The Southwest Power Pool Inc. (“SPP”) and the Electric Reliability Council of Texas Inc. (“ERCOT”) have each filed reports with the Public Utility Commission of Texas (“PUCT”) detailing the estimated costs and production cost savings of transferring Entergy Texas Inc. (“Entergy TX”) into each reliability region. In addition, Entergy filed a report on the costs of remaining in the Southeastern Electric Reliability Council (“SERC”). The studies were submitted in response to a PUCT request for cost-benefit analyses following Entergy TX’s request to join ERCOT.
Entergy filed its application to join ERCOT on December 29, 2006. The PUCT held several hearings in May and July of 2007 to evaluate Entergy’s application. In a series of orders issued in 2007 and 2008, the PUCT requested that 1) ERCOT update its estimates of the costs of integrating Entergy into its system; 2) SPP develop its own report on the costs of integrating Entergy into SPP; and 3) Entergy provide cost estimates on remaining in SERC.
SPP estimates that the cost of transmission system upgrades needed to integrate Entergy into its reliability region is somewhere between $155.8 and $446.6 million. However, SPP would gain between $28 and $80.4 million in production cost savings resulting from the integration. SPP also included the results of a market power study by market monitor Potomac Economics. The analysis did not identify any market power issues associated with the Entergy integration, assuming that a new 500 kV line will be in operation by 2012. If that line is not in operation, Potomac Economics said that market power issues could be managed by Entergy conducting capacity auctions.
ERCOT estimates that integrating Entergy into its transmission system would cost approximately $776.1 million in capital expenses, including $488.7 million in reliability improvements and $287.4 million in economic improvements. ERCOT would save an estimated $55 million per year by integrating Entergy into its system.
Entergy reported the costs of remaining in SERC to be between $161 and $390 million. The expected reliability costs would be lower if the 1200 MW Cottonwood Energy generating facility also remains in SERC and does not interconnect with ERCOT. The company did not provide estimates of potential production cost savings. The company also stated that it would need to add $550 million of new generation capacity in the western region of its service area sometime soon after 2012.
The PUCT is scheduled to discuss the report at its Open Meeting on January 14. Both reports are available online at: www.puc.state.tx.us under Docket No. 33687.