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Fortnightly Magazine - February 2012

service providers to proceed with construction and exercise the power of eminent domain where necessary. The CCN applications in CREZ program are contested cases that generally focus on selecting a transmission route from alternatives proposed by the transmission service providers. In contrast to the regular CCN applications, the applicant in a CREZ proceeding doesn’t need to show that the construction is necessary for the service, accommodation, convenience, or safety of the public. CCN applicants are required to identify a preferred route, though this designation doesn’t necessarily mean that the PUCT will approve it. CREZ CCN applications are statutorily required to be completed within 180 days, instead of the normal one-year period, and the PUCT has the option of approving a route, approving it in part, or denying the application.

The PUCT recognized the critical issue of project-on-project risk, i.e. wind projects require the CREZ transmission build-outs and vice versa. Delays or cancellations of wind development, even with commitment guarantees, could result in under-utilization of the new transmission lines, while aggressive wind development in advance of transmission build-out could result in transmission congestion and market inefficiencies. The PUCT’s solution, per CREZ amendments in November 2009, was to require renewable generators to demonstrate sufficient financial commitment before the PUCT would process the CCN applications for the associated CREZ transmission upgrades. The PUCT determined that installed generating capacity, active construction of new generation, and signed interconnection agreements—a critical development milestone—were the best measures of wind generator financial commitment. For the three west-central CREZ zones—McCamey, Central, and Central West—the PUCT determined that the wind generation that was already developed, along with additional wind generation under active development, and the wind capacity with signed interconnection agreements as of October 2009, demonstrated that sufficient financial commitments had been made to justify the construction of the CREZ upgrades to these zones. The financial commitments of these wind generators are formally recognized in related CCN proceedings.

The PUCT also determined that the wind developers in the northern CREZ zones, Panhandle A and B, hadn’t yet demonstrated sufficient financial commitments. Those wind generators will have the opportunity to either meet the standard described above or demonstrate financial commitment by posting collateral before the PUCT processes their CCN applications. Under the PUCT’s amendments, those wind generators would have to post collateral of $15,350 per MW of capacity corresponding to their planned projects, or $10,000 per MW if the capacity is supported by appropriate lease agreements. These collateral amounts are equivalent to roughly 1 percent or less of the wind projects’ total estimated capital cost. If the total capacity represented by completed projects, projects under construction, projects with signed interconnection agreements, and projects posting collateral is at least 50 percent of the designated capacity for a CREZ upgrade, the financial commitment requirement will be deemed to be met. Collateral would be refunded when a wind or other renewable generator signs an interconnection agreement with the relevant transmission service provider but would otherwise be forfeited.

Most of the CREZ default projects didn’t require a CCN and have either been completed or are under construction.