Economic Criteria
for Transmission Planning
in the ERCOT Region
Public Utility Law Seminar
DeAnn Walker
August 3, 2012
History of Economic Criteria
for Transmission Planning in ERCOT
•
Late 2004 - ERCOT began to investigate appropriate transmission planning criteria
for the ERCOT Nodal market
 ERCOT prepared a White Paper and proposed criteria to the Regional Planning
Group.
 Congestion Management Working Group considered the issues
•
March 2006 - Wholesale Market Subcommittee approved use of the societal impact
or consumer benefit criteria by the Regional Planning Group
•
May 2006 - Technical Advisory Committee approved the use of the two economic
tests for transmission planning.
•
January 2009 - ERCOT Board adopted the economic tests by incorporating them into
the ERCOT Planning Charter.
•
March 2011 - ERCOT Board incorporated the Planning Charter, including the
economic tests, into the ERCOT Protocols.
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Two Historical Economic Criteria
• Societal Impact Test: Compares a project’s costs to the estimated production
cost savings it will create.
 When transmission is built, different generation units may be dispatched to
meet demand, which changes system-wide production costs.
 Estimated production cost savings are measured by comparing the costs of
producing generation to meet system demand with and without the
transmission project.
• Consumer Impact Test: Compares a project’s costs to the resulting market price
changes to quantify the consumer savings it will create.
 Includes changes in production costs, because those affect market prices
 Also examines price reductions resulting from reducing congestion costs and
mitigating market power.
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Historical Process for
Evaluation of Transmission Projects
 Reliability – Projects needed to meet reliability criteria
If the study showed a need for the project for reliability purposes,
then it was approved.
If the study did not show a need for the project for reliability purposes,
then the Societal Impact Test was applied.
 Societal Impact Test
If the study showed a need for the project based on the Societal Impact Test,
then it was approved.
If the study did not show a need for the project based on the Societal Impact Test,
then the Consumer Benefit Test was applied.
 Consumer Impact Test
If the study showed a need for the project based on Consumer Benefit Test,
then it was approved.
If the study did not show a need for the project based on Consumer Benefit Test,
then the project was rejected.
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House Bill 971 in 2011 Session
HB 971 required that the PUCT adopt rules to establish “criteria
for granting a certificate for a transmission project that serves
the ERCOT power region, that is not necessary to meet state or
federal reliability standards, and that does not serve a
competitive renewable energy zone. The criteria must include a
comparison of the estimated cost of the transmission project
and the estimated cost savings that may result from the
transmission project. The commission shall include with its
decision on an application for a certificate to which this
subsection applies findings on the criteria.”
*
Other amendments related to transmission facilities were also made in the bill.
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PUCT Project No. 39537
• June 2011 – PUCT initiated a rulemaking to implement HB 971
• September 2011 – Proposed rule was published in Texas Register
• October 2011 – Approximately 240 comments were filed as well as
numerous comments filed by Legislators
• Winter 2012 – Various workshops were held for interested parties
• March 2012 – PUCT adopted the amended rule
The adopted rule included the Societal Impact Test
but did not include the Consumer Benefit Test.
• July 2012 – ERCOT Board approved Nodal Protocol Revision Request 462
that removed the Consumer Benefit Test from the ERCOT Planning Criteria
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