Market Information System Grid and Market Conditions

News Release

July 19, 2011

CEO Statement Regarding EPA Cross-State Rule

H.B. "Trip" Doggett

President and Chief Executive Officer
Electric Reliability Council of Texas

As the independent system operator for the Texas electric grid, we fulfill specific responsibilities assigned by the Public Utility Commission of Texas and the Texas Legislature – primarily, responsibility for the reliability of electricity across the state’s main interconnected power grid.  We are a non-profit organization; we don’t own generation or transmission; nor do we advocate for or against policy positions – except in cases where electric grid reliability may be affected.   This is one of those cases where we believe it is our role to voice our concern that Texas could face a shortage of generation necessary to keep the lights on in Texas within a few years, if the EPA’s Cross-State Rule is implemented as written. 

ERCOT’s May11 report to the Public Utility Commission on the impact of the proposed environmental regulations did not address the impact of SO2 restrictions on coal plants in ERCOT because these restrictions on Texas were not included as part of the EPA’s earlier rule proposal.  We have not had time to fully analyze the entire 1,323-page Cross-State Rule released July 7 or to communicate with the generation owners regarding what their intentions will be.  However, initial implications are that the SO2 requirements for Texas added at the last stage of the rule development will have a significant impact on coal generation, which provided 40 percent of the electricity consumed in ERCOT in 2010. 

Our concern is that the timing of the new requirements – effective Jan. 1, 2012 – is unreasonable because it does not allow enough time to implement operational responses to ensure reliability.  We fear that many of the coal plants in ERCOT will be forced to limit or shut down operations in order to maintain compliance with the new rule, possibly leading to inadequate operating reserve margins with insufficient time to reliably retrofit existing generation or build new, replacement generation.   

In the state’s deregulated electric market, the generation owner bears the risk of investment and decides when and where to build new generation, and whether to retire or mothball existing generation, based on market conditions.  ERCOT’s role in the competitive market is to provide an outlook for future peak demand and how much generation will be needed to maintain long-term reliability of the electric grid.  At this time, it is not clear that ERCOT operations has adequate tools to maintain long-term reliability in the face of the possible loss of a large amount of existing baseload generation in such a short period of time.

The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to more than 26 million Texas customers -- representing about 90 percent of the state’s electric load. As the independent system operator for the region, ERCOT schedules power on an electric grid that connects more than 46,500 miles of transmission lines and 710+ generation units. It also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for nearly 8 million premises in competitive choice areas.

ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature. Its members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities, transmission and distribution providers and municipally owned electric utilities.