Bloomberg News

Texas Regulators Delay Action on State Power-Market Reserves

November 15, 2013

Texas regulators delayed taking action on a plan to avert power shortages by keeping enough generation capacity in reserve to meet peak demand.

Commissioners of the Public Utility Commission of Texas, at a public meeting today, said they will seek further comments on the plan, which would pay power producers to keep excess generation capacity in reserve. The panel will also address several questions submitted at the meeting and await more data, according to Commissioner Ken Anderson and commission spokesman Terry Hadley.

The proposal follows projections by the Electric Reliability Council of Texas Inc., the grid operator for most of the state, that the risk of blackouts from power shortages will rise in 2015 and beyond as demand for electricity increases.

Power producers, including Energy Future Holdings Corp.’s Luminant unit, NRG Energy Inc. (NRG:US) and Calpine Corp. (CPN:US), say the capacity payments would justify the construction of new plants in a state where low electricity prices restrict reinvestment. Consumer groups and Texas cities say the payments are tantamount to a tax that would boost bills for households and businesses with no guarantee they would spur adequate supply.

Texas State Senator Troy Fraser, a co-author of the state’s power-deregulation law, told the commission in a Nov. 13 letter to take no further steps without legislative action.

“The legislature designed the energy-only market for good reason,” Fraser wrote in the letter. “It certainly was not envisioned that the law would give the agency unprecedented power to do whatever they wanted under the pretext of ensuring ‘resource adequacy.’’

Consumer Costs

Fraser, a Republican and chairman of the Committee on Natural Resources, cited estimates that a capacity market would cost customers $4 billion a year, ‘‘with no guarantee that additional generation will be built.’’

Anderson said in an interview that the commission may determine sufficient consensus has already been reached and they don’t need to vote until after adopting a rule that imposes a ‘‘monstrous electricity tax’’ to implement the reserve margin. Nelson and Commissioner Brandy Marty said at an Oct. 25 meeting that they support the reserve margin, while Anderson voiced his objections.

‘‘I got a little more time, not as much as I wanted,’’ Anderson said after today’s hearing.

Public comments are due in December and a workshop to address questions Anderson and others submitted at today’s hearing will be held in January, Nelson said.

To contact the reporters on this story: Harry R. Weber in Austin, Texas at hweber14@bloomberg.net; Naureen S. Malik in New York at nmalik28@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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