By the OGJ Online Staff
HOUSTON, Jan. 4 -- Deregulation notwithstanding, Texas electricity generators should be required to maintain a minimum reserve margin, the staff of the Public Utility Commission of Texas said Friday.
The PUC staff has been grappling with whether to create a mechanism that would ensure a minimum reserve margin or whether margins should be left to market forces. The staff recommendation lands between industry's interests in letting market forces work and consumer groups who wanted a mandatory approach that would ensure a set level of reserve capacity.
Tilting toward consumers, the staff concluded the "just-let-the-market-work approach creates risk in the price and availability of supply." The full commission is scheduled to consider the staff report at its Jan. 10 meeting.
Under regulation, electric utilities in Texas were required to maintain a 15% reserve margin of generating capacity. But since the Texas market is deregulated, no specific level of reserve capacity is assured, the staff report said.
The Electric Reliability Council of Texas projected the reserve margin would be above 15% anyway through 2005. Under the most conservative assumptions, ERCOT said reserve margins would be 23% in 2002, 22.3% in 2003, 18.9% in 2004, and 15.2% for 2005. The following year it will dip to 11.7%, according to ERCOT.
Even if there is sufficient capacity in ERCOT for the next several years, the PUC staff said there are other unpredictable factors, which could lead to a rapid decline in capacity. Consumer groups mentioned transmission constraints, delayed plant construction, and interruptible load that might not be available when needed.
"It is important to begin work now to determine the necessary level of planning reserve capacity and the most appropriate mechanism for achieving and maintaining it," the PUC staff wrote.
The staff recommended the full commission establish a minimum planning reserve margin level and a mechanism for maintaining that level. The report also suggested creating a process to review projected reserve margins and a method to maintain the margin.