As Moreland Sherrod opens the doors of Mesa Power’s new offices in Pampa, there appears to be a misunderstanding between the new energy company and the State of Texas.
Dallas billionaire and Roberts County rancher Boone Pickens created Mesa Power, L.P., earlier this year with the plan of building a 4,000-megawatt wind farm and more than another 1,000-megawatt coal and natural gas power plant in the Panhandle and sell the electricity downstate in the Dallas area.
The $10 billion project would include transmission lines from Roberts County to Anna, a small town north of Dallas, near McKinney, where they would hook into a larger, more profitable electrical grid than the regulated Southwestern Power Pool of the Panhandle.
The Electrical Reliability Council of Texas, ERCOT, grid has been deregulated and prices for electricity have risen much higher than the Southwestern Power Pool. That makes selling the electricity to the ERCOT grid much more profitable than selling the power locally.
Rep. David Swinford, R-Dumas, managed to pass legislation during last spring’s legislative session that created Competitive Renewable Energy Zones, zones under the control of the Texas Public Utilities Commission that would allow the construction of transmission lines around the state to move power into the ERCOT grid. Construction of those transmission lines, however, is based on being financed by ratepayer fees where the power goes.
Mesa officials contend that since their power generation and transmission is privately financed and because the power is being sold in the wholesale, not retail market, they are exempt from the PUC regulations.
Last week, however, the PUC issued a rule saying that the maximum amount of energy Mesa and others, such as Babcock and Brown, which bought the coal-fired Celanese power plant, could generate from their wind farms in the Panhandle would be capped at 1,000 megawatts. They also indicated that federal approval might be needed to move the electrical power from one grid to another. That means more regulatory dealings with he Federal Energy Regulatory Commission.
“Our attorneys have been telling us all along that as long as we are using a privately owned generating facility and we are taking that power from that location to another power grid on our own transmission lines then FERC has no jurisdiction over us at all,” Michael Boswell, vice president of Mesa Power.
While many of the planned wind farms in the Panhandle have indicated they will work through the CREZ process for transmission, Mesa plans on developing their own transmission lines.
In August, Pickens told a gathering of landowners in Pampa that he thought Mesa as a private company could move more quickly than the CREZ process because of a lack of government involvement.
“What you’ve got to have, obviously, is a project that is big enough and a sponsor that is strong enough, as Boone Pickens is, to get down the road far enough to make sure that happens,” Boswell said.
As Mesa tries to explain to the state that Mesa Power plans to privately finance their operation, Boswell said that companies have contacted Mesa Power with regard to buying power from Mesa’s proposed wind farm for their transmission lines that will go to California.
They told Boswell that the transmission line would be 100 percent privately-owned and FERC doesn’t have anything to do with it.
“The probably has been, obviously, that you’ve got wind where you don’t have markets,” Boswell said, “and you haven’t had transmission from where you had wind to those markets. Especially transmission into higher priced markets.”
While Mesa initially eyed the ERCOT grid downstate, Boswell indicated there might be other more profitable markets in the offing.
“We have absolutely no problem with selling power to the Southwest Power Pool or to the Western Grid or to the Eastern Grid if in fact that works out,” Boswell said.
It’s a matter of who’s willing to pay for the electricity. It’s a simple business proposition.
“As it stands right now, we don’t think that the PUC saying that there is going to be 1,000 megawatt cap on wind power or that the FERC itself is going to have to approve wind power coming out of the Southwest Power Pool into ERCOT or any place else affects what we’re talking about. To our knowledge, nobody else is talking about what we’re talking about,” Boswell said.
The Mesa vice president said that they intend to pursue their plans and try to get the state to understand what they are doing.
“We don’t think that the current rules apply to us,” Boswell said, “and we’re going to proceed that way until we find out something different.”
By David Bowser
9 October 2007