Part 2.
PUBLIC UTILITY COMMISSION OF TEXAS
Chapter 25.
SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS
The Public Utility Commission of Texas (commission) adopts new §25.199
relating to Transmission Planning, Licensing and Cost-Recovery and an amendment
to §25.231 relating to Cost of Service with changes to the proposed text
as published in the October 29, 2004 issue of the
Texas Register
(29 TexReg 9953). The amendment and new section are
necessary to implement provisions of the Public Utility Regulatory Act (PURA) §35.004(d)
and §39.203(e), as amended by House Bill 2548, 78th Leg., R.S., ch. 295, §3
(2003) (HB 2548). New §25.199 prescribes the procedures and criteria
under which the commission may require an electric utility or a transmission
and distribution utility to construct or enlarge facilities to reduce transmission
constraints in the Electric Reliability Council of Texas (ERCOT) in a cost-effective
manner. The amendment to §25.231 prescribes additional criteria the commission
would consider in authorizing construction work in progress, a special form
of rate relief, for a transmission utility that is ordered to build facilities
under §25.199. This new §25.199 and amendment to §25.231 are
adopted under Project Number 28884.
No party requested a public hearing on proposed new §25.199 and the
amendment to §25.231.
The commission received comments on the proposed new §25.199 and amendment
to §25.231 from San Antonio City Public Service (CPS), Brazos Electric
Power Cooperative, Inc. (Brazos), Reliant Energy, Inc. (Reliant), CenterPoint
Energy Houston Electric, LLC (CenterPoint), LCRA Transmission Services Corporation
(LCRA TSC), TXU Electric Delivery Company (TXU Delivery), American Electric
Power Company, Inc. (AEP), Texas Industrial Energy Consumers (TIEC), ERCOT,
FPL Energy, LLC (FPLE), the Wind Coalition and Texas State Representative
Phil King. In its comments, the Wind Coalition represented the views of FPL
Energy, PPM Energy, GE Wind Energy, Vestas-Americas, Inc., Gamesa Energy Southwest,
Cielo Wind Power, Environmental Defense, Public Citizen's Texas Office and
the American Wind Energy Association.
Several commenters criticized §25.199, expressing the view that the
rule did not go far enough to promote the development of wind resources in
Texas. LCRA TSC, AEP, FPLE, and the Wind Coalition all commented that the
rule addressed the reliability and economic aspects of transmission constraints,
but that the rule did little to achieve the renewable goal set forth in PURA §39.904(a).
LCRA TSC said that the rule did not even consider the renewable goal as authorized
by HB 2548. One often-repeated concern was that the ERCOT transmission process
did not adequately address the particular needs of wind generation. Parties
explained that the development of wind generation facilities takes far less
time than the development of fossil fuel generation and that the current ERCOT
planning process for transmission was better suited to meeting the needs of
fossil fuel generation. Parties explained that the current ERCOT process requires
that collateralized interconnection agreements be signed with ERCOT before
it would consider upgrading the transmission system to accommodate the energy.
Wind facilities take far less time to develop than transmission capacity and
parties noted that there can be a significant time lag between when the wind
facility is operational and when the transmission upgrades can be made to
accommodate the wind energy. Parties claimed that the experience with the
heavily curtailed wind projects in the McCamey, Texas area have caused bankers
to be unwilling to commit capital investment for wind facilities significantly
in advance of the necessary transmission capacity to move the energy to market.
Parties argued that, without specific language in the rule to accommodate
this disconnect in the transmission expansion process, financing of new wind
construction would become harder to achieve. TIEC, on the other hand, suggested
that the real problem with the recent dearth of wind development investment
was the absence of the federal production tax credit which has since been
reinstated.
LCRA TSC, AEP, FPLE, and the Wind Coalition all complained that the proposed
new rule did nothing to address consideration of proposed transmission projects
to be built in anticipation of future wind development to reduce the time
lag between the construction of the wind facility and the upgrades to the
transmission system needed to accommodate the facility's energy. AEP suggested
that the requirement that all projects go through the regular ERCOT transmission
planning process "merely codifies the normal evaluation and approval process
that all potential transmission improvement would undergo at ERCOT." AEP argued
that, if the legislation was intended to help Texas meet its renewable capacity
goal, then requiring that applicants first avail themselves of the ERCOT planning
process would be unwieldy, inefficient, and potentially could result in numerous
procedural traps once the certificate of convenience and necessity (CCN) is
filed. AEP suggested one such procedural trap could be a possible conflict
in a subsequent CCN proceeding if ERCOT declined to approve a project but
the commission later determined the project was necessary. AEP viewed that
concern as additional justification to bypass the ERCOT process.
TIEC disagreed with LCRA TSC, AEP, FPLE, and the Wind Coalition, and commented
that the rule provided a feasible framework for developing additional transmission
expansion without ignoring the processes already existing in the ERCOT stakeholder
process and the CCN process. Reliant, in its initial comments, and TXU Delivery,
in its reply comments, agreed with TIEC that projects brought to the commission
under the requirements of PURA §39.203(e) must have previously been considered
in the ERCOT planning process and not be the subject of a pending CCN proceeding.
TIEC emphasized that the collaborative ERCOT stakeholder process is the best
way to ensure efficient development of transmission resources. TIEC reminded
the commission that, in its initial comments in Project 28884, it pointed
out that the legislative intent was for the process envisioned by PURA §39.203(e)
to be used as a last resort when the ERCOT and CCN processes have failed to
resolve acute transmission constraint issues.
AEP suggested a process whereby the commission staff would determine, from
information submitted by interested parties, where significant potential for
wind development existed but could not be realized due to a lack of transmission
infrastructure. AEP recommended that, after an area was identified, the commission
initiate a proceeding to determine the amount of renewable energy for which
transmission capacity should be provided. ERCOT would then provide cost and
other project development information to the commission, after which the commission
could determine whether to order the construction of the facilities. AEP reasoned
that this was a thoughtful and cost-effective way to get out in front of the
wind development and circumvent the time lag issues. TXU Delivery replied
that suggesting that the commission's rule language be broadened to include
consideration of future development of generating resources could make the
rule inconsistent with the existing requirements of PURA Chapter 37 regarding
the need for transmission facility construction. Representative King supported
AEP's proposal. In reply comments, the Wind Coalition urged the commission
to adopt rule language that more proactively addresses future constraints.
The Wind Coalition argued that the commission was empowered by HB 2548 to
consider current as well as future transmission constraints when considering
ordering transmission facilities under this section.
Commission response
The language of PURA §39.203(e) is clear: "The commission may require
an electric utility or a transmission and distribution utility to construct
or enlarge facilities to ensure safe and reliable service for the state's
electric markets and to reduce transmission constraints within ERCOT in a
cost-effective manner where the constraints are such that they are
not
being resolved through Chapter 37 or the ERCOT transmission planning
process." (Emphasis added.) PURA contemplates that the commission would order
the construction of transmission facilities if transmission service issues
are not being adequately addressed by the CCN and ERCOT processes.
The commission agrees with commenters that the ERCOT transmission planning
process does not always accommodate the particular needs of wind development.
An argument made by an applicant that building transmission in anticipation
of wind generation is a cost-effective means by which to circumvent transmission
constraints and achieve an important policy goal is likely to be rejected
by the ERCOT process. The process that the commission is establishing in the
rule would give parties who are dissatisfied with the outcome of the ERCOT
planning process an opportunity for commission review, and the commission
would have the authority to order a utility to construct new transmission
facilities if it concluded that legitimate concerns about transmission service
have not been adequately addressed.
The commission disagrees with LCRA TSC that the rule ignores the goal of
renewable development in HB 2548. House Bill 2548 included the consideration
of the state's renewable goal as part of an amendment to PURA §37.056(c),
which delineates the factors the commission must consider in a CCN proceeding.
PUC Substantive Rule §25.101(c)(6)(D) (relating to Certification Criteria)
refers to the statutory requirements of PURA §37.056(c). The commission
rules thus adopt the statutory criteria for granting a CCN by reference, including
the state's renewable goal.
The amended PURA §39.203(e) clarifies that the commission has the
authority to order the construction of transmission to relieve constraints
in ERCOT in a cost-effective manner. This section does not specifically refer
to congestion caused by renewable energy generation (including wind generation).
The treatment of various transmission needs under the new §25.199 tracks
the statute: the new section establishes a process in which a party that has
a concern about any transmission-service need that it believes is not being
addressed can raise the matter with the commission.
The commission declines to adopt AEP's specific process for identifying
areas where significant potential for wind development exists for several
reasons: the commission believes that the rule, as proposed, is adequate to
address any legitimate concerns about the ERCOT planning process and the commission
believes that the rule should not put transmission needs related to the renewable
energy goal ahead of other transmission needs, such as those related to reliable
service to customers and generators' access to loads. The commission is not
precluded from facilitating or conducting fact-finding to identify areas conducive
to wind facility development. In fact, the commission believes that it is
an appropriate forum in which to develop information on the location of favorable
renewable resource areas and the costs of building transmission to facilitate
their exploitation. However, for the reasons set forth above, the commission
declines mandating by rule the specific process outlined by AEP.
In response to AEP, the Wind Coalition, and others' assertion that the
rule relies on the existing ERCOT planning process, the commission notes that
the process outlined in the rule is entirely consistent with amended PURA §39.203(e).
As is noted above, the statute contemplates commission action where the ERCOT
and Chapter 37 processes do not resolve the problem.
The commission also does not anticipate the same conflict during the CCN
process that AEP does. PURA §39.203(e) states that in any proceeding
brought under chapter 37, an applicant need not prove that the construction
ordered is necessary for the service, accommodation, convenience, or safety
of the public. This provision means that "need" issues would be resolved in
a proceeding under PURA §39.203(e), and that other routing and impact
issues would be resolved in the subsequent chapter 37 proceeding.
The commission agrees with the Wind Coalition and other parties that it
can consider current and future transmission constraints and believes the
rule language does not limit its ability to do so. The commission does not
believe that it is necessary to include the adjectives "current" or "future"
when referring to constraints that it may address under this section.
CPS submitted comments arguing that the commission lacks the jurisdiction
to order a municipality to order the construction of transmission facilities
to address safety and reliability or to address the cost-effective reduction
in congestion. CPS argued that because PURA §39.203(e) does not apply
to municipalities, new §25.199 cannot apply to San Antonio.
Commission response
Prior to the last legislative session, PURA included provisions that authorized
the commission to require that municipal utilities construct transmission
facilities where the commission determined that there was a transmission need
that warranted the construction of the new facilities. PURA §35.005(b)
provides: "The commission may require transmission service at wholesale, including
the construction or enlargement of a facility." This section clearly applies
to municipal utilities because PURA §35.005 applies to electric utilities,
which is defined in PURA §35.001 to include municipal utilities, for
the purposes of Chapter 35, Subchapter A. The 2003 amendment of PURA, which
amended §39.203(e), did not impair the pre-existing commission authority
to require the construction or enlargement of facilities that was set out
in §35.005(b). This rule is primarily intended to implement the 2003
legislation but it is not adopted in a vacuum. Powers of the commission arising
from other sections of PURA may be relied on in adopting this rule, and the
commission identified PURA §35.005 as one of the authorities for the
adoption of the rule.
In its initial comments, LCRA TSC stated that the rule should only apply
to transmission and distribution utilities and that all references to electric
utilities should be removed. LCRA TSC later clarified that its initial comment
was not an indication of LCRA TSC's position on the commission's jurisdiction
over municipally-owned utilities but rather LCRA TSC meant to point out that
the rule was not consistent throughout in using the terms "electric utility"
and "transmission and distribution utility" in every instance.
Commission response
The commission agrees with LCRA TSC that the proposed new rule did not
use the terms consistently throughout and amends the rule language accordingly.
Reliant commented that both subsection (b) and (d) of §25.199 are
titled "Application." To minimize confusion Reliant recommended renaming subsection
(b) to "Applicability" and subsection (d) to "Filing requirements."
Commission response
The commission agrees with Reliant and makes the recommended changes to §25.199.
Brazos commented that allowing any "interested party" to file a request
under new §25.199 was too broad and would allow a person to file if it
claims to have an interest in the ERCOT electric market. Brazos believed the
commission should consider limiting who can make a request and suggested revising
the term "interested party" to "market participant" as defined in the ERCOT
protocols.
Commission response
The commission disagrees that allowing "interested parties" to file requests
under the proposed new rule is too broad. Brazos' suggestion to use the term
"market participant" as defined by the ERCOT protocols does not allow for
the flexibility and scope the commission expects to achieve in the proposed
new rule. "Market participant" is defined in the ERCOT protocols as "An Entity
that engages in any activity that is in whole or in part the subject of these
Protocols, regardless of whether such Entity has executed an Agreement with
ERCOT." The commission prefers to allow entities such as prospective investors
in the ERCOT electric market and other parties not contemplated within ERCOT
protocol's definition of "market participant" to file applications under new §25.199.
The commission's precedent includes broad standards for standing to participate
in a contested case and it believes that those standards are appropriate in
this context.
Brazos also submitted suggestions for clarifying the distinction between
transmission upgrades addressing safety and reliability upgrades addressing
constraints. Brazos interpreted the two situations as separate and concluded
that the cost-effectiveness requirement was only applicable to the situation
where the facility upgrade was to address a transmission constraint.
Commission response
The commission believes that Brazos' suggested revision is not necessary.
The provision as proposed applies the cost-effectiveness requirement only
to the elimination of transmission constraints.
CenterPoint and the Wind Coalition expressed concern that the rule did
not give parties seeking relief under §25.199 the ability to file an
application with the commission if a transmission project was neither accepted
nor rejected in the ERCOT process. CenterPoint suggested that language be
added imposing a time limit on ERCOT so an aggrieved party could use the commission's
process in the event that ERCOT fails to take any action on the request within
a prescribed time period. CenterPoint suggested that, since the ERCOT process
requires up to 139 days for evaluation of a project, allowing 140 days was
reasonable.
The Wind Coalition and FPLE concurred with CenterPoint that the amount
of time ERCOT has to review a transmission project should be limited. The
Wind Coalition commented that the commission should retain the right to monitor
and intervene in the ERCOT planning process, especially when the ERCOT process
has stalled, and that PURA §39.203(e) supported this position. The Wind
Coalition stated that this would provide additional incentive for the ERCOT
process to review transmission projects in a timely manner. The Wind Coalition
suggested that language be added to subsection §25.199(e)(2)(b) allowing
an applicant to petition the commission under §25.199 if the project
under question had been submitted to ERCOT and had not been approved or rejected
within 180 days of submission.
In reply comments, TIEC voiced its reluctance to have new §25.199
contain language imposing explicit time limits on the ERCOT planning process.
TIEC stated that this limitation on the ERCOT planning process, as well as
suggestions by parties that the ERCOT planning process should be bypassed
altogether, turns the transmission planning process on its head. TIEC wrote
that such "limitations on the ERCOT planning process would undermine the holistic,
cooperative process that is vital to the efficient development of transmission
facilities."
The Wind Coalition also proposed language whereby an applicant could request
that the commission order a transmission provider to prepare and file a CCN
for facilities that had been approved through the ERCOT process, but had seen
no subsequent activity by the electric or transmission and distribution utility
assigned to build the line.
Commission response
The commission agrees with CenterPoint, FPLE, and the Wind Coalition that
the ERCOT process should not be open-ended. However, the commission is not
prepared to establish a fixed time limit for the ERCOT or CCN process. Instead,
the commission can assess the facts surrounding ERCOT's consideration of a
transmission-service need or surrounding a utility's progress in preparing
a CCN application and decide whether it is appropriate for the commission
to order new facilities to be built. If the ERCOT process breaks down and
does not accomplish its goal of addressing a proposed project in a reasonable
amount of time, the commission has the authority to address an application
under this section. The commission modified the new section in response to
the comments of CenterPoint and the Wind Coalition to provide that, where
an applicant believes that an ERCOT decision imposes a condition on the approval
of a transmission project that is tantamount to rejection, it may treat the
ERCOT action as a rejection and challenge it through the process set out in
new §25.199. In response to concerns regarding a utility's progress in
the CCN process, the commission modified the rule to require that the electric
utility or transmission and distribution utility present evidence regarding
a reasonable time for submitting its CCN application and that it present evidence
in the CCN proceeding regarding reasonable times for planning, licensing and
constructing the line, so that an appropriate timeline may be included in
any commission final order granting the CCN.
TIEC commented that the commission should clarify the requirements for
filing a complaint under new §25.199 to require applicants to demonstrate
that their transmission issues were not being addressed through an individual
utility's transmission planning process prior to the utility filing a CCN
application. TIEC stated that it believed that the commission intended for
this language to preserve the integrity of the CCN process, but it is concerned
that the rule could be used to undercut a utility's own internal transmission
planning process.
TIEC commented that utilities must be able to evaluate their transmission
resources and needs on a system-wide basis and then allocate resources accordingly.
TIEC expressed concern that utilities could be threatened with contested case
proceedings prior to the utility being able to file its CCN application. TIEC
went on to state that this could preclude a utility from conducting the type
of open evaluation of its system transmission needs essential to viable transmission
planning. TIEC feared this could result in inefficient deployment of transmission
resources, potentially resulting in higher consumer costs and lower reliability.
Commission response
The commission does not believe that there is a significant risk that parties
would use §25.199 to circumvent an electric or transmission and distribution
utility's planning process. TIEC's suggested modification could create an
opportunity for a utility to use its "individual" planning process to prevent
a party from petitioning the commission for relief under §25.199. The
rule requires that an applicant demonstrate that the facilities are not the
subject of a current CCN proceeding and the facilities have been presented
to and considered in the ERCOT planning process and have been rejected. TIEC
would also require that an applicant who comes to the commission with a proposal
for new transmission facilities under the rule demonstrate that the facilities
are not under development in the utility's planning process. Most of the major
projects that other market participants have an interest in also have a regional
impact and are evaluated in the ERCOT planning process, rather than exclusively
in the utility planning process. For this reason, the commission believes
that TIEC's suggested modification is unnecessary.
ERCOT submitted reply comments suggesting that there may be a situation
where one project is rejected in favor of another that is better for ERCOT
as a whole. ERCOT expressed concern that the sponsor of a project not chosen
could come to the commission and ask that its project be ordered built. ERCOT
supplied the commission with suggested language that specifically requires
the applicant to provide information showing that its alternative is less
expensive than ERCOT's approved project.
Commission response
The commission agrees with ERCOT that this scenario is a possibility. However,
the rule cannot anticipate every eventuality. Contested proceedings provide
a workable venue for parties to air issues such as the one ERCOT has described.
The commission expects ERCOT or any other concerned party to intervene and
present arguments to the commission regarding the different projects considered
by the planning process and associated costs. Therefore, the commission declines
to make ERCOT's suggested changes.
The Wind Coalition commented that placing the burden of proof on the applicant
reduces the level of the commission's participation in the decision-making
process and is undue and onerous for the applicant. The Wind Coalition suggested
that the rule be changed to "permit the commission to make findings, independent
of anything an applicant has submitted." The Wind Coalition also suggested
that if ERCOT opposed the applicant, it should be required to present a reasonable
comprehensive cost benefit analysis with regard to the facilities.
Commission response
The commission modified the new section to address the Wind Coalition comments.
Contested proceedings at the commission typically place the burden of proof
on the applicant and the rule, as modified, will still place the burden of
persuasion on the applicant. Where the proposed new rule also implicitly placed
a burden of production of evidence on the applicant, the modifications to
the procedure should assist an applicant in developing evidence to present
its case. In this regard, the commission recognizes that some information
relating to a transmission proposal may not be available to an applicant.
To this end, the commission is making a proceeding filed under §25.199
subject to certain provisions of PUC Procedural Rule §22.251 (relating
to Review of ERCOT Conduct). These provisions require that ERCOT file a response
to the allegations in a complaint. The commission also addressed the Wind
Coalition's concerns about the resources required by a proceeding filed under §25.199,
by establishing a threshold review that would avoid the expenses of a contested
case, if the commission concludes that, for legal and policy reasons, a review
under the new section is not warranted.
Under the procedure set out in the new section, the applicant would file
an application containing the information required in §22.251(d). A copy
would be served upon ERCOT's General Counsel, every other entity from whom
relief is sought, the Office of Public Utility Counsel and any other appropriate
party. Within 14 days of receipt, ERCOT would file a response, as required
under §22.251(f). ERCOT would also be required to provide notice of the
application under §22.251(e) and the notice would be provided to all
transmission service providers in ERCOT. The presiding officer would review
the responses to the application, as a part of the commission's threshold
review. The presiding officer would make an initial recommendation within
20 days of the date ERCOT's response is filed as to whether the applicant's
request should be allowed to proceed. The presiding officer's recommendation
would be reviewed by the commission, and the commission would decide whether
or not a cost-benefit analysis should be undertaken. This process would require
that ERCOT would be a party to any proceeding under this section and should
permit an applicant to conduct discovery, if needed, to develop additional
information. The threshold review would also obviate the expenditure of extensive
resources on a proceeding if the commission concludes that it is not warranted,
for legal and policy reasons.
AEP suggested that the commission narrow the rule's language as it relates
to the commission's choice of a transmission and distribution utility ordered
to build the transmission facility. AEP preferred that the commission adopt
ERCOT's concepts from the Power System Planning Charter and Process which
is similar to the process used in §25.195(c) (relating to Terms and Conditions
for Transmission Service). In reply comments, the Wind Coalition echoed AEP's
concerns and added that merchant transmission developers also should be considered
if that was the most cost-effective means by which to expediently build the
transmission facilities.
Commission response
The commission agrees with AEP that the process described in §25.195(c),
in most cases, is the logical procedure to follow when choosing the electric
or transmission and distribution utility which will be ordered to build the
facilities. However, there might be instances where another utility or a merchant
transmission developer (as suggested by the Wind Coalition) is better suited
to build the facilities in a cost-effective expeditious manner. The commission
will retain its authority to make that determination during the proceeding.
TXU Delivery commented that the requirement that a final order issued pursuant
to new §25.199 include a date certain for the transmission service provider
to file a CCN at the commission had theoretical benefits but that there were
several practical problems with the requirement. TXU Delivery stated that
it had concerns that the method of establishing that date was uncertain and
that no specific time frame is appropriate for every transmission project.
TXU Delivery suggested that such a determination be made only with input from
the utility ordered to build the line.
TXU Delivery stated that, even after developing a reasonable timeframe
consistent with the information submitted by the utility, there are circumstances
outside the control of the utility that may preclude it from filing a CCN
by the date ordered. TXU Delivery urged the commission to include language
in the new rule that allows for the extension of the deadline if the utility
shows good cause. TXU Delivery expressed fears that, if a good cause exception
were not allowed, the utility might be forced to file an incomplete CCN that
could be challenged by interveners and ultimately have to be rejected by the
commission, frustrating the purpose of the deadline.
Commission response
The commission agrees that every transmission project has different requirements
and that those requirements impact the time required to develop the CCN filing.
The commission expects that a utility that has an interest in a particular
project would intervene as an active participant in the proceeding, especially
in light of the fact that ERCOT is required to provide notice to all transmission
service providers within ERCOT, and provide the relevant data crucial to a
commission determination of an appropriate deadline for filing a CCN. The
commission believes that the utility input is crucial in determining a CCN
filing deadline that makes sense. The commission also agrees with TXU Delivery
that there could be circumstances beyond the utility's control that should
lead to a reasonable extension of the ordered deadline and, therefore, modifies
the new rule accordingly.
CPS commented that, in the case of a municipally-owned utility, the rule
language regarding an order issued under this new section as it pertains to
the subsequent CCN requirements is inapplicable.
Commission response
The commission agrees with CPS that municipally-owned utilities are not
required to file for a CCN and amends the language accordingly.
The commission's proposed new rule provided that construction work in progress
(CWIP) could be available if there would be a significant delay between initial
investment and the initial cost recovery for a transmission project. AEP asserted
that the commission's failure to define the term "significant" will be a matter
of much unnecessary controversy. CenterPoint recommended clarifying the rule
to indicate that a "significant delay" would be 12 months. AEP was not opposed
to this suggestion should its own suggestion not be adopted. AEP argued that §25.231
should not contain a threshold test for inclusion of CWIP associated with
projects ordered pursuant to §25.199. Instead, if a utility is ordered
to undertake transmission improvements, project costs classified as CWIP should
be expeditiously included in the utility's rate base. AEP asserted that this
would likely reduce the total cost to the transmission customers of the project
over the life of the transmission line and might lower a utility's financing
costs, improve a utility's cash flow and minimize the impact of future rate
adjustments. AEP further argued that the commission should authorize inclusion
of CWIP in any transmission cost of service filing, including the annual update
filings permitted under §25.192(g) (relating to Transmission Service
Rates). AEP, LCRA TSC, CenterPoint and TXU Delivery suggested that §25.192(g)
be amended to allow for recovery of CWIP in an interim update proceeding with
a complete review of the costs in the utility's next rate proceeding. TXU
Delivery similarly argued that there should be no threshold test for inclusion
of CWIP, stating that requiring a utility to certificate and construct what
is likely to be a lengthy 345-kV transmission project will, by definition,
constitute an exceptional circumstance. CenterPoint also argued that otherwise
applicable criteria for inclusion of CWIP do not apply for transmission projects
ordered under new §25.199. LCRA TSC stated that the new rule does not
change the existing standard for recovery of CWIP and that the Legislature
likely intended a lesser burden when enacting HB 2548. LCRA TSC argued that
the commission should allow all approved transmission projects to be eligible
for CWIP recovery to encourage utilities to proceed expeditiously to build
transmission in the ERCOT region.
TIEC suggested that the rule include a requirement that the utility show
that the project is not being imprudently planned or managed. AEP disagreed.
It argued that PURA §35.004(d) authorizes the inclusion of CWIP if conditions
warrant the action but does not require the specific prudence showing contained
in PURA §36.054(b).
Brazos argued that it would be more appropriate to include the CWIP-related
provision in §25.192 which pertains to a utility's transmission service
rates as opposed to §25.231 which pertains to an electric utility's cost
of service. TXU Delivery made a similar argument.
Commission response
Pursuant to PURA §36.054(a), the inclusion of CWIP is an exceptional
form of rate relief which may be granted only if the utility demonstrates
that inclusion is necessary to the utility's financial integrity. Under PURA §36.054(b),
CWIP cannot be included in the rate base for a major project under construction
to the extent that the project has been inefficiently or imprudently planned
or managed. House Bill 2548 revised PURA §35.004(d) to provide that,
notwithstanding PURA §36.054(a), if the commission determines that conditions
warrant the action, the commission may authorize the inclusion of CWIP in
the rate base for transmission investment required by the commission under
PURA §39.203(e). The requirements in PURA §36.054(b) regarding efficient
and prudent planning and management are still applicable. The commission agrees
with TIEC's position regarding this requirement and amends the rule accordingly.
In light of this modification, the commission declines to amend §25.192(g)
to authorize inclusion of CWIP in an annual update filing as a prudence examination
is not appropriate in such a proceeding.
The commission declines to automatically allow CWIP for all projects ordered
under new 25.199. The Legislature specified that the commission could allow
recovery CWIP "if conditions warrant;" therefore, the commission believes
that it must examine the circumstances underlying a utility's request for
CWIP. Furthermore, if utilities are assured of obtaining CWIP in such instances,
they would have an incentive to avoid applying for a CCN until ordered to
do so. With regard to the question of what constitutes a "significant delay,"
the commission declines to adopt a specific definition for this term, such
as the 12 months suggested by CenterPoint. The need for CWIP is likely to
be different for different utilities and different projects.
Finally, the commission declines to move the proposed amendment from §25.231
to §25.192 on procedural grounds. The amendment was proposed in §25.231,
and the commission does not have the ability, under the Administrative Procedures
Act, to amend a different section, without issuing a new proposal to amend
that section.
All comments, including any not specifically referenced herein, were fully
considered by the commission. In adopting this section, the commission makes
other minor modifications for the purpose of clarifying its intent.
Subchapter I. TRANSMISSION AND DISTRIBUTION
1.
OPEN-ACCESS COMPARABLE TRANSMISSION SERVICE FOR ELECTRIC UTILITIES IN THE ELECTRIC RELIABILITY COUNCIL OF TEXAS
16 TAC §25.199
New §25.199 is adopted under the Public Utility Regulatory
Act, Texas Utilities Code Annotated §14.002 (Vernon 1998, Supplement
2005) (PURA) which provides the commission with the authority to make and
enforce rules reasonably required in the exercise of its powers and jurisdiction
and specifically: PURA §35.004 which requires a transmission and distribution
utility to provide transmission services at non-discriminatory rates and terms
and permits the commission to allow a utility to include construction work
in progress related to transmission investment in its rate base; PURA §35.005
which grants the commission the authority to order transmission service to
include the construction or enlargement of a facility; PURA §37.056 which
delineates the criteria the commission will consider to grant or deny a certificate
of convenience and necessity; PURA §39.203 which grants the commission
authority to require transmission facilities to be built to ensure safe and
reliable service, and to relieve congestion in a cost-effective manner where
the constraints are not being resolved through Chapter 37 or the ERCOT planning
process.
Cross Reference to Statutes: Public Utility Regulatory Act §§14.002,
35.004, 35.005, 37.056 and 39.203.
§25.199.Transmission Planning, Licensing and Cost-Recovery for Utilities within the Electric Reliability Council of Texas.
(a)
Purpose. The purpose of this section is to prescribe the
procedures and criteria under which the commission may require an electric
utility or a transmission and distribution utility to construct or enlarge
facilities to ensure safe, reliable service and to reduce transmission constraints
within the Electric Reliability Council of Texas (ERCOT) in a cost-effective
manner.
(b)
Applicability. This section applies to all electric utilities,
transmission and distribution utilities and ERCOT. This section does not apply
to an electric utility or transmission and distribution utility located outside
of the ERCOT region. For the purpose of this section, an electric utility
includes a municipally-owned utility and an electric cooperative.
(c)
Eligibility for filing a request under this section. Any
interested party in the ERCOT electric market may file a request for an order
under this section.
(d)
Filing requirements. Sections 22.251(d) - (f) of this title
(relating to Review of ERCOT Conduct) shall apply to proceedings under this
section, except as otherwise provided. In accordance with §22.251(f)
of this title, ERCOT shall file a response to the application within 14 days
after it receives the notice required under subsection (g) of this section.
ERCOT shall include as part of the response all existing, non-privileged documents
that support ERCOT's position on the issues identified by the applicant.
(e)
Standard for review. The commission may require an electric
utility or a transmission and distribution utility to construct or enlarge
transmission facilities to ensure safe and reliable service for the state's
electric markets and to reduce transmission constraints within ERCOT in a
cost-effective manner where the constraints are such that they are not being
resolved through Chapter 37 or the ERCOT transmission planning process. An
applicant bears the burden of persuading the commission that the facilities
are necessary to ensure safe and reliable service for the state's electric
markets or to reduce transmission constraints within ERCOT in a cost- effective
manner.
(f)
Threshold requirements. In its request, the applicant must
plead facts that are sufficient, if proven, to show that the request is likely
to be granted under the standards of this section.
(1)
The applicant must provide sufficient information for the
presiding officer to determine that the transmission constraints are not being
resolved through Chapter 37 or the ERCOT transmission planning process. In
particular, the applicant shall demonstrate that:
(A)
the facilities are not the subject of a pending application
for a certificate of convenience and necessity; and
(B)
the facilities have been presented to and considered in
the ERCOT transmission planning process and have been rejected, or have been
approved with one or more conditions that are tantamount to rejection, either
in the regional planning process or by the board of directors, or ERCOT has
not acted upon the application within a reasonable amount of time.
(2)
Within 20 days after ERCOT has filed its response to the
complaint pursuant to subsection (d) of this section, the presiding officer
shall make a recommendation as to whether the applicant has shown that the
facts alleged, if proved, would warrant granting the application. The recommendation
shall be submitted to the commission for its consideration and action at an
open meeting.
(g)
Notice. An applicant shall serve copies of its complaint
and other documents, in accordance with §22.74 of this title (relating
to Service of Pleadings and Documents), and in particular shall serve a copy
of the complaint on ERCOT's General Counsel, every other entity from whom
relief is sought, the Office of Public Utility Counsel, and any other party
as may be appropriate. The notice required by ERCOT under §22.251(e)
of this title shall also be provided to all transmission service providers
in ERCOT.
(h)
Cost effectiveness. Prior to granting a request filed pursuant
to this section, the commission, together with the applicant or other parties
as appropriate, may undertake a comprehensive cost- benefit analysis to consider
both quantitative and qualitative costs and benefits of the proposed facilities.
The analysis should consider at a minimum:
(1)
capital costs;
(2)
projected operation and maintenance costs;
(3)
carrying costs of the proposed upgrade;
(4)
a comparison of the cost of the proposed transmission project
to other congestion- management techniques, such as system re-dispatch;
(5)
system reliability; and
(6)
impact on wholesale power costs in the ERCOT region.
(i)
Commission order. If the commission concludes that the
applicant has demonstrated that the facilities are needed to ensure safe and
reliable service for the state's electric markets or to reduce transmission
constraints within ERCOT in a cost-effective manner and that the constraints
are not being resolved through Chapter 37 or the ERCOT transmission planning
process, it shall order an electric or transmission and distribution utility
or utilities to construct or enlarge the requested facilities.
(1)
The commission shall issue the final order in a proceeding
initiated under this section not later than the 180th day after the filing
of a complete, non-deficient request. Notwithstanding the foregoing, however,
the 180-day deadline may be extended by the commission for good cause.
(2)
An order adopted under this section:
(A)
except in the case of a municipally-owned utility, shall
be contingent on the successful outcome of the subsequent certificate of convenience
and necessity proceeding for the proposed facilities;
(B)
except in the case of a municipally-owned utility, shall
include a date, appropriate for the required construction, by which the electric
utility or transmission and distribution utility ordered to construct the
facilities will be required to file an application for a certificate of convenience
and necessity, which may be extended by the commission for good cause;
(C)
shall provide that the electric utility or transmission
and distribution utility need not prove in any proceeding filed under PURA
Chapter 37 that the construction or upgrade ordered is necessary for the convenience,
accommodation, convenience or safety of the public, and need not address the
factors listed in PURA §§37.056(c)(1)-(3) and (4)(E);
(D)
except in the case of a municipally-owned utility, shall
provide that in any proceeding filed under PURA Chapter 37 the electric utility
or transmission and distribution utility shall present evidence regarding
reasonable times for planning, licensing and constructing the line, so that
an appropriate timeline may be included in any commission final order granting
a certificate for a line; and,
(E)
shall provide that the electric utility or transmission
and distribution utility ordered to construct or enlarge the requested facilities
may request the inclusion of construction work in progress (CWIP) in the electric
utility or transmission and distribution utility's transmission cost of service
rate proceeding. The commission will grant CWIP in accordance with §25.231
of this title (relating to Cost of Service).
This agency hereby certifies that the adoption
has been reviewed by legal counsel and found to be a valid exercise of the
agency's legal authority.
Filed with the Office of
the Secretary of State on March 24, 2005.
TRD-200501301
Adriana A. Gonzales
Rules Coordinator
Public Utility Commission of Texas
Effective date: April 13, 2005
Proposal publication date: October 29, 2004
For further information, please call: (512) 936-7223
1.
RETAIL RATES
Subchapter J. COSTS, RATES AND TARIFFS