ERCOT mum on cost of extra wattage
Grid operator shuns state regulator’s plea in hunt to boost winter capacity
Despite scrutiny from state regulators, the Texas power grid operator wouldn’t say Thursday how much it plans to spend to add the 3,000 megawatts of power it’s seeking to shore up its reserves as it works to avoid emergency conditions this winter.
The Electric Reliability Council of Texas announced in October it wanted to quickly add the extra generation, going so far as asking generations to reopen shuttered coal plants to meet the need.
“If we continue to use these capacity contracts, we don’t have any bounds as to what the costs are and I, apparently, cannot divulge what’s in this internal document,” Commissioner Lori Cobos said during a meeting of the Public Utility Commission of Texas, referring to the cost estimates ERCOT did not make public.
“There are ranges in there that are concerning,” she said.
Ultimately, major costs incurred by ERCOT would trickle down to consumers and the rates they pay their own utility providers.
ERCOT’S request for added reserve capacity came on the heels of projections showing an 18% risk the grid operator will need to enter emergency conditions and a 14% risk of resorting to rolling blackouts in the case of a December winter storm similar to last year’s.
Those risks go up to about 21% and 17%, respectively, for storm conditions on a January morning at 8 a.m., according to a new report released Wednesday. Commissioner Will Mcadams said that while ERCOT’S main goal is reliability, the PUC has to balance both reliability and cost.
“Many times now, there’s a tension there,” he said.
The PUC asked ERCOT last month to share a budget outline of what it could cost to add the de
sired capacity by opening shutdown coal plants, relying on battery storage or adding new programming to reduce power loads during critical periods. Most proposals are likely to come from demand-response programs, which remove load when supply is tight via agreements with larger commercial users or the ability to adjust residents’ thermostats.
But ERCOT says sharing its budget publicly could drive up costs as it attempts to nail down proposals to add the power reserves.
“We are trying to save money for consumers by picking what we believe is reasonable to address the reliability concern,” said ERCOT general counsel Chad Seely.
Mcadams wrote in memo to the board “the market was rightfully shocked” by what he called the “extraordinary action” that would create “a short term capacity market by fiat.” Further, commissioners have voiced concerns that ERCOT might not have the authority to secure that amount of capacity in an unprecedented two-month turnaround without the commission or the operator’s own board’s guidance. Mcadams wrote ERCOT was following “obscure protocol” when establishing the request for proposals seeking the winter reserve. He backed up previous concerns from another commissioner who questioned if what ERCOT was doing was even legal. ERCOT has maintained it is acting within its protocols, which were established when it made a deal in 2011 to get 400 megawatts in reserves from a mothballed plant ahead of the summer.
Budget issues
Much of Thursday’s PUC meeting revolved around ERCOT’S upcoming expenses. After two hours of heated discussion, commissioners voted for a twoyear budget plan that increased rates paid by power wholesalers per megawatt hour from 55.5 cents to 63 cents.
ERCOT had initially been seeking a nearly 30% increase in the rate to grow their overall budget significantly over four years, drawing criticism ranging from industrial manufacturers to environmentalists. While the rate increase doesn’t immediately impact regular residential customers, it would eventually trickle down into the rates they pay with utility providers.
Ultimately, Mcadams got two other commissioners to support a plan he said “split the baby” between the market assurance the PUC wants and the ambiguity ERCOT says it needs over the reserve plan.
That resulted in a 3-1 vote in support of viewing the capacity program as a “bridge program” for improved reliability that had already been established under state law. The legislature already set a $1 billion cap on net costs for qualifying programs.
Cobos voted in favor of that recognition but maintained it didn’t go far enough to actually provide a clear cap. Mcadams said it at least provided some guardrails that “can assuage concerns of the market that billions of dollars cannot be used now or in the future.”
ERCOT said the auction for proposals begins Nov. 10 and the public will know its planned expenses for the added capacity on Nov. 22.