Two major independent power producers in Texas, Calpine Corp. and NRG Energy, teamed up on May 13 to file a complaint with the Texas Public Utility Commission over a new Electric Reliability Council of Texas transmission project.
Calpine and NRG Energy are appealing an ERCOT decision over the so-called “Houston Import RPG Project.” (RPG stands for Regional Planning Group). They are seeking review of the ERCOT board of directors' April 8 resolution endorsing the project.
They are seeking a good cause exception to the requirement to enter into the alternative dispute resolution (ADR) process with ERCOT, and also request that the case be retained at the commission and not transferred to the State Office of Administrative Hearings.
Through participation in the ERCOT stakeholder processes, including the technical advisory committee (TAC) and its various subcommittees, as well as the RPG, Calpine and NRG said they have supported ERCOT's efforts to maintain and improve system reliability and security.
“However, the need for the Houston Import Project (‘Project’) has not been validly demonstrated,” the two power producers said. “ERCOT's determination to support it is the result of inadequate and incomplete study and regulatory-based policies with the potential to exacerbate the very localized resource adequacy concerns this Project intends to remedy. Many inconsistencies and untenable assumptions have led to ERCOT's findings that the Project is warranted. These collectively amount to an abuse of ERCOT's discretion, which constitutes conduct that is in violation of law the Commission has jurisdiction to administer, orders and rules of the Commission, and Protocols and procedures that ERCOT has adopted pursuant to laws the Commission has jurisdiction to administer.”
They said that ERCOT has not even established that a real reliability problem exists. “ERCOT ignored the latest load forecasting methodology that has been utilized in the two most recent Capacity, Demand, and Reserves Reports (‘CDR’), and its own 90/10 extreme weather forecasts developed previously. ERCOT instead used interested transmission service provider (‘TSP’) forecasts. The TSP-provided forecasts show significantly higher Coastal region load growth than any of ERCOT's load forecasts using either the new or the previous methodologies. Using either of the ERCOT load forecasts (either the new CDR methodology or the 90/10 forecasts) shows that no reliability problem exists.”
Several transmission utilities proposed projects that the RPG studied over several months, and for which ERCOT staff prepared an independent review. The ERCOT board adopted a resolution on April 8 endorsing the need for the project, and also finding that the Limestone-Gibbons Creek-Zenith 345-kV double circuit line component of the project was of "critical" status, the companies said.
Calpine and NRG do not want the commission to suspend the resolution while this case is pending. After hearing, however, they request that the commission's final order suspend the resolution and its implementation, and instruct ERCOT that any further consideration of the project should adhere to standards that do not constitute an abuse of discretion.
While adopting a very conservative approach to forecasting 2018 coastal zone resource levels, the companies added, ERCOT merely assumed without any explanation that the north central zone would experience resource expansion at levels adequate to flow over the project and meet the coastal zone's supposed resource deficiency, The independent review concedes that the north central zone does not presently contain adequate resources to serve the zonal load and have spare capacity to flow south.
Nor does the independent review offer any insight into why ERCOT believes that the project itself will alter resource investment economics in the north central region of the state to stimulate such investment by 2018. At most, it merely opines that a possibility exists the project will incentivize additional resource investment, they said.
ERCOT found that a new import path into the Houston area may open the market for new, more efficient generation sources to construct outside of the area and sell power by importing into Houston which will introduce additional competition for the legacy generation resources in the area.
The project that the board approved included construction of a new transmission line and several substation upgrades. These include:
· A new Limestone-Gibbons Creek-Zenith 345-kV double circuit line (2,988 MVA of emergency rating/circuit);
· Upgrade the Limestone, Gibbons Creek, and Zenith substations to accommodate the terminations of the new circuits; and
· Upgrade of the existing T.H. Wharton-Addicks 345-kV line to 1,450 MVA of emergency rating.
ERCOT's Independent Review estimated the project's capital cost as $590m in 2018 dollars, but stated that the estimate may vary from actual results based on the designated transmission providers' actual designs and cost analyses.
In one of its sensitivity cases, ERCOT assumed the retirement of 1,939 MW of greater than 50-year-old Houston area generation units by 2018 and ran power flow studies excluding these existing resources. “However, ERCOT ignores any possibility that these assumed retirements would be offset by repowering projects at those sites, and more importantly, ERCOT assumed there would be no retirements of greater than 50 year old generation in other regions of ERCOT that would be required to import the power needed across the Project's transmission lines to serve the Houston area load,” Calpine and NRG said.
“The Houston Import Project amounts to ERCOT's classification of temporary intra-zonal generation shortfalls as a transmission reliability issue,” they added. “ERCOT controls transmission, not generation, and as a consequence it has employed study methodologies, such as using a load forecast provided by interested TSPs rather than ERCOT's own load forecast, that point ERCOT toward deploying transmission solutions to resolve localized resource adequacy issues. Transmission takes longer to develop than generation, as modern combined cycle generation or plant repowerment and refurbishment options can be developed within two to three years. The temporal ambiguity this presents to transmission planners seems to create a bias to see the transmission they control as the solution for every forecasted system shortfall. This distorts and suppresses resource pricing signals critical to an energy-only market's viability. In this case, this premature resort to transmission options will impose nearly $600 million in additional transmission costs and construction risk on Texas customers rather than private generation investors. It creates conflicting positions on whether ERCOT possesses sufficient resources.”