More Texas Economic Engines (TI, Oil Producers) Line Up Against Capacity Market

More and more of the drivers of Texas economic growth are formally telling the Public Utility Commission of Texas that a capacity market would be "damaging" to businesses due to increased costs.

Texas Instruments said that it opposes a capacity market, "and suggests that alternatives such as the Supplemental Reserve Service (SRS) proposal, can achieve the same objective at a much lower cost."

While capacity owners have attempted to speak for customers on the need for "reliability," TI said that resource adequacy is, "an issue very important to TI, as the reliability of the Texas grid not only impacts our operations in ERCOT, but due to the way TI controls our global factories, it can also impact operations in other countries."

However, "[w]hile the reliability of our electricity supply is extremely important to us, so is our cost of electricity, as it impacts our ability to compete in the global marketplace. Texas Instruments operates in over 35 countries, and we still spend one third of our $200m+ electricity budget in Texas."

TI noted that in other parts of the country, capacity markets have been implemented and, "have proven to be very costly."

"In fact a recent study showed well over 90 percent of capacity payments went to existing power plants - not new generation facilities," TI said.

"TI urges you to keep an open mind to possible solutions as several exist - beginning with the ORDC currently being implemented. And should there be a need to move to an out-of-market solution, options also exist."

"TI supports an alternative solution, such as the SRS. It will be much more efficient, as only the generators providing the reserves are paid. A recent analysis performed by TIEC comparing the cost of these two alternatives concludes that the SRS option will not only cost one fifth that of a forward capacity market, but it should result in actual generating assets being built. This is just one example of solutions that can provide the desired results at a lower cost," TI said.

Separately, the Texas Independent Producers and Royalty Owners (TIPRO) said that its membership, "opposes any shift toward a capacity market in Texas."

TIPRO is an oil and gas trade association made up of over 2,500 members statewide, the vast majority of which are small independent oil and natural gas producers. TIPRO also represents royalty owners across Texas, as well as most of the largest publicly-traded independent producers operating in the state.

"The resulting hike in cost," from a capacity market, "would be particularly damaging to small independent producers, most of which operate on a tight profit margin," TIPRO said.

"In fact, many small producers reinvest virtually all profits from a given well into their next project," TIPRO said.

"Further, many producers in west Texas are already struggling to compensate for congestion charges. To further increase their costs by switching to a capacity market would compound this problem and may prove to be an insurmountable barrier to the continued operation of some companies," TIPRO said.