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Winds of Change in Texas

Rising gas prices spark a rush to wind farms, straining grid capacity and raising larger issues about market design.
Fortnightly Magazine - April 1 2003

and egg question," says Brian Almon, director of engineering for the PUCT. "There is a question in our mind whether we can certify a line for future need. And then the providers have the question, 'Should we build for 2,000 MW, maybe even 3,000 MW? What if it [the need] doesn't come?'"

A related problem is the potential time lost in getting interconnect agreements, as Stuart Nelson, manager of asset development for transmission service provider, the Lower Colorado River Authority (LCRA), explains.

"The problem that we have is that we cannot start on a project until a generator signs an interconnect agreement. We actually can't even start on the studies. If they sign an interconnect agreement, we start studies which can take anywhere from three months to a year," he says, and those are based on typical ERCOT schedules. "Even on relatively minor transmission lines, the project can take anywhere from three to five years from when you sign the interconnect agreement."

As for cost, Nelson says, "The most realistic risk that we have is that the project stops or goes away while we're in the certification process, in the first year. If it's certified and we start it, we're talking about $100 million projects, you could be potentially stranded for the total cost of the project. Obviously that is a risk that we or another transmission provider could not accept."

These uncertainties surrounding construction and other timely factors are exactly what frustrate wind generators. Discussions over transmission became rather heated at a West Texas Region Planning Group Meeting held at ERCOT in late January when FPL's Garza exclaimed, "If you don't build it, we won't come."

Here again, wind power developers simply have their hands tied until transmission constraints get cleared up; meanwhile, highly sought after investor money is put on hold.

Who Foots the Bill?

Texas regulators also must worry about the region's socialized or "uplifted" costs to relieve transmission congestion.

In a memo 3 addressing local congestion problems as documented in a separate case at the PUCT to examine wholesale market design, Eric Schubert of the PUCT's MOD staff notes, "At present, ERCOT reimburses generators for lost profits for undeliverable energy scheduled across a local constraint."

In other words, ERCOT actually asks that the generator should withhold output to save room on the transmission system. The ERCOT protocol is known as "OOME," for Out of Merit Order Energy. "OOME down" is the term used to denote a decremental action when generators are asked not to generate. 4 Who pays OOME downs? A customer in Austin, for example, helps pay wind generators in West Texas, not to generate power needed by the Dallas metro area.

Moreover, Qualified Scheduling Entities (QSEs) had been getting paid market value when they were OOME-ed down, but the wind generators did not recover the Production Tax Credit's portion of their revenue or receive renewable energy credits (RECs). Last fall, ERCOT approved a protocol revision allowing a QSE to file claims with ERCOT to receive payments covering the actual costs of providing service.

PUCT commissioners and