import capacity into the Houston area.
ERCOT says generation options are out of its purview
The Houston Generators complain that ERCOT did not consider “any resource options” to address the reliability criteria violations. They have consistently complained that the real issue to be addressed is a lack of generation, not a lack of transmission infrastructure.
“ERCOT agrees that the retirement of significant generation in the Houston area over the past ten years and the simultaneous lack of new generation additions have resulted in reliability issues arising from the area’s increasing reliance on imported power,” ERCOT wrote. “Current transmission planning requirements do not permit ERCOT to recommend generation or load resources to address a transmission reliability criteria violation. But the planning guides do allow ERCOT to account for planned generation resources in its transmission planning analysis if the resources meet certain specified requirements. Beyond that, if the Houston Generators desire broader consideration of resource development in the planning process, they should seek those changes through a rulemaking, [Nodal Protocol Revision Request], or [Planning Guide Revision Request].”
Moreover, ERCOT said it did perform a sensitivity analysis to determine how much additional resource capacity (whether from generation or load response) would be necessary to defer the need for the project. That analysis showed that 1,800 MW of additional generation or demand response would be required to defer the project for one year.
The Houston Generators also raise a “red herring” by continuing to argue that ERCOT assumed that generation resources older than 50 years in the Coast weather zone would be retired, while not considering whether those resources would be repowered or addressing whether units of that vintage would also be retired outside the Coast weather zone, ERCOT said.
“ERCOT never assumed that generation resources older than 50 years in the Coast weather zone would be retired for purposes of analyzing the reliability need for the project,” it said. “Rather, consistent with transmission planning requirements, ERCOT assumed that those older-vintage units in the Coast weather zone would continue to operate unless ERCOT has received a notice of suspension of operations. ERCOT did assume the retirement of generation resources older than 50 years in the Coast weather zone in a sensitivity analysis performed to determine which of the eight project options to recommend. But that analysis was not used to establish the need for the project.”
To address the reliability issues, ERCOT has recommended construction of the following transmission facilities:
- a new 345-kV double circuit line terminating into the Limestone and Gibbons Creek substations;
- a new 345 kV double circuit line terminating into the Gibbons Creek and Zenith substations;
- upgrades to the existing Limestone, Gibbons Creek, and Zenith substations to accommodate the terminations of the new lines; and
- an upgrade of the existing T.H. Wharton-Addicks 345 kV transmission line.
Calpine and NRG are seeking at the commission a good cause exception to the requirement to enter into the Alternative Dispute Resolution (ADR) process with ERCOT, and they also request that the case be retained at the commission and not transferred to the State Office of Administrative Hearings.