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District Judge Rules in Favor of Texas Ratepayers

As a consequence of his ruling, further transmission line development relating to the so-called Competitive Renewable Energy Zone (CREZ) process must be suspended until the PUC properly weighs the costs and benefits to electric customers.

The decision comes in a case brought by Garland's municipally-owned utility, which has consistently advocated for affordable power on behalf of its nearly 200,000 electricity users. Garland submitted a proposal in 2008 to participate in the CREZ construction process, but it was rejected by the PUC in favor of potentially higher-cost plans.

Besides requiring the PUC to reconsider Garland's proposal, Judge Yelenosky's decision potentially could lead to other CREZ savings - savings that would be enjoyed by all ERCOT ratepayers - because the decision requires the PUC to consider costs and benefits of all the CREZ proposals.

The overall cost of the CREZ lines has been put at about $5 billion - or $4 for every ratepayer in ERCOT.

"This decision simultaneously encourages customer protection and the development of clean energy - goals that benefit all Texans," said Garland City Attorney Brad Neighbor. "The PUC should not put the interests of big transmission line developers before the interests of Texas ratepayers. We applaud this ruling today."

But Neighbor cautioned that if the PUC again excludes municipally-owned utilities in favor of high cost out-of-state and foreign companies, Texas consumers will end up losing again. In the order that was reversed today by the Court, the PUC had awarded hundreds of millions of dollars in CREZ construction projects to foreign and out-of-state companies, including a Spanish consortium.

Because it is municipally owned, the Garland utility operates on a not-for-profit basis, does not pay various taxes as commercial ventures do, and can borrow money at a lower cost. Such advantages allow Garland to build transmission lines at a lower cost than other entities.

A staff expert at the Texas Public Utility Commission presented evidence during the agency's initial CREZ deliberations that Garland, of all the applicants, enjoyed the lowest cost of debt. The expert stated that "assigning these facilities to the companies with the lowest cost of capital is likely to result in the CREZ transmission plan that is of the lowest cost, and, consequently, in the public interest as it provides the most potential benefits to consumers of electricity in Texas."

The PUC staff had initially recommended that Garland and another municipally-owned utility receive a substantial portion of the construction projects - valued at approximately $400 million - but unexpectedly reversed itself shortly afterwards. In May 2009, the PUC awarded CREZ development projects to Oncor, Sharyland, a Spanish consortium and other transmission developers - all with presumably higher capital costs than those enjoyed by Garland's utility.

In making this initial decision, the PUC appeared not to have explicitly considered what's most cost-effective for electric customers. In an earlier letter to parties in the case, Judge Yelenosky noted that the "PUC relied upon factors that are not relevant to providing transmission capacity in a manner most beneficial and cost-effective to electric customers and based its decision on underlying findings that lack substantial evidence."

He also noted that there is no substantial evidence that Garland's proposal would cause a relevant delay in the CREZ process.

"But what could delay the process is failure by other parties to immediately comply with the court's order," said Garland City Attorney Neighbor. "We're ready to go. Our plans will save consumers money while encouraging the development of clean energy. We have the experience to build, and our not-for-profit status and tax and financing advantages mean we can save money for Texans."

The City of Garland, through its municipally-owned utility, already operates more than 130 miles of transmission lines that serve not only its own customers but also other residents in the Dallas area. Garland is one of 13 transmission operators certified to operate in ERCOT.

City of Garland
Brad Neighbor, 972-205-2380
City Attorney