Kinder Morgan Says ERCOT CRR Market Driven by "Speculators," Warns West Zone Congestion Hurting Economy (What Will Capacity Charges Do to Texas Businesses?)

Kinder Morgan CO2 Company, L.P. filed comments at the Public Utility Commission of Texas regarding congestion in the West Zone, expressing dissatisfaction with the congestion revenue rights (CRR) process, and warning of economic consequences from continued West Zone congestion.

Kinder Morgan's letter was dated September 4, prior to ERCOT's most recent update on West Zone congestion issues, though Kinder Morgan's letter was not marked as received by the PUCT docketing division until September 10.

Citing the large increase in its electricity costs due to West Zone congestion, Kinder Morgan told the PUCT that it, "aggressively sought to hedge against the cost increases by participating in the congestion revenue rights ('CRR') auctions." At the auctions, Kinder Morgan was able to buy CRRs for August at approximately $10 per MWh, but Kinder Morgan was only awarded approximately 75 percent of its monthly 185 MW requirement in the auction.

"Participating in the CRR market left Kinder Morgan with the clear impression that the CRR auction distorts the market by allowing speculators to buy up available CRRs, leaving inadequate CRRs for market participants to hedge their loads," Kinder Morgan said.

"Moreover, Kinder Morgan was unhappy to learn that the excess revenue received by ERCOT from CRR auctions is distributed back to retail providers on their load ratio share after account holders have been satisfied and that retail providers have retained these payments and not returned them to load customers. This means that customers are footing the bill for the systemic distortions which are causing costs to rise, while retail providers are reaping a windfall," Kinder Morgan said.

"The escalating costs are taking a toll on the West Zone. While Kinder Morgan has invested well more than $1 billion in the area and will continue to make significant investments and to create jobs in the West Zone, the costs have impacted Kinder Morgan's operations. If companies in the West Zone which are, without a doubt, being impacted scale back in their investment, then it is almost certain there will be negative impact on the economic health and vitality of the West Zone. Lost jobs and other disruptions could threaten the economic strength of the region. Also, continued unreasonably high congestion costs could have a chilling effect on new investment and cause the region to lose its competitiveness. Remedying the ballooning costs of congestion in the West Zone is necessary to continue the economic stability of the region and to ensure that incentives for investment such that the competitiveness of the area remains strong," Kinder Morgan said.

If increased congestion costs are threatening West Texas' economic viability, the question must be asked how such businesses will shoulder the expected billions of dollars in mandated capacity payments that would be imposed on loads if Texas decides to adopt a capacity market.

Kinder Morgan's letter was filed in Project 31600.