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Power companies lose battle over transmission costs, in win for renewables

January 21, 2019

Texas regulators last week rejected a proposal to change the way transmission costs are apportioned among power generators, a move that would have cost wind farms in West Texas more to get their power to market.

Electricity is lost naturally as electrons travel along transmission lines and the state apportions the costs of the lost power equally among generators. Calpine Corp. of Houston and NRG Energy of Houston and Princeton, N.J., asked the state to assign transmission losses based on the distance the power travels, a move that would benefit traditional power companies which tend to have plants closer to population centers and hurt wind and solar farms in the remote parts of the state — namely, West Texas where the majority of wind farms are located.

NRG, Calpine and other merchant power companies have struggled in recent years in a highly competitive electricity market with low prices.

Texas became the nation’s top producer of wind energy by attracting billions of dollars of investment in wind farms in large part by offering generators low-cost transmission and access to power markets in urban areas. A key element was the decision to spread the cost of transmission losses equally among generators.

In a memo submitted Wednesday ahead of the decision, DeeAnn Walker, chairman of the Public Utility Commission, wrote that she did not believe changing the way the state apportions transmission costs was worth the market disruption.

Last summer, fears of a shortage in hot weather were stoked by the shutdown of three coal plants in Texas. But the shortages didn’t occur as wind farms generated more than expected. It hurt legacy power generators’ profits, since they rely on high demand and tight supplies during summer months to boost wholesale prices.

Environmental and consumer advocacy groups praised the decision by the Public Utility Commission.

Cyrus Reed, the conservation director of the Lone Star chapter of the Sierra Club, said implementing transition costs would have too suddenly changed the way the market works after years of investment in wind and solar farms and transmission.

“What we’ve told our generation community is that you can locate anywhere on the grid and we will pay for the electricity you generate,” Cyrus said. “It would have really undermined that development.”

Calpine and NRG declined to comment.

While regulators did not approve the proposal for transmission costs, they did approve a different proposal sought by power companies. A change to a market mechanism known as the operating reserve demand curve, which pays higher prices to power companies by increasing the wholesale price of electricity when demand increases and reserves run low, is expected to deliver more revenues to power companies, but increase electricity prices this summer.

erin.douglas@chron.com

Twitter.com/erinmdouglas23

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