Will Electricity Transmission Prices Increase?

The transmission costs were originally allocated equally to all power producers without consideration of the distance that the electricity is transported between generator and consumer. The generator with plants in Eastern Texas believe that is inappropriate and are working the Public Utilities Commission to change how the transmission costs are allocated.

If the PUC adopts a transmission costs that is a function of distance, this will make the cost of electricity produced in West Texas, where the wind and solar plants are situated, more expensive. The transmission costs are allocated to Georgetown consumers separately from the generation costs and thus they can be increased independent of the generator costs. Thus this mechanism would be a way to increase the electricity costs to the Georgetown consumer!Houston Chronicle

Calpine Corp. of Houston and NRG Energy, of Houston and Princeton, N.J., have asked the state Public Utility Commission to change the way transmission costs are apportioned among power generators, a move that would undo a key element of the policies that have made Texas the nation’s top producer of wind energy. Instead of using state tax credits, Texas has attracted billions of dollars in investment in wind energy by offering generators easy access to the biggest electricity markets through low-cost transmission. 

Not only would the change proposed by Calpine and NRG increase the price of electricity fromWest Texas wind and solar farms, analysts said, it could also discourage new investment in renewable projects.
But NRG and Calpine argue that their proposal revolves around market effciency. Producers don’t have incentives to build new power facilities close to their customers if they don’t have to pay for the power that is lost by transporting it over a long distance, according to the companies’ fling to the utility commission. 

Directly assigning transmission losses would expose the true costs of delivering electricity from remote locations where renewable resources have been concentrated, NRG and Calpine said, especially West Texas which has seen an over-building of renewables that have overwhelmed the existing transmission infrastructure.