Calpine, NRG want to argue further against Houston power import project

Calpine Corp. (NYSE: CPN) and NRG Energy (NYSE: NRG) on Jan. 5 asked the Texas Public Utility Commission to re-consider its recent decision to support the Houston Import transmission upgrade projects planned by the Electric Reliability Council of Texas, which knocks out of contention to meet future capacity needs new power projects planned by companies in the Houston area.

Their arguments on rehearing include:

  • ERCOT’s assumptions in support of the Houston Import Project (HIP) were unreasonable and in violation of applicable legal standards-yet complainants were not permitted to present critical evidence demonstrating this non-compliance, including how ERCOT’s “manipulated” load forecasts could not occur in reality, contained many flawed elements, and were not in keeping with industry practice.
  • ERCOT was allowed to present evidence regarding its Sensitivity Studies, which it claims support its endorsement of the project, but Calpine and NRG were prevented from presenting evidence to rebut that assertion.
  • The commission’s order denying the complaint is legally insufficient because it fails to explain its conclusion that ERCOT did not violate applicable legal standards.
  • Developments over the last year (since ERCOT’s analysis of the project) confirm the invalidity of ERCOT’s endorsement of it. The most efficient resolution is to send the project back to ERCOT for a re-analysis that complies with applicable procedures and uses realistic and reasonable assumptions, before costly and contentious certificate of convenience and necessity (CCN) proceedings are litigated, the two companies said.

“The fact that ERCOT forecasts load and generation using different methodologies with different timelines necessarily means that even slight base case variations will lead to divergent forecasts of load and generation, and the divergence will increase exponentially as the forecasts extend further into the future,” the two power generators said. “It is therefore imperative that ERCOT’s analysis strictly comply with the Protocols and Planning Guide requirements. What might be a reasonable variation under some limited, short term circumstances is not a reasonable variation when it results in assumptions about longer term future load and generation that are inconsistent with reality. That is what happened here. ERCOT’s demonstrated risk-adversity and heretofore unquestioned application of an arbitrary and unreasonable construction of the Planning Guide requirements should not prevail over consideration of more accurate information about both load and generation forecasts that support Complainants’ contentions and cast overwhelming doubt on ERCOT’s endorsement of the Project’s need.

“The undeniable fact is that we already know that ERCOT’s assumptions about both load and generation growth in support of the Project are wrong. ERCOT’s skewed and unfounded forecasts are precisely what the Protocols and Planning Guide are designed to avoid. ERCOT’s own February 2014 Capacity, Demand and Reserves (‘CDR’) Report, which was available but not used for the HIP study, forecasted much lower peak load for 2018 than was utilized in ERCOT’s HIP analysis. ERCOT’s more recent December 1, 2014 CDR Report indicates that the lower peak load trend will continue, noting also that significant ‘new CDR-eligible capacity is estimated to enter commercial operations by the summer of 2017.’ The Houston Business Journal reported recently that ‘Houston has a bevy of new natural gas power plants under construction as the city’s energy sector booms.’ These include the Pondera King Energy Center, Competitive Power Ventures Holdings LLC‘s 900 MW natural gas plant, NRG’s 360 MW natural gas plant southeast of Houston, and Exelon Corp.’s expansion of a natural gas power plant southwest of Houston. The EPA also recently granted a [greenhouse gas] air permit for 454 MW of new peaking capacity at Calpine’s existing Guadalupe Energy Center in ERCOT’s South load zone.

“Here, ERCOT and the Commission have at their disposal better information about both the load demand and the resources available in 2018 and beyond to better evaluate the validity of ERCOT’s endorsement in favor of an updated analysis by ERCOT using a compliant and reasonable methodology, before costly and contentious CCN proceedings begin. But it is not just this new information that justifies a re-visit of the need for the HIP. The evidence in this record demonstrates that ERCOT conducted a faulty analysis even with the then-current information. It was ERCOT’s use of illogical and unauthorized methodologies that led to its unsupported approval of the HIP.”

The Dec. 16 commission order supporting the import project said about the May 13 complaint from these Houston-area power producers: “The Commission finds that Calpine and NRG failed to show that ERCOT violated any law that the Commission has jurisdiction to administer, any order or rule of the Commission, or any protocol or procedure adopted by ERCOT. The Commission therefore denies the complaint and appeal.”

The Houston import project consists of the following six components: construction of a new 345-kV line terminating into the Limestone and Gibbons Creek substations, construction of a new 345-kV line terminating into the Gibbons Creek and Zenith substations, upgrades to the existing Limestone substation, upgrades to the existing Gibbons Creek substation, upgrades to the existing Zenith substation, and the upgrade of the existing T.H. Wharton-to-Addicks 345-kV line. The stated purpose of the project is to increase the transmission import capacity serving the Houston area from the northern regions of the ERCOT system.

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.