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Compassionate Competition?

With its own private power grid, Texas thinks it's got restructuring licked.

Fortnightly Magazine - February 1 2001

2001, when pilot programs start up in Texas for retail electric choice, and continuing at least through 2003. It will not create a scheme for tradable transmission congestion rights (TCRs) unless congestion costs exceed $20 million in any 12-month period. However, Bojorquez concedes that ERCOT is "transitioning" to a new single control area, and is building new control area facilities in Wheeler, Texas, with a backup office in Austin. (That effort proved a budget buster in California.)

And ERCOT offers another unique feature. As I learned from two technology experts from Lodestar, which has signed software deals with the ISO, ERCOT will perform all the forecasting, load profiling, and customer aggregation, and will initiate most of the required data transfers between utilities, suppliers, and the scheduling coordinators, known in Texas by the delightful acronym of QSE-pronounced as "quesy"-which stands for "qualified scheduling entity."

According to Steve Doroff, Lodestar's senior vice president of product development, and Jason Iacobucci, product manager at the company, the Texas law barred utilities from passing along to their ratepayers any new cost incurred for any new services associated with retail choice. That rule was enough, they said, to convince the utilities to delegate all the ordinary marketing functions to the ISO, including the development of data formatting and communications protocols between suppliers, utilities, and scheduling coordinators for customer enrollment and load and revenue estimations, using electronic data interchange (EDI) and XML software systems.

This feature has proved a godsend to the Texas market, says Lodestar. It centralizes the myriad of data transfers under the control of one player-with one software network-instead of fragmenting the job among various utilities, marketers and aggregators, and new players such as the "meter data management agent," as in California. That means Texas will be spared the trouble of having to estimate and allocate the dollar cost of sales and marketing functions between utilities and unregulated retailers. That task has become a minefield for PUCs.

Nevertheless the retailers, suppliers, and utilities are free to develop their own software systems to interact with ERCOT. "If the QSEs are smart, they won't take ERCOT's word for it," Doroff told me. "They'll do their own calculations."

"THIS SCENARIO MAY BE MORE PROBLEMATIC FOR TEXAS THAN CALIFORNIA," says Mark Krebs, the outspoken attorney from Laclede Gas.

Here Krebs was talking about generation siting, not ISO market design. Yet his words show that Texas eventually may face the same problems we saw last year in California.

Writing on Nov. 30, on behalf of the American Gas Cooling Center, Krebs told Jim Linville, of the Texas Natural Resources Conservation Commission, that the new draft rules proposed in Texas in November 2000 governing air emissions for distributed generation and small-scale electric generation (comments taken until Feb. 5) might spell trouble for the state.

Krebs criticizes the Texas policy of forcing all DG plants statewide to comply with emissions rules designed for the Houston/Galveston ozone nonattainment area, where many cogeneration and DG units are planned.

"The potential impact," writes Krebs "would appear to be a ban upon all DG (with the illusory