Competition In Electricity Generation
by Lance Adkins
After receiving comments and questions from several readers regarding last month’s article “Wakeup Call For Electric Consumers in Eastern New Mexico” I am compelled to further explain several issues.
In that article, I noted that existing constraints on the electric transmission system would make it difficult for power from other suppliers to be imported into this area, and as a result eastern New Mexico would be held captive to the new owners of the old Southwestern Public Service Company (SPS) generation plants.
To better understand the constraints on the transmission system, we must first understand how electricity is generated in the United States. Electricity used in homes and business is generated at a frequency of 60 hertz AC (alternating current). In other words the voltage and current alternates or cycles at a rate 60 times per second. As the United States grew following the introduction of modern electric generation, three separate generation grids formed. There is a western grid, eastern grid, and Texas considered themselves big enough to develop a grid of their own. A grid is an area or region of companies with generators interconnected to increase reliability and stability of electric power within the region. Eastern New Mexico is situated at a juncture of all three grids; however, SPS generation is interconnected with the eastern grid. These grids generate electricity out-of-phase with each other and cannot be easily interconnected or joined. If you try to join the grids, bad, and very expensive things would happen. One option would be to shut down one half of the United States and bring generation back on line in sync with the other half. Obviously this is not a viable option. Another way to join the grids and allow power to flow from east to west is to connect the systems through a DC (direct current) tie. Within this tie electricity is converted from AC to DC and back to AC again. Because DC has no cycle or alternating waveform it can be interconnected. Eastern New Mexico has two DC ties interconnecting the eastern and western United States, one located on the Curry and Roosevelt County line south of Clovis and another in Eddy County. Each of these ties has a capacity rating of 200 megawatts (MW). In other words there is a limitation or constraint of 400 MW in how much power can flow into or out of eastern New Mexico from the west.
While import/export capacity from the east is not limited by the capacity of a DC tie, import/export capacity from the east is limited by the capacity of the transmission lines themselves. SPS has stated their total generation and firm power import/export capability is just over 6,400 MW, with actual generation resources of over 4,400 MW. This calculates to roughly 1,600 MW of import/export capability into the eastern grid, taking into consideration the 400 MW capacity links to the west. In short, consumers in eastern New Mexico will continue to purchase power generated by the former SPS power plants.
That said, the question now is, will there be enough competition between the new owners of the old SPS generation plants to keep prices from going through the roof? As the bulk of the SPS generation to be sold is situated in Texas, the restructuring laws in Texas will affect how much generation any one company will be permitted to own. Under Texas restructuring no competitive power supplier can own more than a 20% market share in a given market area. A given company’s market share will be determined by how much generation they own and the import capabilities of the transmission lines into their market area. SPS has commented they expect a minimum of five or six new owners or competitors as a result of the sale.
Consider that under restructuring the owners of generation will no longer have any obligation to serve customers, they will be able sell power to the highest bidder. Consider also that at this point in time SPS’s current generation resources are stretched to their limits under peak summer-season conditions. If the new owners of the old SPS generation utilize the current import/export ties to the east and west to sell power out of this region they could create an artificial generation shortage in eastern New Mexico. Generation shortages were one of the driving factors in high costs experienced in California this summer.
These facts and others continue to raise considerable doubt that restructuring will be beneficial to those of us in eastern New Mexico. Regulators and legislators are listening as New Mexico consumers voice concern about electric restructuring in New Mexico. Already the New Mexico Public Regulation Commission has conducted a working session to hear from special interest groups and consumers. It now appears the legislative committee who studied restructuring for many years before recommending restructuring legislation will begin a new round of meetings this fall. If the current restructuring schedule is to be slowed, changed, or halted altogether, it must be done in the 2001 legislative session. I urge you to stay informed and make your ideas and concerns known to your local legislators.
Lance Adkins is the General Manager of Farmers' Electric Cooperative in Clovis, New Mexico, providing electrical service to approximately 10,500 meters in New Mexico.
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