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Outsmarting the Grid
A trio of eager tech startups confronts an industry intent on preserving the status quo.
Amigas is primarily an arbitrage play on the price differentials between the three asynchro- nous grids, which could promote price convergence between various points within ERCOT and the Western and Eastern grids.
In its rate application, Tres Amigas has submitted evidence showing high, low, median, and average wholesale power price differentials between MISO, SPP, ERCOT, Palo Verde (the ICE hub), and CAISO in 2008.
That evidence, however, prompted the Texas Industrial Energy Consumers to argue that Tres Amigas will siphon low-cost nuclear and coal-fired power from ERCOT to other regions, causing retail electricity rates in Texas to climb. Tres Amigas countered, however, that the question of whether its project will be good or bad for Texas retail ratepayers is irrelevant to the question of whether the merchant project has assumed the requisite risk to warrant federal authority to charge market-based rates ( see Answer of Tres Amigas to Requests for Denial of Negotiated Rates, FERC Docket No. ER10-396, filed Jan. 13, 2010 ).
Other parties warn, however, that with competition unlikely to emerge anytime soon in the relevant market ( i.e., bridging the three asynchronous grids), Tres Amigas could exert market power and simply pocket those regional price differentials as rent.
As APPA General Counsel and Policy Vice President Susan Kelly mused, Tres Amigas “could exercise market power by virtue of its 100-percent control over what sounds very much like a potential essential bottleneck facility” ( see Comments, Docket ER10-396, filed Dec. 23, 2009 ).
Despite its creativity, Tres Amigas still could end up as a bridge to nowhere. Its success depends entirely on whether it can convince other parties in ERCOT, SPP, and the Western Interconnection to build transmission lines to the superstation in Clovis, so that Tres Amigas receives injections of power to re-route among the various grids.
Otherwise, the project will just lie there, inert, with electrons circling aimlessly within its triangular, super-cooled underground ring, like some UFO landed in the vast emptiness of eastern New Mexico.
Even lead counsel Raskin concedes that without a jurisdictional disclaimer, “the unique benefits of Tres Amigas will be lost.”
Nancy Bagot, in her written comments as vice president of regulatory affairs for EPSA, gave her own unique spin on the issue:
“The commission,” she wrote, “must remain focused on the legal merits of the petition and not be distracted by the purported benefits.”