Senators chastise utility commission on power policies

Nov 26 - McClatchy-Tribune Regional News - Laylan Copelin Austin American-Statesman

Several Texas senators on Monday questioned the direction and cost of the Public Utility Commission's attempt to guard against rolling blackouts, suggesting the agency is overstepping its authority by pursuing a solution that would cost consumers billions.

Sen. Troy Fraser, chairman of the Senate Committee on Natural Resources, called Monday's hearing to criticize the utility commission for a 2-1 decision to begin mandating the level of electricity reserves instead of leaving it up to the private sector to achieve a target for surplus power.

Despite the inclement weather on Monday, a dozen senators -- several of whom are not even committee members -- traveled to Austin to attend the hearing. Several senators -- Republicans and Democrats -- echoed Fraser's concerns. None came to the utility commission's defense.

"They have totally left the Legislature out and are operating in a vacuum," said Fraser, R-Horseshoe Bay.

"If they make a decision on their own, we're going to get the heat," said Sen. Juan "Chuy" Hinojosa, D-McAllen.

The two commission members who support mandatory reserve margins -- Chair Donna Nelson and Commissioner Brandy Marty -- insisted that their decision does not "preordain" one particular solution, including extra capacity payments to generators.

"It's always been my goal to keep the lights on at a reasonable price," Nelson said.

She pledged to Fraser that the utility commission would conduct a cost-benefit analysis before the agency makes any major changes to how wholesale electricity is bought and sold.

Sen. Leticia Van de Putte, a San Antonio Democrat who is running for lieutenant governor, said it's not enough to know the overall projected increase.

"If you are really going to change the system, we need to know who's going to pay," she said of the different classes of customers.

After the meeting, Nelson said she intends to continue pursuing the issue. The agency has a couple of reports pending and workshops scheduled in January that will provide fresh information and more input.

Monday's debate centered on whether Texas really faces power shortages in the future, and if so, what the cost of addressing the shortage would be.

In 2011, historically hot temperatures and a drought tested the limits of the state's primary electricity grid, operated by the Electric Reliability Council of Texas, which is commonly known as ERCOT. That prompted the utility commission to start studying whether ERCOT had ample power supplies to meet peak demands on summer afternoons.

ERCOT operates the only "energy-only" electricity market in the nation that pays generators only when they sell power. But wholesale electricity prices have been too low for several years to encourage very much investment in new power plants until recently.

A coalition of power plant owners is lobbying for the utility commission to charge consumers additional "capacity payments" to give generators a more reliable cash flow and, in theory, a greater incentive to build or improve plants.

During Monday's hearing, estimates for the capacity payments ranged from $2 billion to $6 billion a year, with the most cited figure being $4 billion.

Commissioner Ken Anderson Jr. opposes a mandatory reserve margin as the first step to capacity payments.

He offered a chart breaking down the projected costs for each meter.

At $4 billion, capacity payments would be $396 per year for every meter in ERCOT, which is three-fourths of the state.

However, Anderson said the utility commission might not have the authority to make customers with city-owned utilities or co-ops pay the capacity costs. In that case, the per-meter cost increases to $588 per year for the remaining customers

Nelson disputed the $4 billion projection, saying capacity payments should lower the energy portion of the bill after several years.

She cited a consultant's report saying that over time the current system would cost $18.3 billion per year to provide an 8 percent power reserve margin and only $18.7 billion to provide 14 percent surplus power.

Nelson noted that ERCOT would have suffered 40 hours of rolling blackouts in 2011 if the reserve margin had been 8 percent.

"That's absurd," Fraser countered. "You are projecting that the sky is falling."

He said the reserve margin was almost 14 percent in 2011 and had never fallen below 13 percent in the 14 years since the Legislature deregulated the wholesale electricity market.

He blamed inaccurate forecasting of power needs for a perceived crisis.

Sen. Donna Campbell, R-San Antonio, agreed, saying the utility commission had suggested "a false dilemma."

"I'm not sure what you put forth is a true picture," she said.

Sen. Rodney Ellis, D-Houston, said he doubts the agency has the legal authority to change the state's wholesale electricity market -- a view championed by Fraser, who co-authored the 1999 law deregulating the system.

Most of the witnesses invited to testify Monday oppose a capacity market.

Many businesses -- from manufacturers to retailers -- have weighed in against capacity payments as an unnecessary expense that could chill the economy.

But John Fainter, president of the Association of Electric Companies, said risks to the state's primary grid are real.

"The agency not only has the authority," Fainter said, "it has the obligation to maintain a reliable system."

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