Diana Liebmann in Law360: Texas Regulation to Watch in 2014

01/02/2014


Texas energy producers are keeping a close eye on several brewing regulatory changes, as the state plans to take over greenhouse gas permitting from the U.S. Environmental Protection Agency and a heated debate continues over how to address an expected electric capacity shortfall...

Continued Debate of Electric Capacity Market
The Texas Public Utility Commission is expected to make decisions in 2014 about the hotly debated need for a power capacity reserve margin. A report due at the end of January on the economics of a reserve margin for the power grid covered by the Electric Reliability Council of Texas has been cited by commissioners as a key piece of information they need before making a final call on how to guarantee the state stays powered up — and a vote on whether to adopt a reserve margin could come the following month.

If the state does decide to set a minimum threshold for power capacity, still up for a potentially lengthy debate is where and how that level should be set. The overarching question is whether the state needs to intervene and provide incentives to encourage investment in new power plants and expanded electricity generation capacity through an estimated $4 billion annual subsidy, or if the free market can accomplish that goal on its own.

“The encouraging thing is they’re not just going to depend on the energy only piece of the market to incent new capacity to build,” said Diana Liebmann of Haynes and Boone, LLP, who represents clients that want the state to shift to a capacity market. “From the perspective of getting revenue out of the market, in an energy-only market those revenues aren’t streams that are steady enough to be financeable because they’re based on weather, but if you have the same cost associated with a capacity market there’s a forward price signal that is financeable.”

Excerpted from Law360, January 2, 2014. To view full article, click here (subscription required).

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