Last month, Judge Stephen Yelenosky of the Texas District Court of Travis County dropped a bombshell
when he reversed the order of the Public Utility Commission of Texas ('PUCT') that awarded responsibility for constructing, operating, and maintaining transmission facilities necessary to deliver renewable (wind) energy to the population centers of the State.
In 2005, the Texas Legislature adopted Senate Bill 20 which directed the PUCT to select the most productive wind zones in the State and devise a transmission plan to deliver wind energy from these remote areas to the State's urban centers. Five Competitive Renewable Energy Zones ('CREZ') were identified in West Texas and the Panhandle for the construction of new wind energy generation. In 2008, the PUCT ordered the construction of new transmission to support up to 18,456 megawatts of wind energy capacity at an estimated cost of $4.93 billion, or approximately $4.00 per month per residential customer once construction was completed. The costs were to be reflected as rate increases. In its order of March 2009, the PUCT named thirteen transmission service providers (TSPs) to build the new power lines.
The City of Garland promptly sued the PUCT charging the Commission failed to consider the interests of electric customers and the advantages of municipally-owned utilities when awarding the contracts, including lower costs to electric customers. The City also argued that the PUCT did not make any "fact-specific findings" that substantiated why the thirteen entities were selected over those that were not. Judge Yelenosky agreed and on January 15 ordered the PUCT decision reversed and remanded back.
Where things stand
Judge Yelenosky's order had the effect of stopping the transmission projects authorized under the CREZ process.
The attorney for the City of Garland, Brad Neighbor, issued a press release on the Judge's ruling calling it "a big win for Texas ratepayers". This earned him a public rebuking by the PUCT Commissioners who appeared more concerned about their reputations than the court's order. But the fact is, Neighbor was right.
In a letter explaining his ruling, Judge Yelenosky found that the PUCT did not explicitly considered what’s most cost-effective for electric customers. He further detailed several areas where the PUCT relied on factors that were either legally irrelevant or lacked substantial evidence in the record to justify its decision.
Case in point: the PUCT partially supported its decision to not select the City of Garland or other municipally owned utilities because such entities were not required to pay property taxes and that payment-in-lieu-of-taxes might be infeasible. The Judge found the PUCT offered no explanation to connect this finding with the need to provide beneficial and cost-effective transmission capacity to electric customers. Rather, the record showed mere speculation "that taxing entities and others would be angered by transmission lines that did not come with tax payments." The Judge also found the PUCT's claim that "municipally-owned utilities did not possess the current and expected capabilities" was not based on any relevant factors or evidence in the record.
The PUCT appears to have acted on opinion and/or its own bias in deciding who would share in the $5 billion public pie.
But it gets worse.
In a little noticed hearing of the PUCT last fall, regulators sided with the companies building Texas' renewable-energy transmission network in deciding against seeking federal stimulus funding that could have saved money for the State's electric consumers. The Commissioners concluded that stimulus funds came with strings that would slow construction or negate any financial savings including:
a) the "Buy America" rule on iron, steel, and other US-made goods;
b) federal rules requiring workers be paid "prevailing wages" i.e. wages in line with what laborers earn in similar jobs in the region; and
c) major federal environmental review.
We note that transmission developers making the case against the stimulus funds have a vested financial interest in keeping their costs elevated; lower costs generally reduce the profit that regulated utilities can earn.
At the very least, the PUCT should have required the companies to prove the federal funding wasn't worth it, but we know from this recent court ruling that the Commissioners do not seem to know the difference between opinion and factual evidence. The ratepayers of Texas can only hope the Commissioners will respond constructively to the court ruling and remember who it is they serve.