Houston — The Public Utility Commission of Texas on Thursday directed its staff to draftan order approving Sempra Energy's purchase of Oncor Electric Delivery,majority owner of Texas' largest transmission system, in a deal valued atalmost $16.5 billion.
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DeAnn Walker, who chairs the PUC, directed Stephen Journeay, the commission'sdirector of commission advising and docket management, to delegate to astaffer the preparation of an Oncor -Sempra proposed order.
Walker expressed hope the order might be ready in time for the PUC's March 8open meeting.
The discussion took relatively little time in an eventful meeting. The PUCalso:
Directed staff to draft an order approving the transfer of most of Lubbock Power & Light's load from Southwest Power Pool to the Electric ReliabilityCouncil of Texas
Decided to postpone for one month a change in ERCOT 's Operating Reserve
Demand Curve calculation
Received an update on how Texas utilities plan to adjust their rates toaccount for last year's federal corporate tax cut
If Sempra succeeds in acquiring Oncor, it will be a significant milestone inthe 46-month-old Chapter 11 bankruptcy proceedings of Dallas-based EnergyFuture Holdings, selling off the last major asset in the giant successor ofTXU, which had been acquired in 2007 in a leveraged buyout by Kohlberg KravisRoberts, Texas Pacific Group and Goldman Sachs Capital Partners that left EFHmore than $40 billion in debt.
In October 2016, EFH's Luminant generation and TXU retail electricity providerbusinesses were spun off to form Vistra Energy.
On February 1, Matthew Henry, the Vinson & Elkins attorney representing OncorElectric Delivery, reported to the PUC that a joint stipulation about theterms of the deal had achieved the unanimous support of all intervenors,including PUC staff, the Texas Office of Public Utility Counsel, the SteeringCommittee of Cities Served by Oncor, Texas Industrial Energy Consumers, TexasEnergy Association for Marketers, the Alliance for Retail Markets, GoldenSpread Electric Cooperative, Nucor Steel and the Texas Legal Services Center.
The PUC was scheduled to conduct a hearing on the merits of the case February21 and February 23, which the commission on Thursday cancelled.
LP&L load switch order requested
The commission also directed Journeay to ask for a draft order approvingLubbock Power & Light, Texas' third-largest municipal utility, to connect 470MW of its estimated 600-MW load to ERCOT beginning June 1, 2021. Walker askedthat the order be ready for the March 8 open meeting.
LP&L applied for the transfer on September 1, and the City of Lubbock onFebruary 8 filed an unopposed joint stipulation outlining the terms of thetransfer.
Xcel Energy 's Southwestern Public Service currently supplies power to LP&Lwith one short-term agreement for 470 MW through May 30, 2021, and a long-termagreement serving the remainder through 2044.
The deal's terms include the following:
LP&L pays $22 million a year for five years to ERCOT wholesale transmissioncustomers
LP&L makes a one-time $24 million hold-harmless payment to SPS upon the dateof integration into ERCOT, allocated and credited to SPS customers
LP&L takes no action that would cause the Federal Energy Regulatory Commissionto assert jurisdiction over ERCOT
Walker added that the order should make it clear that LP&L cannot convert itstwo natural gas -fired generation units, totaling about 125 MW, to connect tothe ERCOT system without approval by ERCOT .
Regarding the construction of transmission facilities to connect the load tothe ERCOT grid, Walker said the order should assign that work to SharylandUtilities and LP&L, allowing them to divide the work between them.
If they are unable to reach agreement on that, the issue should be brought tothe PUC for a decision, she said.
In Project No. 47199, regarding a possible reform of ERCOT pricing rules, thecommissioners discussed a staff memo which had advocated the possibility ofremoving generation committed for reliability purposes from calculations ofERCOT 's Operating Reserve Demand Curve price adder, which would result inhigher prices during periods of relative capacity scarcity.
All three commissioners said that "as a matter of policy" it would be correctto remove reliability-unit-committed units, which are dispatched to resolveshort-term problems, and reliability-must-run units, which are dispatched toresolve longer-term issues, from the ORDC adder calculation.
The idea had been proposed in a paper entitled "Priorities for the Evolutionof an Energy-Only Market Design in ERCOT," by Harvard's William Hogan and FTIConsulting's Susan Pope. This paper had spurred the PUC to initiate Project47199.
Excess power 'ain't our problem anymore'
However, Commissioner Brandy Marty Marquez said that in private discussionswith Hogan after the paper was submitted, she said Hogan agreed that ERCOT'smain trouble was "too much power."
"Well, guess what?" Marquez said Thursday. "That ain't our problem anymore."
After Luminant Energy, NRG Texas and the City of Garland, Texas, retired morethan 5,400 MW of generation this winter, the summer of 2018 is expected tohave a planning reserve margin of 9.3% or less, compared with a target of13.75% -- designed to ensure ERCOT has a blackout due to a lack of capacity nomore often than once every 10 years.
"We are prepared for what the summer is going to bring, which is higherprices," Marquez said. "Is there a signal we could send that is going tochange anything? Not at this point, I think."
Kenan Ogelman, ERCOT first vice president for commercial operations, saidERCOT has performed an internal analysis of the effects of removing RUC andRMR units from the ORDC adder calculation, which the commissioners said theywant to review before taking any action at the March 8 meeting.
Ogelman said that if the PUC decides to order the deduction of RUC and RMRcapacity from the reserves used in the ORDC adder calculation, ERCOT couldimplement the change by July 1.
Regarding actions utilities might take to revise their rates in light of lastyear's federal corporate income tax cut from 35% to 21%, Darryl Tietjen, PUCdirector of rate regulation, said utilities generally are considering changingtheir interim transmission cost-of-service mechanism, the distribution costrecovery factor and/or a credit rider adjustment.
"They all plan to do it in a fairly timely manner," Tietjen said, indicatingsome file changes in March and others in April.
An Entergy Texas representative said his company plans to include changes "ina full-blown rate case the first week of May."
--Mark Watson, email@example.com