Texas PUC Staff Recommend Cost Recovery Mechanism (From REPs) For Energy Storage Contracted By TDUs

Staff of the Texas PUC have filed a draft proposal for adoption for a new rule which would establish an avenue for transmission and distribution utilities (TDUs) in ERCOT to contract with power generation companies (PGCs) for electric energy storage facility (EESF) capacity to ensure reliable service to distribution customers.

Regarding cost recovery, Staff's proposed final rule would provide for the recovery of EESF contract costs through existing interim cost recovery mechanisms, such as the DCRF rider. The REP Coalition had supported the use of existing mechanisms for cost recovery, opposing a new recovery mechanism.

Staff also proposed that the PUC confirm for the REP Coalition that, under §25.58(h)(1)(A), a TDU is required to provide REPs with a 45-day notice before approved rates reflecting the EESF costs become effective.

The proposed final rule would provide that a TDU may, with prior authorization from the commission under the rule, enter into a contract with a PGC for EESF energy and output capacity for the limited purpose of ensuring reliable service to the TDU’s distribution customers.

A TDU that has entered into a contract with a PGC for EESF energy and output capacity, in compliance with the rule, may direct the PGC to discharge the contracted capacity only to the extent necessary to ensure reliable service to the TDU’s distribution customers, Staff's recommended final rule provides

The proposed final rule would explicitly state that, "Nothing in this section, or a commission order issued under this section, authorizes the ownership of an EESF by a TDU."

PURA established that the leasing of EESF capacity by TDUs is limited to 100 MWs across the entire ERCOT region, and the proposed final rule now explicitly notes such limit

The proposed rule provides that EESF shall only be permitted if it is a more cost effective solution than traditional distribution facilities, and may only be used for reliability purposes.

EESF capacity leased to a TDU under the draft rule is not authorized to be used for resource adequacy purposes or to supplant or compete with generation resources.

Project 59523