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Texas Retail Providers, Others Seek Summary Judgment That TDU's Proposed Method of Battery Ownership Contrary To PURA

April 3, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Several stakeholders, including TXU Energy Retail Company, the Alliance for Retail Markets, the NRG Companies, and Texas Energy Association for Marketers (joint movants), have moved for a summary decision finding that the ownership and operation of energy storage facilities in the manner proposed by AEP Texas-North Division in a proposal before the Texas PUC violates the Public Utility Regulatory Act.

As previously reported, AEP Texas-North proposed to install a lithium-ion battery in two locations on its distribution system (click here for prior story for more details)

Concerning energy used to charge the battery, and energy discharged from the battery, AEP, "proposes that it be treated as unaccounted for energy (UFE), similar to ERCOT Protocol 10.3.3.1 (f)(iii), which clarifies that metering of energy flows from transmission service provider-owned battery storage technology in Presidio is not required for settlement."

AEP had said that, "The assets described in this filing will not be used to sell energy or ancillary services at wholesale so they are not generation assets."

However, the joint movants, which also include TIEC and OPUC, described the proposal thusly: "Under its proposal, AEP would own and operate battery facilities that would be charged with electric energy appropriated from the market (usage that AEP would opt not to meter), unilaterally declare that such energy is 'unaccounted for energy' or UFE (thereby passing on the cost of the energy to all loads on ERCOT’s system), and then strategically deploy the battery facilities to provide electricity to AEP’s distribution consumers without directly charging them for the energy. In other words, AEP is proposing to exploit its position as a regulated utility by taking quantifiable amounts of electric energy from the market for free -- energy that AEP cannot lawfully buy or sell—and then releasing that energy to serve loads at a later time, imposing any costs on the market as a whole by attempting to characterize these transactions as 'UFE.'"

The joint movants noted that under PURA § 39.105, a TDU, "may not sell electricity or otherwise participate in the market for electricity except for the purpose of buying electricity to serve its own needs."

"Despite AEP’s attempts to frame its proposal to avoid the prohibitions in PURA § 39.105, its request runs directly contrary to the market structure mandated by the Legislature in Senate Bill 7 nearly twenty years ago, which imposes a clear division between the business of regulated electric utilities and the activities of competitive wholesale and retail market participants. TDUs are prohibited from selling electricity. AEP’s proposal is not cured because it offers to give away the electricity that it has taken from the market; rather, this adds another layer of impropriety because AEP would be exploiting its status as a regulated utility to systematically spread the financial implications of these transactions to the market at large," the joint movants said

"In effect, AEP would be participating in the competitive market with others’ money, using a facility that is subsidized by regulated utility rates and interjecting itself as a participant in ERCOT’s wholesale market. This type of market participation by a regulated entity will impede competition and distort efficient market signals. Regardless of AEP’s plan to shift the financial impacts of its energy transactions to ERCOT customers, AEP’s proposal still violates the prohibition in PURA against TDUs 'otherwise participat[ing] in' the competitive electric market," the joint movants said

With respect to one of the batteries to be installed at Paint Rock, the joint movants said, "AEP would use a rate-based, subsidized asset to serve load during peak usage periods, and would thus inappropriately displace market generation. As a result, AEP would significantly alter appropriate market prices by introducing energy that was previously purchased (by one set of customers through 'UFE') to serve a different set of customers during peak (when prices are higher), all using a facility that would be financed through regulated utility rates.25 On a larger scale, this type of interference in the competitive market could significantly impair efficient pricing, which is critical to the long-term health of ERCOT’s energy-only market."

"The Legislature also directed in PURA § 35.152 that energy storage facilities, to the extent they are permitted to operate within the electric market framework, participate as generating facilities, and thus they cannot be owned and operated by regulated electric utilities," the joint movants said

Docket 46368

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