Battle still brewing over Houston power line

OREANDA-NEWS.  A battle over a proposed \$590mn power line designed to move power from north Texas into power-hungry Houston shows no signs of cooling despite a regulatory approval last year.

CenterPoint Energy and LS Power have proposed building the 130-mile (209km), 345kV line, called the Houston Import Project. NRG Energy and Calpine, two of the state's largest power producers with generation in Houston, oppose the project.

Texas regulators in November backed approval of the line by the Electric Reliability Council of Texas (ERCOT) board, rejecting the generators' complaint that the grid operator overestimated future Houston demand.

Generators wanted regulators to force ERCOT to revisit the need for the line using revised load forecasts that cut Texas' future demand growth expectations.

NRG is considering an appeal of the Texas Public Utility Commission order. "The current [load] trends are completely at odds with these assumptions," NRG vice president for regulatory affairs Mark Walker told members of the Gulf Coast Power Association in Houston.

NRG may also intervene when companies seek state regulatory approval to build the line, Walker said.

Transmission costs have tripled even as energy prices have fallen since Texas deregulated its wholesale power market more than a decade ago, Walker said. "This should be a warning flag to us," Walker said. "We need to take extra care to do our homework to get it right."

Houston represents more than 25pc of ERCOT load and rising power demand has strained existing transmission lines as power plant retirements exceeded new generation by 2,000MW.

ERCOT studies cited a need for more transmission into Houston back in 2006, five years after Oncor predecessor TXU built a line that doubled transmission capacity between north and south Texas.

Grid congestion charges in the Houston area in 2014 exceeded \$31mn for the second year on a row, ERCOT said.

Houston peak prescheduled prices averaged 3pc above the north zone in 2013, but dropped to a 1pc premium in 2014. Houston peak assessments average a 6pc premium to the North hub for calendar 2016. That premium widens to 9pc premium in 2019.

Higher Houston prices are seen as the primary reason generators oppose the new line which CenterPoint wants to complete by 2018.

A spokesman for Texas' industrial power users said the line could save \$250mn per year in future congestion costs, a number Walker disputed as too high.

"Generators do not build in load pockets because the minute you build, the congestion and price advantages go away," said Phillip Oldham, who represents large industrial customers. "Load pockets are persistent and must be addressed with transmission."

NRG disagreed with the ERCOT analysis that indicates new generation in north Texas will be available to serve Houston, calling the proposed line "a bridge to nowhere."

Interest in adding generation near Houston may "diminish significantly," Walker said.

NRG is building a 360MW peaker south of Houston, but has delayed a decision to build 750MW at two existing Houston sites. Exelon plans to build a 1,000MW plant southwest of Houston in 2017.