| HOUSTON, March 7
HOUSTON, March 7 Texas' top power regulator said
Thursday it should have all the information needed by the fall
to decide which direction the state's $35 billion electric
market should move to ensure electricity is available to keep
pace with the growing economy.
Despite several changes made in the past year to boost the
wholesale power price cap to a level that would attract
investment in new power plants, the prospect for rolling
blackouts remains high in Texas in coming summers as the supply
of electricity fails to keep pace with growing demand.
"We're moving forward on a lot of fronts now," Texas Public
Utility Commission Chairman Donna Nelson told the IHS CERAWeek
energy conference in Houston.
A lack of new power plant construction and two extremely
hot summers strained power supplies in Texas in 2010 and 2011,
adding urgency to an ongoing regulatory discussion about the
need to encourage new generation in the deregulated market.
The state's grid operator, the Electric Reliability Council
of Texas (ERCOT), warned that it will likely increase its calls
for consumers to reduce power use on hot afternoons this summer
when air conditioners run for extended periods.
But the discussion has left Texas market participants and
regulators divided over a long-term solution to encourage new
The PUC is studying two general options: whether to modify
ERCOT's existing energy-only market to incorporate more "demand
response," programs that pay customers to curtail electric use
when supplies are tight, or to create a so-called "capacity
market" that pays generators to be available in future years.
Companies that generate power approve of what the PUC has
done so far, and generally favor creation of a capacity market
such as that used in other U.S. power markets.
"We need a lot of investment," said Thad Hill, president of
Calpine Corp, an independent power producer with a large
presence in Texas.
Demand response efforts to curb peak demand will be needed,
Hill said, but "we will need more steel in the ground."
To get financing to build new plants, lenders want the
certainty of payments a capacity market can provide, not just
the possibility that scarcity will lead to high prices, Hill
Large power consumers generally dislike the capacity market
for fear of added cost.
Nelson said she wants to foster an "honest discussion" about
the cost to consumers between the different options which she
thinks would be comparable. "Texans need to understand the pros
and cons of each direction," Nelson said.
While the PUC is studying methods used around the nation,
the ultimate solution in Texas will likely be unique, she said.
"Whatever path forward we take, it will be the Texas way,"
The biggest transmission and generation companies in ERCOT
include units of privately held Energy Future Holdings, owned by
Kohlberg Kravis Roberts & Co ; CenterPoint Energy Inc
, American Electric Power Co Inc, PNM Resources
Inc, NRG Energy Inc, Exelon Corp,
NextEra Energy Inc and Calpine Corp.
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