July 14, 2008

Manufacturers to PUC: Be Responsible in Wind Transmission Plan

The following can be attributed to Tony Bennett, chairman of the Texas Association of Manufacturers (TAM), which represents more than 200 manufacturers statewide.

The Texas Association of Manufacturers is proud of the renewable industry in Texas. Texas boasts more renewable electric generation than any other state in the nation, and as much as many European countries. While market-based renewable energy can and should be developed, Texas must proceed carefully and appropriately. It is paramount that reliability is preserved and that costs are not unnecessarily increased.

For Texas, reliability and cost of electricity are the keys to sustaining Texas economic engine. As the Commission considers the designation of Competitive Renewable Energy Zones or “CREZs,” and the approval of transmission plans to bring that renewable energy to market, the right choice is the one that preserves electric reliability and avoids an unnecessary increase in electric rates.

TAM believes that Scenario 1B represents the highest level of transmission investment that the Commission should take on at this time. Scenario 1B is a bold step that will result in over 12,000 MW of wind power to be brought to market in ERCOT. Taken with wind development that is occurring in areas not associated with CREZ zones, which is not counted in the 12,000 MW, Texas will remain the undisputed leader in renewable energy.

Scenarios above 1B run the risk of hurting the overall transmission grid. Given that there are not infinite resources to build transmission, Scenario 1B will allow Texas to continue expanding other transmission infrastructure, which is needed to address reliability issues and to avoid costly price spikes in the market. These are important projects and Scenario 1B will not impede their development.

Scenarios above 1B could also harm reliability. It is no secret that wind power is an intermittent resource. Texas has a great deal to learn in order to reliably integrate the levels of wind being discussed. Recent events have taught us that without proper care, wind power can create reliability problems. Scenario 1B ensures that we can fully and responsibly bring wind to market, without having the lights go out in the process.

Finally, all the CREZ Scenarios carry hefty price tags, but those above 1B are particularly costly. The estimates submitted by ERCOT in the CREZ hearing were eye-opening. According to ERCOT, when all the transmission necessary to develop these wind resources are included, the cost for Scenario 3 - the most expensive of the scenarios presented – will exceed $7 billion.

To put that figure in perspective, a residential customer faces more than $6 per month in increases, and a hospital would see more than $800,000 per year in increased electric costs. And these estimates are low. According to ERCOT, the estimates do not include recent increases in the cost of building transmission, financing costs that will be incurred, and the actual routing of the lines. All of these factors will mean that the real costs will be much higher. These are not trivial increases and run the risk of harming economic development in Texas.

Even under scenario 1B, a residential customer will pay $3 more per month on their electric bills. For a hospital, the cost is over $500,000 per year. For a large manufacturer, the increased cost can exceed $1 million per year. While expensive, these costs are not as great as those projected under Scenario 3.

Texas can be proud of its record on promoting renewable energy. However, overreaching can be costly. With the national experience with Ethanol clearly in our focus, care is warranted. The Commission should do the right thing for Texas. It should act to allow for the expansion of renewable energy, but in a manner that preserves reliability and avoids unjustified cost increases.

Contact: Luke Legate, 512-775-9400