Texas Regulators Support Mandatory Reserves for Power Market

Texas regulators voiced support for requiring the state’s power companies to have access to extra electricity during times of peak demand, changes that may lead to additional payments for generators.

Public Utility Commission Chairman Donna Nelson and Commissioner Brandy Marty indicated a preference for mandating reserve margins at a regularly scheduled meeting today in Austin, Texas, Terry Hadley, an agency spokesman, said in a phone interview. Commissioner Ken Anderson, who holds the third vote at the agency, opposed the move.

“It appears quite clear two commissioners support the policy of a mandatory reserve margin, which is perceived by many to be the first step on a road to a centralized capacity market,” Paul Patterson, a New York-based analyst with Glenrock Associates LLC, said in a phone interview.

The commission didn’t vote on any proposal today, saying it would await a power market resource adequacy report due in January. A reserve margin would require a minimum amount of excess capacity for peak-demand periods and may lead to the establishment of a so-called capacity market that pays generators for having available electricity. Other regional power organizations, including PJM Interconnection LLC, have installed capacity markets to encourage adequate future supplies.

Calpine Corp. (CPN), the state’s third-largest generator, rose 7.3 percent to $20.99 at 3:32 p.m. in New York, the biggest intraday increase in almost two years. NRG Energy Inc. (NRG), the second-largest power provider, gained 6.6 percent to $30.04. The largest power company in Texas, Luminant, is owned by closely held Energy Future Holdings Corp.

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net; Naureen S. Malik in New York at nmalik28@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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