“Overheard at the GCPA 2017 Fall Conference”
The Gulf Coast Power Association’s 32nd Annual Fall Conference last week attracted several hundred attendees to the Texas state capital. A panel of CEOs discussed their reactions to the U.S. Department of Energy’s recent Notice of Proposed Rulemaking to FERC, while other panels covered ERCOT market reforms, federal policy issues, industry changes affecting transmission and distribution companies, and the future of the state’s energy markets
Lively Price-Formation Panel
“That’s a lot to respond to,” said Thompson & Knight’s Katie Coleman, speaking for Texas Industrial Electric Consumers (TIEC), which represents the state’s 50 largest electricity consumers. “Probably the most offensive aspect of the priorities for the energy-only market paper is the locational aspect. You want to send scarcity pricing signals to encourage new investment in ERCOT. Industrials have been very supportive of sending appropriate scarcity-pricing signals. … What we don’t think is appropriate is creating sustained high prices in one area of the state [such as that created by Houston congestion], irrespective of what’s going on statewide.
“That’s concerning to us because from a resource-adequacy standpoint … the minute you get a new transmission line, you’ve just exacerbated your oversupply capacity for the rest of the state, and you’re also suppressing price signals in that area,” Coleman said.
She said TIEC’s other concern is that locational prices won’t result in “very significant” construction of new generation. “Generators understand how to build just to the point where the pricing is maintained. They’re never going to build to the point where pricing collapses, right? That’s sort of self-defeating.”