Texas regulators have approved ERCOT’s reliability plan for the petroleum-rich Permian Basin that could rely on the state’s first use of 765-kV transmission facilities.

The plan includes both 765- and 345-kV infrastructure to support the region’s current and future power needs and new and upgraded local projects, as well as new import paths that will bring additional power to the region. The Public Utility Commission approved the plan during its Sept. 26 open meeting (55718).

Commissioner Lori Cobos, a native West Texan who has taken the lead on the proceeding, filed a memo recommending the PUC authorize the region’s transmission service providers (TSPs) to begin preparing applications for infrastructure along eight import paths into the basin to serve its projected load in 2030.

She said that would preserve the plan’s “optionality” after recent ERCOT analysis indicated that installing transmission elements capable of either voltage would require additional months of engineering studies. The grid operator had initially hoped to use interchangeable import paths capable of both 345- and 765-kV lines.

“The whole goal remains the same in terms of preserving optionality at this time on the import paths into the Permian Basin region, so that ERCOT and the commission can continue their evaluation of EHV [extra high voltage], primarily 765-kV transmission lines,” Cobos said.

She said directing ERCOT to work with the TSPs on the import paths that would be needed for 2030 will provide certainty by prioritizing the applications for certificates of convenience and necessity. At the same time, she said, the grid operator and PUC will be able to continue their evaluation of EHV transmission and determine the import paths so CCNs can be filed. ERCOT has designated five of the import paths as 345-kV and the other three as 765-kV.

Cobos set a date certain of May 1, 2025, for the commission to approve the 765-kV lines. Should the PUC decide not to move forward with the EHV buildout, the 345-kV import paths would be considered approved and the TSPs allowed to file their CCNs, she said.

The grid operator has projected oil and gas load peaking at nearly 15 GW by 2038 and an additional 12 GW of data center and other non-petroleum load by 2030. Based on those projections, ERCOT has said building the transmission facilities to meet that load could cost more than $15 billion. It is currently considering 4,481 miles of 765-kV lines and 20 associated substations. (See EHV Tx Lines Coming into Focus for ERCOT.)

“If you look at some of the cost estimates for building out a 765 backbone throughout the state, it’s going to cost a lot of money just because of how large the state is,” PUC Chair Thomas Gleeson said in a keynote address Sept. 25 at Infocast’s Texas Clean Energy summit in Houston. “I think it’s important for us, for ERCOT, for the transmission and distribution utilities to not only show that cost, but also speak intelligently and clearly about what the benefits of all these transmission upgrades are, because you don’t get all the economic development here unless you’re willing to invest in the infrastructure.”

“It’s going to be a tremendous boon for our state in so many ways,” Cobos said of the plan.

Commissioner Jimmy Glotfelty continued to push for EHV lines, saying he was ready “to do 765.”

“I continue to believe that the deeper we get involved in the process and the deeper ERCOT’s involved in the process, the longer it’s going to take,” he said. “If we continually kick things to ERCOT, I fear that there are things that we can get tripped up on and slow down, and that makes me fearful of the default back to 345. I don’t think that’s the right default. The amount of congestion that we see in West Texas that this could help solve is somewhere between $100 [million] and $300 million a year. That obviously would pay for these lines, not even considering the economic development in the Permian.”

PUC to Review 4CP Program

The commission signaled it is ready to discuss doing away with ERCOT’s Four Coincident Peak (4CP) program, a demand charge that alerts industrial users to high energy costs during peak demand periods and was intended to allocate transmission costs to the drivers of new facilities (34677).

Staff said they were “supportive of opening the dialogue about 4CP.” They noted the program has been in existence for more than two decades and suggested it can be revised to maintain an ERCOT-wide rate based on demand but still “modify the allocation method away from 4CP.”

“I think it’s definitely time to talk about it and be proactive about … reviewing that decision that was made 20 years ago and make sure that it remains the correct one. And if not, then what should we be moving to?” Barksdale English, the PUC’s deputy executive director, told the commissioners, while also noting there is not “uniform [staff] opinion” on the program.

The grid operator’s Independent Market Monitor has recommended since 2015 in its annual market reports that 4CP be changed to better reflect the true drivers for new transmission. It said again in its latest report that the current method “does not apply transmission costs equitably to all loads.”

Under 4CP, pricing signals are sent to industrial customers who might want to avoid peak transmission costs. ERCOT looks at the peak demand over four 15-minute intervals from each of the summer months — June, July, August and September — and then assigns transmission costs to transmission and distribution service providers (TDSPs) based on their share of total peak load.

The TDSPs recover their transmission-cost obligations through wires charges on all loads. Staff use those obligations to calculate 4CP demand charges for industrial customers based on the facilities’ peak demand during the four 15-minute windows. The 4CP charges are then distributed over a 12-month period as part of the facility’s bill over the next year.

“Customer demand during the peak summer hours is no longer the main driver of new transmission in ERCOT today,” the Monitor said in its 2023 State of the Market report. “Decisions to build transmission are based on transmission congestion patterns throughout the year and an analysis of whether generation can be delivered to serve customers reliably.”

Cobos agreed the discussion on 4CP is worth having, given the need to build out the grid to meet demand that continues to increase.

“We have to make sure that we start proactively looking at how we are allocating costs and developing cost allocation and rate design in our rate cases now,” she said. “I’m concerned that all of the massive transmission infrastructure that we’re looking at as a future will be primarily allocated to the small business and residential consumers, so I think that the 4CP discussion needs to start as soon as possible.”

Staff made the suggestion as part of a response to the IMM’s latest market report. They gave an opinion (support, neutral or disagree) on each of the Monitor’s 16 recommendations from the current and previous reports.

The PUC also approved a proposed rulemaking that establishes procedures for utilities outside ERCOT’s footprint to apply for grants from the Texas Energy Fund. The TEF includes an Outside ERCOT Grant Program that will award grants for the modernization of infrastructure, weatherization, reliability and resilience enhancements, and vegetation management for facilities outside ERCOT.

The commission will accept comments on the proposal through Nov. 7 (57004).