Competition in the Texas electricity industry has the wind at its back.
Texas regulators are contemplating a plan to require power line monopolies to compete for the right to build hundreds of miles of transmission lines to bring wind power from West Texas to North Texas.
The plan, which would cost billions of dollars, might spawn a form of competition in the last remaining regulated monopoly in the electricity industry – the business of operating power lines.
“I’ve stirred up a whole host of bees,” said Public Utility Commission Chairman Paul Hudson.
“We are going to have a dialogue on competitive transmission and new providers of transmission in the state of Texas. We may do nothing, but we are going to have this dialogue. It’s critical,” Mr. Hudson said in a speech at a Gulf Coast Power Association conference.
Traditionally, regulators assign power line monopolies to particular regions of the state.
Those monopolies, such as TXU Corp.’s Oncor Electric Delivery unit, build and operate the electricity wires needed to serve customers in their territories.
But wind presents a new challenge: how to get wind power from the sparsely populated areas of West Texas – where the wind blows best – to crowded North Texas, where demand for power continues to grow.
Texas must build more transmission lines to support the amount of wind power that generation companies are planning.
Without new transmission lines, the state could quickly reach the limit of wind power that the system can handle.
Already, Texas has 2,981 megawatts of wind capacity, more than any other state and most other countries. The Legislature set a goal of 10,000 megawatts of renewable energy by 2025.
The PUC wants companies to build enough transmission lines to handle 22,366 megawatts of renewable power.
Taking the initiative
So, rather than waiting for power line companies to come up with their own transmission project, PUC commissioners are organizing things themselves.
The commission is carving up the map of West Texas into Competitive Renewable Energy Zones, which are regions of the state with enough potential for wind turbines to warrant special transmission lines.
Next, the commission must decide who gets to build those lines.
The PUC might solicit bids from any transmission company that wants to compete and then take the best offer.
Doing so could give out-of-state companies the opportunity to build in Texas.
The industry would remain regulated.
That is, a power company builds a line and presents the bill to the PUC for review.
The commission decides how much the power company may charge customers for the project.
In theory, forcing companies to compete for the right to build transmission lines would prompt companies to cut costs, resulting in lower rates for consumers.
But until the companies present bids, it’s not certain whether consumers would see a financial benefit from the process.
It could be four or five years before the transmission lines are constructed.
That means some large wind farms under development will begin turning before the lines exist.
“We’re kind of working on the car as we’re driving down the highway on this one,” said Jess Totten, head of electric industry oversight for the PUC, during the conference on Wednesday.
The commission must decide what transmission technology should be built. Some transmission companies propose a giant, high-tech power line.
Think of an interstate highway for electricity.
It’s an expensive idea, but it could make things more efficient in the future.
Oncor, on the other hand, has proposed a network of smaller power lines, which could be built one piece at a time, said spokesman Chris Schein.
The Electric Reliability Council of Texas, which operates the electricity grid, will study the project and consider various technologies.
ERCOT chief executive Bob Kahn said he expects to finish the study by the end of the year.
The PUC will use the study to determine which types of transmission lines to commission and how to do so.
Mr. Totten said he expects to issue certificates to companies to build the power lines in mid-2009.
By Elizabeth Souder
5 October 2007