Calpine, NRG outline power projects in the works around Houston

Calpine Corp. (NYSE: CPN) and NRG Energy (NYSE: NRG) said that parties to their May 13 complaint against ERCOT at the Texas Public Utilities Commission over a power import project for the Houston area are improperly taking ERCOT’s word for what the facts are in this case.

Calpine and NRG say that the Electric Reliability Council of Texas (ERCOT) is looking to allow power from outside the Houston region to flow in to meet future demand needs through an enhanced grid, instead of encouraging development of generation within the region.

In July 7 reply comments, Calpine and NRG countered the arguments of ERCOT, other interveners and a recommendation of the commission staff. Because CenterPoint Energy Houston Electric LLC incorporated its pending motion to dismiss into its response, the complainants addressed those issues as well.

“The parties’ Reponses and Staff’s Recommendation raise two main points,” wrote Calpine and NRG. “Initially, nearly all the parties and Staff mistakenly equate the Protocols with ERCOT’s interpretation and application thereof. Because they view ERCOT’s interpretation as definitive, they conclude that any challenge to such interpretation or application inherently attacks the underlying standards (and thereby fails to state a proper claim). This Commission has previously rejected that reasoning, and to preserve its authority to exercise meaningful review over ERCOT, the Commission should reaffirm its authority here. The Commission bears a statutory and constitutional duty to oversee ERCOT’s application of discretion, not simply to defer in all cases to its actions. As Commissioner Anderson noted only two weeks ago, the Protocols mean what the Commission says they mean, not what ERCOT interprets them to mean. The Complainants demonstrate here exactly how ERCOT violated the Protocols and other applicable standards that govern its conduct.”

Second, the failure of the parties to offer any real substantive defense to ERCOT’s analysis for the Independent Review should cause the commission significant concern, Calpine and NRG added. It is this underlying analysis of the Houston Import Project and ERCOT’s reliance on it that is the center of this complaint, not the parties’ and staff’s simple conclusion that ERCOT claims to have followed the relevant process and applicable criteria. Perhaps more alarming, the two companies added, is that no party defended the substantive analysis, in whole or part, or refuted the complainants’ criticisms of ERCOT’s analytical approach, which include:

  • ERCOT utilized a 2018 load forecast for the Coastal/Houston region that was supplied by one of the companies chosen to build the Houston import project, with that forecast being over 2,000 MW higher than ERCOT’s own “severe weather” forecast for the same region;
  • ERCOT relied on non-coincident peaks in only one region of the state to derive a study case peak hour planning load of over 79,000 MW, nearly 10,000 MW higher than ERCOT’s own forecasted system coincident peak;
  • To make the planning study cases solve, ERCOT had to “scale” down the north regional loads by 15%, while keeping the Coastal region at disputably high peak levels, which “fabricated” excessive flows from the north into the Coastal region;
  • The regional non-coincident peak and scaling assumptions mentioned above stretched the system to a 3.6% installed reserve margin;
  • ERCOT conducted no analysis to justify an underlying premise that generation cannot develop within the Houston area due to site restrictions and air quality standards;
  • Nor did ERCOT even look to whether sufficient generation would exist by summer 2018 to flow over the import project in amounts sufficient to “relieve” overloaded circuits;
  • ERCOT failed to include known and highly predictable Coastal generation sources, ignoring stakeholder-approved procedures directing it to include such generation.

“The parties and Staff ask the Commission to prevent Complainants from even obtaining a hearing on a project that, assuming Commission approval, will impose nearly $600 million on electric customers within ERCOT,” said Calpine and NRG. “The Commission must exercise its statutory duty to review ERCOT’s conduct and send a strong policy signal that any recommendation of ERCOT must be rooted in robust, transparent analysis that is not beyond the Commission’s substantive review.”

NRG has generation development plans around Houston

Calpine and NRG said that ERCOT failed to take into account generation and cogeneration planned for the Houston region. “In ignoring the Pondera King facility at 1,468 MW, which has an interconnection agreement, ERCOT ignored the admonition to consider such facilities. Additionally, the claim that Pondera King does not qualify under Planning Guide 6.9 ignores that that section applies to development of ‘base cases.’ It does not speak to ‘[r]easonable variations of generation commitment and dispatch’ that ERCOT can make under Planning Guide (5)(b). In addition, NRG has plans to add 300 MWs of peaking capacity at the former Robinson plant site next year. NRG has additional projects in the air permitting process to add 1,400 or more MWs in the Houston area when market conditions will support the investments.”

As for the 1,400 MW planned by NRG, the filing pointed to: the Cedar Bayou Unit 5, 2×1 combined cycle gas turbine facility (about 700 MW net); and SR Bertron Unit 5, 2×1 combined cycle gas turbine facility (about 700 MW net). Both projects are going through Texas Commission on Environmental Quality permitting.

“As for cogeneration, ERCOT’s claim that it ran a sensitivity analysis assuming cogeneration build-out that still indicated the Project was needed ignores two critical omissions,” Calpine and NRG added. “First, the analysis only modeled enough cogeneration capacity to serve the projected load increase at industrial load buses in question. ERCOT did not model additional cogeneration capacity that would export to the grid. Complainants, who have substantial experience with cogeneration, will show at hearing that industrial cogeneration seldom covers only the steam host’s electrical load. Developers generally add more capacity than the host load to allow for grid exports. For example, Calpine acted in 2012 to add a total of 550 MW capacity at its Channel Energy Center and Deer Park Energy Center, both cogeneration facilities, to come on line during summer 2014. This action illustrates how cogeneration developers can enhance their capacity in short order to respond to market conditions. Second, this sensitivity analysis builds upon unreasonable load variations to ERCOT’s Project case, i.e., CenterPoint’s interested load forecast that exceeded ERCOT’s own ’90/10′ extreme weather forecast. The magnitude of CenterPoint’s excessive load forecast simply overwhelmed the understated cogeneration amounts ERCOT’s sensitivity case added.”

CenterPoint said in its June 20 motion to dismiss this complaint: “CenterPoint Energy Houston Electric, LLC (‘CenterPoint Energy’) moves to dismiss the complaint filed by Calpine Corporation and NRG Energy, Inc. (‘Houston Generators’) because: (1) no violation of a law, rule, order, protocol or procedure has been alleged; and (2) Houston Generators are not harmed by the Electric Reliability Council of Texas’ (‘ERCOT’s’) recommendation that a 345 kV transmission line between the Limestone and Zenith Substations (the ‘Project’) is needed by 2018 to maintain reliable electric service to the Houston Region.”

Said ERCOT in its June 10 response to the complaint: “Electricity consumers in the Houston area increasingly rely on imported power to meet their needs. 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.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.