With the New Year ringing in the launch of retail electric competition in Texas, a key executive with the Electric Reliability Council of Texas (ERCOT) last Wednesday expressed confidence that the state’s transmission system will be up to meeting the demands of electricity deregulation.

ERCOT will play a pivotal role in the state’s deregulation efforts since it administers the Texas power grid and serves approximately 85% of the state’s electric load. Texas regulators have opened up large swaths of the state to retail electric competition.

Sam Jones, ERCOT COO, expressed confidence that the Texas transmission system will be able to handle whatever challenges may result from electricity competition in the state. “We’ve been adding some transmission facilities,” Jones said in an interview with NGI. “We put a major new transmission line in service last May.” He also noted that ERCOT has some additional transmission lines on the drawing board.

“We actually converted our wholesale market ahead of the retail market and we converted it during August, which is our peak month,” Jones went on to say. “We had some high congestion clearing costs on four or five days, but other than that we didn’t see anything unusual.”

Unlike other states, Texas first engaged in a seven-month pilot program prior to the start of full competition in which up to 5% of customers were allowed to switch to a new provider. But the pilot program faced some difficulties getting off the ground last year due to computer-related glitches.

Jones was asked to gauge his confidence that the ERCOT computer systems won’t experience similar difficulties now that retail competition is officially underway. “We’re actually running the computer systems at full production right now,” Jones said. “The bottom line is I don’t think anybody realized the complexity of the retail mechanic function we were undertaking,” he noted.

“We found that we just basically had to do a lot of improvements, performance improvements on the systems, make some changes to make it all work, and that just took longer than anybody envisioned, including the system vendors,” the ERCOT executive pointed out. “We’re satisfied now, through testing with real-time data, that the systems are functional, they’re fast enough, they’re ready to go.”

Meanwhile, Jones elaborated on some of the major differences between Texas’ wholesale electricity market and that of California’s, which has been whipsawed in recent years after opening up for competition.

“One, Texas has had a pretty competitive wholesale open market for five years,” Jones told NGI. “And I think that has caused the independent generators to come in and build quite a few facilities — we’ve actually added over 10,000 MW of new generation in the last two years.”

“Secondly, our rules are a little bit different and they allow for 100% self-provision on the part of the market participants,” the ERCOT executive said. “Everything can be bilateral by contract so they can do some long-term hedging on their costs, depending on how much they want to.” Jones also noted the absence of a spot market in ERCOT.

“I think just that long-term hedging, the bilateral contracts and the adequate resources is a real good shield against the severe price increases and shortages that they saw in California,” Jones said.

Jones provided an update on how many customers ERCOT has switched as of Jan. 2, 2002, including the pilot project. “As of today, we have actually switched 85,800 customers to their new CR (competitive retailer) and they’re receiving power from those new providers.” He said that ERCOT has another 40,400 customers that are scheduled to switch at their next meter read and an additional 8,000 that are going through ERCOT’s system right now that are lining up to switch.

The Texas Public Utility Commission (PUC) has launched a public education campaign designed to educate and inform Texans of their right to choose a retail electric provider. As part of these efforts, the PUC has set up a web site that Texans can turn to for additional information on electricity choice (www.powertochoose.org/).

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