Archive for January, 2012

Is There Enough Time for Dallas Electricity Providers to Meet New EPA Rule?

Dallas electricity providers as well as other Texas electricity utilities in the state won a temporary victory as U.S. Federal appeals court recently issued a delay order to the January implementation of the new EPA Cross-State Air Pollution Rule. The decision was made after state legislators, the Texas electric grid operator and several other sectors of Texas society challenged the new ruling, pointing out the lack of time and resources for electric utilities to meet demands as well as the apparent threat to power capacity with the closing down of non-compliant power plants.

 

The new EPA rule aims to address the threat to human health brought about by the downwind pollution coming from the emissions of old, coal-fired power plants identified from 27 states across the country including Texas. The new rule also includes new standards for mercury, sulfur dioxide, and other toxic pollutants from electric plant smokestacks. Dallas electricity providers and other power generators across Texas and other affected states indicated that there is no enough time for them to meet the redesign, installation and upgrading of these power plants, not to mention the enormous costs such upgrades would entail.

 

Dallas electricity providers and other Texas electric companies challenged the new EPA rule pointing out that the government agency relied in faulty assumptions regarding the impact of this new rule to the state when the EPA included Texas in the list of affected areas. These companies claimed that they were given no opportunities to provide their inputs regarding the matter, forcing them to shut down power plants that could not be upgraded in time.

 

Loss of Texas Electricity Grid Capacity

In a survey conducted by the Associated Press among 55 power plant operators, it was estimated that at least 32 power plants will be forced to shut down unless they comply with the new EPA emission rules. Most of these plants are coal-fired while others are antiquated units that would require large amount of capitalization to be upgraded. The survey also pointed out that 36 more power plants will be shutdown when all the EPA rules have taken effect by 2014-2015 – equivalent to 14.7 gigawatts, enough to provide 11 million households with electricity.

 

One gigawatt is 1,000 megawatts of electricity, enough for Dallas electricity providers to power hundreds of thousands. Closing down coal-fired plants will definitely affect not only Dallas but the whole Texas electricity grid in terms of capacity. With the ever increasing demand for electricity in the state, compounded by high temperature levels during summer, the state will not have enough excess capacity to prevent rolling blackouts should peak demand increase beyond current levels.

 

Loss of Texas Jobs

Dallas-based Luminant Generation Company was among the first Dallas electricity providers that announced that they will not be able to meet the new EPA requirements and will be forced to shut down at least three lignite coal mines and power plants, losing up to 1,300 megawatts of capacity. The company will also be forced to cut 500 jobs from the plants and mines should the new EPA rule take effect during January.

 

The U.S. Federal appeal court stay order gives Dallas electricity providers some respite and time to make changes to their power plants for them to meet the new rules. However, although many Texas electricity providers and the grid operator announced plans for power plant upgrades, there are no certainties given yet if these projects will push through.

 

About Shop Texas Electricity– Shop Texas Electricity helps consumers and businesses compare and shop for their electricity plans in Texas. Learn more about Shop Texas Electricity by visiting us at www.ShopTexasElectricity.com

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Business Electric Rates and the Looming Texas Electricity Crisis

The announcements from ERCOT, the Texas state electrical grid operator, of a potential Texas electricity crisis and the occurrence of rolling blackouts during the next summer cycle has raised several mixed reactions from different sectors. Many saw the threat as real and blame the shutting down of old power plants in compliance with new EPA environmental rules. Others remain skeptical that there is indeed a looming electricity crisis and could be resolved by increasing consumer and business electric rates.

The real issue behind this predicament is capacity and in an energy-only deregulated Texas electricity market there was a lack of incentives for electric companies to build new power plants due to lower price caps. To incentivize Texas electric companies to build new power plants and address the potential threat of power shortages and rolling blackouts, the Texas Public Utility Commission is considering raising the price caps for wholesale Texas electricity.

This will give electric utilities guaranteed additional payments as incentives for building new power plants. However, many are apprehensive as the raised prices will be passed along to consumers through higher residential and business electric rates. 

The Texas Energy Only Market

The state went for an Energy-Only system after the Texas electricity market was deregulated back in 1999 and had plenty of excess capacity, making residential and business electric rates affected only by market forces and not dictated by legislators and politicians. In this system, the power plant operators are only paid for the power they supply, and this price is dictated by the price caps set for wholesale power.

This is different from a capacity market wherein the generating Texas electric companies are paid an additional flat amount above the whole price, giving power plant operators an incentive and the means to recoup the cost of building new power plant generators. Texas is not the only market with an energy-only system as countries like Australia adopt the same practice.

The difference however is that Australia has wholesale market price caps that are five times higher than Texas and this price difference is enough incentive for electric companies to build new power plants. With this lack of incentives, not enough new power plants have been built and the capacity margins in the state continued to shrink while demand continued to expand.

Raising the Market Price Cap 

The deregulated energy market in Texas not only gave consumers the power to choose their electric options but also allowed consumers to enjoy cheap electricity and competitive business electric rates – the 3rd cheapest rates in the country. The wholesale price cap is also at the low end and currently sits a $3000 per MWh, far from the $12,500 per MWh market cap in Australia.

To address the issue, the Texas Public Utility Commission is working on raising the current price cap to $4000 or even up to $6000, to give new investors incentives to look into building new power plants as profitable ventures in Texas. However, there are concerns that these increases may not be high enough to incentivize electric companies to invest in a new multibillion dollar power plant facility.

There are other less drastic means that the Public Utility Commission is initiating to address the looming electricity crisis that will come to the state as early as next summer. One thing is for sure though – there will be higher residential and business electric rates that consumers will absorb to ensure that homes and business will have enough electric juice to run through the cold winters and the scorching heat of the Texas summer.

About Shop Texas Electricity– Shop Texas Electricity helps consumers and businesses compare and shop for their electricity plans in Texas. Learn more about Shop Texas Electricity by visiting us at www.ShopTexasElectricity.com

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