Texas predicts 23% summer reserve margin but decline also forecast

Feb. 1, 2001—Compared to the 1.5% reserve margin that has kept California on the edge of rolling blackouts for 17 straight days, Texas will have a 23% cushion over peak demand this summer, state regulators said Thursday.

"With all these new power plants, Texas is a buyer's market," said Pat Wood III, chairman of the Public Utility Commission (PUC), just in time for the beginning of retail electric competition in January 2002.

With the turmoil in the West more states are rethinking deregulation and the impact it could have on consumers. A Texas lawmaker has already introduced legislation that gives the PUC the power to delay deregulation, if the agency determines conditions are not in place to go forward. Meanwhile, western governors are meeting in Portland, Ore., Friday to address potential impeding power shortages throughout the region.

Seeking to reassure Texas consumers, Wood noted nearly 50 new plants are either completed or under construction in Texas. More than 25 additional generation projects have been announced. New plants will add more than 21,000 MW of capacity by the summer of 2002, enough to power nearly 5 million Texas homes.

Statewide, firm electric demand in Texas is expected to reach 67,000 MW this summer, but total generation capacity should exceed 83,000 MW for a 23% reserve margin. Within the Electric Reliability Council of Texas Inc. (ERCOT), a bulk electric system serving 85% of Texas' electric load, firm peak demand is projected to reach almost 56,500 MW this summer, while installed capacity will top 70,700 MW. However, the same ERCOT study projects a steady decline in reserve margins through 2006.

ERCOT forecasts that by 2006 the reserve margin will fall to a skinny 11.2%. When the reserve margin dips to 7%, California calls a Stage 1 emergency, asking for voluntary conservation. ERCOT is also forecasting the amount of voluntary interruptible load available will decline almost by half to 1,692 MW in 2006 from 3,008 MW this summer.

Summer demand will hit a projected high of 65,050 MW in 2006. Meanwhile, ERCOT is forecasting electric generating capacity will decline to 71,381 MW in 2006, after peaking at 72,696 MW in 2005.

The year 2006 is a pivotal one under Texas deregulation law. Investor-owned utilities' rates are frozen through this year. They cannot raise residential and small commercial customers' rates before 2005, or until they have lost 40% of their load.

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