Transmission line proposal sparks high-powered dispute

CenterPoint says the money should be spent, but Calpine and NRG contend new plants can fill needs

The Public Utility Commission of Texas may decide later this year whether to allow electric transmission company CenterPoint Energy to move forward with plans for a $590 million transmission line to Houston that the company says is critical to ensuring reliable power access in the area.

The project, which CenterPoint says could come online as soon as 2018, would create another route for electricity generated outside the region to enter Houston, where company officials say demand for power is growing while the capacity to produce it has decreased in recent years.

"Simply put, there's a critical need for power import," CenterPoint CEO Scott Prochazka said Tuesday in a meeting with the Houston Chronicle editorial board. "Our role is to make sure there's enough power here for people, business and industry to thrive."

But two major power generators with Houston headquarters, Calpine and NRG Energy, are urging the Public Utility Commission of Texas to put the brakes on the project.

They argue that CenterPoint's proposed line is expensive and unnecessary and say they can build power plants to serve the Houston area before CenterPoint builds its lines.

The commission has scheduled a hearing for Oct. 17 to hear the companies' arguments and will make a decision sometime after that.

Earlier this year the Electric Reliability Council of Texas, the grid operator for most of the state, endorsed a version of CenterPoint's transmission line plan, dubbed the Houston Import Project or the Brazos Valley Connection.

ERCOT said the demand for power in the Houston region is growing but expressed doubt that new generation facilities would come online soon enough to handle it. In fact, the agency said, plant retirements have outpaced new generation in the region by about 2,000 megawatts over the past decade.

The lack of new generation coupled with the growing demand for power, ERCOT said, has resulted in a growing reliance on importing power from other parts of Texas. CenterPoint leaders say the region's ability to import power is approaching its threshold.

If power needs exceed transmission capacity, company executives said, it could cause major headaches. CenterPoint leaders alluded to the rolling blackouts in February 2011 as a harbinger in the area if a new line isn't installed.

"It's the equivalent of a three-lane accident on 290," Prochazka said. "It's a disaster. Everything grinds to a halt."

CenterPoint proposes a 130-mile line from a substation in Limestone County, east of Waco, to another substation east of Bryan and ultimately to one in northwest Harris County.

Customers across the ERCOT grid would bear the project's $590 million price tag, as is standard practice for new transmission lines anywhere within the council's region. CenterPoint estimates the project would add 35 to 40 cents to residential customers' monthly bills.

But NRG and Cal-pine want the Public Utility Commission to require ERCOT look again at the project. They question the methodology ERCOT used when it recommended the infrastructure.

"It's our view that if you're going to justify spending that much ratepayer money ... you really need to be sure you've done the proper analysis, followed all the rules and used reasonable forecasts," said Mark Walker, NRG's vice president for regulator affairs.

Walker said ERCOT overestimated demand in the Houston area and made unrealistic assumptions about how much new generation could come online in northern Texas for the area to import.

Power generators acknowledge that they won't build plants until wholesale prices justify construction, but note that point may be coming soon.

NRG officials pointed to three possible projects totaling 1,500 to 1,900 megawatts of new power generation capacity serving the Houston area - none of them sure things yet.

Some power generators have pushed for a change in the state's markets to let them build, and get paid for, generation that's only used when demand is high. That hasn't happened, which has stymied construction in some areas.

Regulators cannot order generators to build plants.

CenterPoint says it can't simply wait for power companies to decide when their models justify new facilities in the region. Even if the commission rules in CenterPoint's favor, it will still need a subsequent approval from the commission after it gives more information about the details of the line's route.

That could happen next year.

CenterPoint is also involved a separate dispute about the project. ERCOT ordered two other transmission companies to build the northern leg of the project, with CenterPoint taking on the southern leg.

CenterPoint is asking the Public Utility Commission to give it responsibility for the entire project, since it controls the substations on both ends.

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