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Texas PUC Staff File Draft Report On Evaluation of Transmission Cost Recovery
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Staff of the Texas PUC have posted a draft report concerning the evaluation of transmission cost recovery
The draft report does not include, in a section of the formal draft report, draft recommendations and proposed next steps
However, Staff's filing in an explanatory memo does invite stakeholder comment on the following draft recommendations listed below, which Commission Staff is "considering" for inclusion in the
final report:
Retail Transmission Cost Recovery
Interconnection costs
• Eliminate cost allowances related to interconnecting large load customers.
• Require large load customers to pay a portion of system upgrade costs.
Cost allocation
• Require annual updates to allocation factor values.
Rate design
• Require large load customers to pay a minimum demand charge that is based on the
large load customer’s contracted peak demand for a 10 to 15 year period.
Wholesale Transmission Cost Recovery
Rate design
• Change the methodology for assessing wholesale transmission costs on distribution
service providers to a coincident peak (CP) methodology with a greater number of
CPs.
• Lengthen the interval over which a coincident peak period is measured.
The draft report, in listing pros and cons of the current 4CP methodology, notes, among other things, "Wholesale 4CP rate design combined with 4CP class allocation and 4CP retail rates, sends a conservation and demand response price signal. This price signal incentivizes non-opt-in-entity (NOIE) DSPs and customers billed on a 4CP basis to respond in a manner that reduces peak demand on the transmission system during times of transmission scarcity. This retail rate design component can also help REPs determine the hedge value of an energy efficiency program for customers in competitive choice areas."
The draft lists cons of the current 4CP methodology as including:
(1) The 4CP methodology does not capture transmission scarcity which has recently occurred during winter season peak periods.
(2) The use of a single peak from each of the four "summer" months does not adequately reflect significant scarcity on the transmission system that occurs outside of those four intervals—notably during solar ramp hours in the morning and evening—and which may reflect higher scarcity than occurs during the other three summer months that comprise the 4CP methodology.
(3) The use of 15-minute intervals to establish the peak period in each month likely provides too "sharp" of a price signal in too narrow a timeframe, thereby over-valuing the amount of peak demand reduction or avoidance achieved in relation to the transmission costs avoided.
(4) Some types of sophisticated large industrial consumers can reasonably predict 4CP intervals and rapidly reduce consumption during likely peak hours, thus creating a mismatch in allocation factors on average over time.
(5) As more flexible large loads, such as crypto mines and certain types of data centers, interconnect to the ERCOT transmission system, clear transmission cost assignment may become increasingly difficult. These flexible large loads require significant transmission system investment and consume electricity on an order of magnitude higher than most other consumers. Their flexible operating procedures allow them to quickly reduce consumption without significantly disrupting their core business functions. This will become both a feature and a bug of the 4CP methodology.
Project 58484
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March 16, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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