Electric Regulatory Developments Involving Distributed Renewable Generation in Texas

Transcription

1 The University of Texas School of Law Presented: The University of Texas School of Law 2013 Renewable Energy Institute January 30, 2013 Austin, Texas Electric Regulatory Developments Involving Distributed Renewable Generation in Texas Elizabeth Drews Author contact information: Elizabeth Drews Brown McCarroll, L.L.P. 111 Congress Avenue, Suite 1400 Austin, Texas Continuing Legal Education

2 Table of Contents I. INTRODUCTION...1 II. BACKGROUND RELEVANT TO DRG ISSUES...1 A. Overview of Texas Electric Regulatory Structure Federal and State Jurisdiction in Texas State Regulatory Models in Texas...2 B. Historic Levels and Types of Renewable Energy Development in Texas..4 C. Texas Renewable Portfolio Standard What Is Texas RPS?...6 a. Total Renewable Capacity Standard...6 b. Non-Wind Renewable Capacity Target Draft RPS Recommendation...7 III. TEXAS REGULATION OF DRG...7 A. DG as an Alternative to Distribution Facility Construction...7 B. Consumer Rights to DG...8 C. DRG and RECs...8 D. Encouragement of DRG...9 E. DRG Interconnection and Technical and Commercial Requirements PURA Regarding Solar DRG at Public Schools PURA Regarding DRG PURA Regarding DRG in EPE s Service Area PUC Rules on DRG Interconnection and Technical and Commercial Requirements...12 F. Net Metering versus Roll-Back Meters or Pricing Equivalent Net Metering Issues in Texas Outside EPE s Service Area Net Metering Issues in EPE Service Area...14 G. REP Obligations to Buy DRG Output...16 H. Regulatory Status Issues Involving DRG Law Prior to the 2011 Legislation...17 a. Prior Law on Retail Consumer s Status...17 i. Prior Law on Retail Consumer as a Utility...17 ii. Prior Law on Retail Consumer as a PGC...17 b. Prior Law on Third Party s Status...18 i. Prior Law on Third Party as a Utility...18 ii. Prior Law on Third Party as a PGC or REP Legislation on DRG Regulatory Status...20 a. Summary of SB b. Summary of SB PUC Rules on DRG Regulatory Status...21 I. ERCOT Registration of DRG J. DG Provision of ERS K. Rate Treatment of DRG IV. CONCLUSION...26 ii

3 Electric Regulatory Developments Involving Distributed Renewable Generation in Texas Elizabeth Drews 1 Brown McCarroll L.L.P I. INTRODUCTION Utility-scale renewable 2 energy projects can occupy many acres of land and have hundreds of megawatts (MW) of installed capacity. Examples include vast wind farms and fields of solar generation facilities typically owned by utilities or independent power producers. In contrast, distributed renewable generation (DRG) typically is much smaller-scale and is located on a retail electric consumer s property, such as on the roof of or adjacent to the consumer s building. Depending on the type of retail consumer, this might be a home, school, or business premises. In 2011, the Public Utility Commission of Texas (PUC) observed: Smaller-scale, distributed resources at customers homes and businesses are now seen as resources that can provide several benefits, economically supplying the customer s energy needs, enhancing reliability at the home or business, and also supporting grid energy needs. 3 This paper addresses DRG electric regulatory issues arising in the Electric Reliability Council of Texas (ERCOT) region and non-ercot parts of Texas, a state with a high and growing demand for electricity, enormous and diverse renewable energy potential, and a unique electric regulatory model. II. BACKGROUND RELEVANT TO DRG ISSUES Before addressing regulatory issues specific to DRG, this paper discusses relevant background on the Texas electric regulatory scheme, historic renewable energy development in Texas, and the state s renewable portfolio standard (RPS). A. Overview of Texas Electric Regulatory Structure 1. Federal and State Jurisdiction in Texas 1 Opinions in this article are solely mine, and nothing in this article constitutes legal advice or rendition of legal services. This paper is a summary of a broad and changing area, omitting issues and details that may be important in individual situations. 2 In this paper, renewable refers to the definition of renewable energy technology in the Public Utility Regulatory Act, TEX. UTIL. CODE , (d) (PURA). That definition is quoted in Section II.B of this paper. 3 PUC, 2011 Report to the 82nd Texas Legislature: Scope of Competition in Electric Markets in Texas (Jan. 2011) (2011 Scope Report) at 81. 1

4 In Texas, the level of regulation depends on whether generation, transmission, distribution and retail electric service are provided by investor-owned companies or river authorities, member-owned electric cooperatives (coops) or municipally-owned utilities (munis). 4 The ERCOT region includes 85 percent of the electric load and 75 percent of the land in Texas, including the entire state except the El Paso area, the Panhandle, and parts of east Texas. The ERCOT grid is intrastate and deemed not to be in interstate commerce. With limited exceptions, 5 electric regulation is thus performed only by the PUC and ERCOT, which has reliability, settlement and other functions. 6 Authority is clear and direct: ERCOT operates under PUC oversight, and both operate under direction of the Texas Legislature, expressed chiefly in PURA. In contrast, in Texas outside the ERCOT region, regulatory functions are divided between the PUC and FERC. The PUC grants certificates of convenience and necessity to construct generation (for investor-owned utilities) and transmission (for transmission service providers other than munis) and regulates retail rates and service (for investor-owned utilities). 7 FERC regulates transmission and wholesale power sales in interstate commerce. 2. State Regulatory Models in Texas Pursuant to the 1975 legislation that created it, the PUC granted certificates of convenience and necessity to provide retail electric service to areas throughout the state. 8 In most areas, only one incumbent supplier had a certificate of convenience and necessity to a given retail service area and could lawfully serve retail customers there. Electric utility service was viewed as a natural monopoly. Suppliers other than munis needed a certificate of convenience and necessity from the PUC to construct generation and most transmission facilities. The PUC regulated utility rates and service (except sales in interstate commerce regulated by FERC) but had only limited authority over munis. This regulatory model applied throughout Texas until the Legislature introduced wholesale competition, then retail competition, in the ERCOT region. The model still applies to non-ercot parts of Texas. 4 Regarding the PUC s limited authority over munis and coops, see PURA (6) and Chapters Regarding river authorities, see PURA Chapter 32, Subchapter B. 5 The major exception is federal jurisdiction over electric reliability, which is now regulated under both federal and Texas programs. See 16 U.S.C (c). The Texas Reliability Entity is the regional entity to which the Federal Energy Regulatory Commission (FERC) has delegated powers to enforce that federal statute in the ERCOT region. Most DRG is too small to require registration with the Texas Reliability Entity as a Generation Owner or Generation Operator. See and 6 See PURA regarding ERCOT s duties and the PUC s broad authority over ERCOT. 7 See PURA Chapters See PURA and

5 Find the full text of this and thousands of other resources from leading experts in over 30 legal practice areas in the UT Law CLE elibrary (utcle.org/elibrary) Title search: Electric Regulatory Developments Involving Distributed Renewable Generation in Texas Available as part of the ecourse Texas Renewable Energy 2013: Update on ERCOT Interconnection Rules; plus Electric Regulatory Developments Involving Distributed Renewable Generation in Texas First appeared as part of the conference materials for the 2013 Renewable Energy Institute session "Electric Regulatory Developments Involving Distributed Renewable Generation in Texas"