UPDATE 3-ERCOT sees another tight summer for Texas power supply

Fri Mar 1, 2013 6:37pm EST

March 1 (Reuters) - Texas power grid operator said Friday the amount of electricity available to serve consumers will be tight again this summer as projected demand grows faster than generation is being built to serve those needs.

"Current estimates indicate that we likely will see very tight conditions on the hottest days," Kent Saathoff, vice president of grid operations and system planning for the regional grid operator Electric Reliability Council of Texas (ERCOT), said in a statement.

The agency will likely increase its calls for consumers to reduce power use on hot afternoons when air conditioners run for extended periods, officials said.

To entice more power generation into the market, Texas utility regulators increased the price at which power can be offered in time of scarcity to $5,000 per megawatt-hour beginning this summer. That amount will rise to $9,000 per MWh by summer 2015.

While regulators continue to study new ways to increase wholesale prices to levels necessary to attract additional generation, no other market changes are likely to be implemented ahead of the summer.

On Friday, the chairman of the Texas Public Utility Commission (PUC) proposed opening another regulatory project to look at implementation of an "operating reserve demand curve" a way to improve the efficiency of scarcity pricing.

The time needed to fully evaluate and allow market comment on the latest design alternative means changes are likely to be delayed into next year.

"While I understand some stakeholders favor implementation of an interim solution prior to this summer, I do not think such a solution can be developed, vetted by stakeholders, and implemented within that time frame." Chairman Donna Nelson said in a memo discussed in a public meeting Friday.

ERCOT said its preliminary summer assessment anticipates a peak demand of 67,998 megawatts (MW), based on a weather outlook similar to that of 2010 and a slower-growth economic outlook.

The grid operator anticipates 73,708 MW of generation capacity before accounting for power plant outages, which typically total about 2,600 MW during an operating day.

That's 1,200 MW lower than the total listed in a report from December that included a number of older, previously retired gas units that ran only in the summer.

One megawatt can serve about 200 homes during peak demand periods.

"Current trends call for a summer that is hotter and drier than normal," Chris Coleman, ERCOT meteorologist, said in the release. "Although we don't anticipate prolonged heat waves like those in 2011, we expect conditions in many areas to be similar to 2012."

The ERCOT region's all-time record peak occurred on Aug. 3, 2011, when consumer demand hit 68,305 MW. Power demands in the ERCOT region are highest in summer, primarily due to air conditioning use in homes and businesses.

Although the summer of 2012 was much milder than the record-breaking conditions that marked the previous year, ERCOT still experienced new monthly peaks in June, July and September.

ERCOT will release its final summer assessment in May.

The biggest transmission and generation companies in ERCOT include units of privately held Energy Future Holdings, CenterPoint Energy Inc, American Electric Power Co Inc , PNM Resources Inc, NRG Energy Inc, Exelon Corp, NextEra Energy Inc and Calpine Corp .