New Findings Confirm Old Warnings

News flash:  expensive new transmission lines under development to support wind power will end up costing Texans nearly 40 percent more than earlier projections.

A city coalition warned in 2008 that transmission cost projections were off target.

That’s according to a new report, just released last month, which has concluded that a system of high-voltage lines once predicted to cost $4.9 billion will end up costing $6.8 billion instead.

ERCOT, the operator of the Texas power grid, developed the original flawed numbers in April 2008, as part of an analysis known as the CTO Study. The newest revised projections were included in a report produced in July for the Texas Public Utility Commission. The Texas Tribune, an online publication, first reported on the discrepancy earlier this week.

The sheer size of the missed projection is startling. All told, Texans now are on the hook for $1.9 billion in additional costs — which makes the error five times the size of construction costs of Reliant Stadium in Houston.

But what may be even more surprising is that regulators were warned in advance.

Three years ago, in documents filed at the PUC, a coalition of cities stated that the If you are disconnected from the game after you have confirmed your bet, the system will play out your hand based on Basic Strategy. CTO Study “dramatically underestimated” the cost of the proposed transmission lines, and that “cities are concerned that the appropriate studies have yet to be performed, and that the costs, benefits and reliability impacts of the various … scenarios are not completely known.”

The cities, members of a coalition known as the Steering Committee of Cities Served by Oncor, issued their warning in a document filed at the PUC on June 26, 2008 — about three months after the release of the CTO Study.

Specific problems identified by the cities in 2008 have been borne out:

  • The cities warned in 2008 that that the CTO Study failed to adequately account for interest or inflation when calculating transmission costs. Those findings have been validated in the new report.
  • The cities warned in 2008 that the CTO Study unreasonably assumed straight-line distances for transmission lines, when some deviation was more likely. That conclusion also has been confirmed in the new report.
  • The cities predicted in 2008 that cost projections in the CTO Study would be off by 39.9 percent.  That’s only slightly different from the newest projections, which shows the CTO Study was wrong by 38.8 percent.

The CTO Study became vitally important to Texas regulators as they weighed different options for the construction of thousands of miles of transmission lines as part of the Competitive Renewable Energy Zone program, which was authorized by the Texas Legislature in 2005. Ultimately Texans, through their electric rates, must pay for the new transmission construction.

The Steering Committee represents the interests of cities and their citizens at the PUC and ERCOT. The Steering Committee supports the development of cost-effective renewable energy, but has urged regulators to exercise caution to ensure the protection of ratepayers.

“Cities also understand the less tangible benefits that wind power can provide to the state, and are mindful of the economic benefits experienced by local communities in which wind capacity is built,” the Steering Committee stated in its 2008 filing.

You can read that Steering Committee filing here. The new cost projections can be found here. The original CTO Study can be found at this link.

— R.A. Dyer

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