BLOG: Will Mexico Developments Undercut Authority over ERCOT?

ERCOT is an island unto itself — that is, unless the Federal Energy Regulatory Commission takes over.

And that at least remote possibility has captured the attention of the state’s top utility regulator. “I’m very, very concerned about it,” said Public Utility Commission chair DeeAnn Walker, addressing her colleagues during a recent PUC meeting.

ERCOT, also known as the Electric Reliability Council of Texas, operates the state’s primary power grid. Since its creation decades ago ERCOT has done without most federal oversight and today is overseen primarily by the PUC. But Walker said she has learned of potential developments across the Mexican border that could undermine that arrangement.

Here’s the back story:

Will FERC take over regulatory authority of ERCOT?

The Federal Energy Regulatory Commission asserts its jurisdiction over other U.S. power grids because energy flows freely between them. This interstate authority of FERC derives from the Commerce Clause of the U.S. Constitution.

The situation with ERCOT, however, is different. The Texas grid has connections with other states, but those connections are limited by engineering constraints. Texas also maintains links to Mexico, but there’s no possible way that electricity from any other U.S. state could flow into ERCOT through them. As a consequence FERC has maintained it has only very limited authority over the Texas grid. For the most part that job has been left to Texas regulators.

But two potential developments in Mexico could change that. Walker said she’s been warned as much by FERC officials.

First, a subsidiary of a Dallas-based company wants to create a link between Arizona and Mexico’s main power grid. If this deal goes through, it’s possible that FERC could assert its authority over ERCOT because power — at least theoretically — could flow between Texas and Arizona through this new link.

DeAnn Walker

Second, officials in Mexico are seeking to link the nation’s main power grid with a separate national grid serving Baja California. This is significant because the Baja California grid imports power from the U.S. state of California.  If the two Mexican grids are connected, then California power could flow into ERCOT, and ERCOT, in turn, could fall under FERC control.

Although seemingly arcane, these are not trivial issues. ERCOT’s independence from most federal regulatory oversight is prized by stakeholders at ERCOT, as well as industry officials and Texas regulators. ERCOT’s independence “is not only a source of pride, but it makes our market work so well,” Public Utility Commissioner Brandy Marquez said during a recent commission meeting.

Walker said she had discussed the situation with officials from AEP Texas, CenterPoint Energy, Oncor and Sharyland.

“Those are issues that will occur outside of the United States for which the commission will likely have no notice or participation opportunities,” she said. “Even if they take care of the issues in Arizona, I still have concerns about the impacts in California. We need a solution. This isn’t something we’re going to sit back and wait for it to happen.”

— R.A. Dyer