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Texas PUC Chair Recommends Rulemaking To Address How Generating Capacity Determined For Compliance With Market Share Thresholds In Merger Proceedings

June 27, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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In two memos in advance of today's open meeting, Texas PUC Chairman DeAnn Walker recommended that a rulemaking be opened to address how a generator's capacity is counted for purposes of compliance with various market share thresholds and limitations under PURA

Walker made the recommendation in memos regarding two separate applications concerning the acquisition of intermittent resources (or ownership interests) by generators -- Docket 48139 (Global Infrastructure Partners' acquisition of Zephyr Renewables LLC from NRG) and Docket 48162 (Cactus Flats Holdings, LLC's application for issuance of passive equity interests to BAL Investment & Advisory, Inc.)

Walker specifically addressed the treatment of intermittent capacity in the memos. Walker raised similar points in both memos.

"I have some general concerns with the application of the statute and Commission rules to the cases processed for acquisitions of generation facilities. I would like the Commission to set forth a process for applying the law in these proceedings going forward as well as reviewing the Commission's rules for potential modifications. Therefore, I recommend adopting the proposed order with modifications to conform it to the calculations of installed renewable capacity as described below," Walker wrote in the memo in Docket 48139

"Section 39.158 of the Public Utility Regulatory Act (PURA) requires the Commission to perform an evaluation to determine compliance with the 20% ownership limitation in PURA § 39.154 if an owner of electric generation facilities would own more than one percent of the total electricity for sale in a power region after a sale, merger, or consolidation. The share of the installed generation capacity of an electric generation company should to be calculated as described in 16 Texas Administrative Code (TAC) § 25.401. This section mandates that generating unit capacity ratings be calculated as described in 16 TAC § 25.91(f). That section of the Commission rules provides that generating unit capacity is reported at the summer net dependable capability with two exceptions. First, for renewable resources that are not dispatchable, the capacity rating is reported at the actual capacity during the most recent peak season and data must be provided to support this value. Second, generating units that will be connected to the transmission and distribution system and operating within 12 months are reported at the nameplate capacity," Walker wrote in the memo in Docket 48139

In the Docket 48139 (GIP-NRG) memo, Walker wrote that, "In this proceeding, the applicants have proposed that wind generating unit capacity be calculated at 5% of the nameplate capacity. The applicants made this discount on the nameplate capacity based on the Southwest Power Pool (SPP) Planning Criteria. The applicants cited a previous docket that utilized this discounted value; however, such discount is not in compliance with Commission rules. Because no data was provided in the record to support the 5% calculation as required by 16 TAC § 25.91(f), I recommend that the Commission utilize the nameplate capacity for calculating the share of installed generation capacity in this docket. The Commission has the authority to make this correction under 16 TAC § 25.401(c)."

In the Docket 48139 (GIP-NRG) memo, Walker wrote that, "This change does not affect the outcome of the PURA § 39.154 determination in this case. The share of installed generation capacity determined using the 5% discount was 5.29%. By using the nameplate capacity, the amount increases to 6.65%, which is still below the 20% limitation."

In the Docket 48162 (Cactus Flats) memo, Walker wrote that, "In this proceeding, the applicants have proposed that generating unit capacity be calculated at 14%, 59%, or 75% of the nameplate capacity depending on the type of facility. The applicants based this discount on the nameplate capacity on determinations in Docket No. 39870, which was a docket created to determine the total installed generation capacity in the Electric Reliability Council of Texas (ERCOT) region. The total installed generation capacity determined in Docket No. 39870 is used in calculations required by statute and Commission rules, including PURA § 39.154. The capacity factors that were used in Docket No. 39870 were based on an ERCOT report on Capacity. Demand, and Reserves. However, these discounted values are not in compliance with Commission rules when used to determine an individual unit's peak season capacity. Because no data was provided in the record to support the discount calculations used for the applicant's renewable units as required by 16 TAC § 25.91(f). I recommend that the Commission utilize the nameplate capacity for calculating the share of installed generation capacity in this docket. The Commission has the authority to make this correction under 16 TAC § 25.401(c)."

In the Docket 48162 (Cactus Flats) memo, Walker wrote that, "This change does not affect the outcome of the PURA § 39.154 determination in this case. The share of installed generation capacity determined using the discounted values was 1.7%. Using the nameplate capacity, this amount increases to 3.58%. which is still below the 20% limitation."

"Additionally, I would like for the Commission to address the manner in which these proceedings will be conducted in the future. Going forward. I recommend that the Commission require the following for calculating the share of installed generation capacity for renewable generating unit capacity: either the nameplate capacity should be used or data be provided in the record to support the actual unit-specific capacity value as described in 16 TAC § 25.91(f). Nameplate and actual capacity value are the only two values contained in the Commission rules for calculating the capacity rating of renewable resource facilities that are not dispatchable. The Commission should utilize its authority under 16 TAC § 25.401(c) to revise incorrect capacity ratings where the nameplate capacity is not used or data is not provided to support an actual capacity value as described in 16 TAC § 25.91(f)," Walker wrote in the memo in Docket 48139

"Further, I believe that the Commission should open a rulemaking proceeding to revise the applicable Commission rules. specifically 16 TAC §§ 25.401 [Share of Installed Generation Capacity] and 25.91 [Generating Capacity Reports], to clarify the manner in which to calculate generating capacity to be used in performing an evaluation under PURA §§ 39.154 and 39.158. The rules were originally adopted in 2000, and much has been learned since that time. If the Commission sets forth the recommendations above on the manner in which to address future proceedings, I do not believe that the rulemaking should be a high priority project, but I believe that it should proceed in order to review the process," Walker wrote in the memo in Docket 48139

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