PUC considers new payments from consumers for power plant construction

Posted Tuesday, Oct. 08, 2013  comments  Print Reprints

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Electricity providers in Texas say they should be paid by households and businesses to be sure there’s enough generation capacity held in reserve for days when demand is highest.

The Texas Public Utility Commission is considering rules that would overhaul how the state’s biggest power grid operates. Instead of relying solely on electricity sales for profits, providers would also receive fixed payments from consumers to build and maintain supply within the Electric Reliability Council of Texas, which serves about 75 percent of the state.

These so-called capacity payments would largely go to plant owners. That aim is to maintain some chosen level of reserves of extra capacity to meet peak demand.

Executives of Calpine Corp., the third-biggest power provider in Texas, CPS Energy, the nation’s largest municipally owned gas and electric company, and EnerNoc Inc., the largest demand-response provider, supported the payments before the commission Tuesday.

Groups representing industrial consumers, such as independent oil refiner Valero Corp., oppose the move.

“Capacity markets don’t cost more, are far more reliable and stable than other market designs,” Thad Hill, president of Calpine, told the agency’s three commissioners in Austin. “Calpine would not invest hundreds of millions of dollars into brand new capacity. We think that is true of other investors as well.”

Generators are seeking a capacity market as a way to recoup costs following a 73 percent drop in the price of natural gas over the past five years, which drove electricity prices lower. Last year, the PUC responded by raising the cap on wholesale power prices to $4,500 a megawatt-hour from $3,000, with the limit rising to $9,000 in June 2015.

“We urge the commission not to think there is a crisis, because there really isn’t,” said Phillip Oldham, a representative of Texas Industrial Energy Consumers, whose members purchase more than 1.3 billion kilowatt-hours a year. “We want reliability, but we want it at reduced costs.”

Chris Brewster, an attorney for the Steering Committee of Cities Served by Oncor, the state’s largest regulated power utility, said a mandatory reserve margin “produces increased regulation and litigation and a much less streamlined and efficient process.” The cities oppose capacity payments.

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