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Too much competition a bad thing? Power companies oppose project that could lower Houston prices

A massive transmission project that could lower electric prices in Houston has won approval from the operator of the Texas power grid — despite objections from two major generation companies.

Dubbed the Houston Import Project, the transmission lines will cost an estimated $590 million and will run 130 miles from the northern portion of the Houston metro area to east-central Texas. The state’s primary grid operator, the Electric Reliability Council of Texas, gave its OK on April 8.

Power companies NRG and Calpine successfully opposed an earlier version of the project and continue opposing this most recent effort. Their objections do not surprise observers, given that both companies have a concentration of generation plants around Houston. The new lines could open the region to more competition and lead to a decline in wholesale power costs.

ERCOT estimates that wholesale power costs in the Houston area are approximately $27 million higher each year as a result of existing transmission constraints. The new lines, when complete, should lower those wholesale power costs by facilitating the import of power from other areas of the state.

NRG has argued that higher market prices around Houston will encourage investors to build more power plants, which, in turn, will help Texas keep up with future energy demand. But so far, new plants around the Houston area have yet to materialize. This is in large part due to the dense population in the region and environmental restrictions there that limit new plant construction.

Consumer representatives active at the ERCOT board — including those allied with TCAP — support the Houston Import Project. Although construction won’t be cheap, the additional costs will be borne by ratepayers statewide. That means the per-customer cost of construction should be nominal, while the lines themselves should contribute to energy affordability in the Houston area.

ERCOT recommended the project not for economic reasons, but rather to help ensure grid reliability. It says the construction should be completed no later than 2018. The expansion project is similar to others given the green light by ERCOT for reliability purposes, including projects around the Dallas/Fort Worth Metroplex and the Lower Rio Grande Valley.

TCAP is a coalition of more than 160 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers. – R.A. Dyer

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