Texas QF generation shut-in; QFs file complaint at FERC

Ann de Rouffignac
OGJ Online

HOUSTON, Jan. 25 -- Texas cogenerators known as qualifying facilities asked federal regulators to enforce a federal law governing electricity sales from the facilities in a emergency complaint Wednesday.

The companies claimed in a petition filed with the Federal Energy Regulatory Commission that the Texas Public Utility Commission is violating a May order, which required the PUC to enforce provisions of the Public Utility Regulatory Policies Act(PURPA), governing QFs sales to electric utilities.

As a result, some have quit producing power. I know a lot of [QF]capacity is shut in now," said Marianne Carroll, attorney with Carroll & Gross LLP who represents QFs before state regulators. "Somebody is going to have to make a decision about this."

Texas QFs said they have struggled to operate since Jan. 1 because utilities aren't paying them rates required by tariffs. They said they are only getting between 0.9?/kw-hr and 2.1?/kw-hr. At other times it is zero or negative, the QFs said in a FERC filing.

The price offered by utilities since the first of the year is below the QFs average costs of production, the filing said. QFs have 3,000-4,000 Mw available to sell in the Electric Reliability Council of Texas (ERCOT) market. Complainants include Cogen Lyondell Inc., Dynegy Power Corp., Baytown Energy Center, Calpine Corp., Pasadena Cogeneration, Clear Lake Cogeneration, and others.

After Jan. 1, all integrated regulated utilities in Texas split up into three distinct companies--transmission and distribution, generation, and retail sales-- casting doubt over which of those companies would have the federal obligation to purchase power from QFs at the integrated utility's "avoided" costs. Avoided costs are the costs of producing power, which a utility would have incurred if it built a power plant.

Because the PUC failed to pass a new rule for QFs before the market opened, the successor companies to the old regulated utilities decided to "self-implement" PURPA and use ERCOT's imbalance energy price to pay the QFs.

The imbalance price is often zero or negative. It represents an ERCOT purchasing mechanism to balance system frequency and is not a market price nor indicative of the utility's avoided costs, the filing said. They complained the resulting low prices have forced facilities to shut down or cycle inefficiently.

"Since the ERCOT energy imbalance price is often negative, the Texas utilities may seek to force the QFs to pay them to take energy," the filing said. "This has caused the QFs to operate in a significantly less efficient manner, back their units down, and cease making as-available sales to the utilities."

Last spring Texas utilities and the PUC petitioned FERC for a "waiver" in Texas of the federal law PURPA in anticipation of the market opening in 2002.

"FERC responded swiftly, with an order that reminded Texas officials that PURPA was still in effect and Congress had not repealed it yet," Carroll said at a Gulf Coast Power Association meeting in Houston.

FERC said retail and generating companies that resulted from splitting up the integrated utilities would remain "electric utilities " as defined by PURPA and be required to purchase QF electricity. FERC also said Texas utilities must continue to use the approved and filed tariff rather than the ERCOT imbalance energy price to pay for QF power.

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