Control Number : 42511

Item Number : 262

Addendum StartPage: 0

PROJECT NO. 42511$ _ .. ;:^^...

COMPLAINT OF CALPINE § PUBLIC UTILITY C^'

O^P"'I 2, 33A"&CORPORATION AND NRG ENERGY, §INC. AGAINST THE ELECTRICRELIABILITY COUNCIL OF TEXAS § OF TEXASAND APPEAL OF DECISION §CONCERNING THE HOUSTON §IMPORT PROJECT §

JOINT REPLY TO COMPLAINANTS' MOTION FOR REHEARING

January 15, 2015

TABLE OF CONTENTS

1. INTRODUCTION ................................................................................................................. 1

II. REPLY TO COMPLAINANTS' ASSERTIONS OF ERROR ......................................... 2

A. The Commission's Order is reasonable and supported by the record evidence; theComplainants failed to meet their burden to identify any violation of any applicableplanning requirement . ......................................................................................................... 3

B. The Commission properly excluded portions of the Complainants' direct and rebuttaltestimony because the testimony addressed policy issues beyond the narrow scope of thiscase ...................................................................................................................................... 5

C. The Commission's Order complied with APA § 2001.141. (Point of Error No. 14, citingto Finding of Fact 51 and Conclusion of Law 5) ................................................................ 6

III. CONCLUSION ................ ................................................................................................. 8

PROJECT NO. 42511

COMPLAINT OF CALPINE §CORPORATION AND NRG ENERGY, §INC. AGAINST THE ELECTRIC §RELIABILITY COUNCIL OF TEXAS §AND APPEAL OF DECISION §CONCERNING THE HOUSTON §IMPORT PROJECT §

PUBLIC UTILITY COMMISSION

OF TEXAS

JOINT REPLY TO COMPLAINANTS' MOTION FOR REHEARING

CenterPoint Energy Houston Electric, LLC ("CenterPoint Energy"), Cross Texas

Transmission, LLC ("Cross Texas"), the City of Garland, Luminant Generation Company LLC

and Luminant Energy Company LLC ("Luminant"), and Texas Industrial Energy Consumers

("TIEC") submit this reply to Calpine Corporation ("Calpine") and NRG Energy, Inc.'s ("NRG")

(collectively, "Complainants") Motion for Rehearing of Docket No. 42511. The Joint Parties

received notice of the Commission's Order on December 16, 2014,1 so this Reply is timely filed

under P.U.C. Proc. R. 22.264 and § 2001.146(b) of the Administrative Procedure Act (APA).2

1. INTRODUCTION

The Complainants' Motion for Rehearing should be denied. The Commission's Order,

including the findings of fact and conclusions of law, does not prejudice the Complainants'

substantial rights.3 Specifically, the Commission's Order: 1) does not violate any constitutional

or statutory provision, 2) is not in excess of the Commission's statutory authority, 3) was not

made through any unlawful procedure, 4) is not affected by any error of law, 5) is reasonably

supported by substantial evidence considering the reliable and probative evidence in the record

as a whole, and 6) is not arbitrary or capricious or characterized by abuse of discretion or clearly

unwarranted exercise of discretion.4

The Motion for Rehearing raises no new facts or arguments that merit a different

outcome. The robust record in this case conclusively demonstrates that the Commission did not

err in excluding any testimony or in finding and concluding that ERCOT's process and its

1 The City of Garland received notice on December 18, 2014.2 Tex. Gov't Code § § 2001.001 et seq. (West 2008) ("APA").

3 APA § 2001.174(2).

4 APA § 2001.174(2)(A)-(F).

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endorsement of the Houston Import Project (HIP) was in conformance with all relevant

Protocols, Planning Guides, procedures, and laws the Commission has jurisdiction to administer,

or any order or rule of the Commission.

The record evidence shows that Houston has long relied on importing electricity to serve

customers and maintain reliability.5 Further, the evidence demonstrates that load growth in the

area, including industrial development along the Houston Ship Channel and the Texas Gulf

Coast, dictates that Houston will ultimately need additional import capability, particularly in

light of the geographic and siting limitations for new generation in the region.6 Every single

case study in evidence shows overloads on the import paths into Houston by 2018. 7

Complainants have raised no factual, legal, or other considerations that should cause the

Commission to revisit its decision. The Commission should deny the Motion for Rehearing.

II. REPLY TO COMPLAINANTS' ASSERTIONS OF ERROR

The Complainants' Motion for Rehearing re-urges the same arguments the Complainants

have been making since the HIP was first proposed. All of these issues have been repeatedly

considered and rejected. Nothing raised by the Motion for Rehearing shows any error on

ERCOT's part during the study process, nor does it undermine ERCOT's finding of need for the

HIP. The Complainants' real dispute is with the outcome of the HIP study-not the study

process or any specific ERCOT action. Distilled to its core, the Complainants' sole allegation

has been that the assumptions ERCOT used to study the HIP were not "reasonable" or

"normal .,,8 As discussed at length in post-hearing briefs,9 the evidence before the Commission in

this docket shows that ERCOT's load assumptions and the variations it made to allow the study

case to "solve" (i.e., for generation to meet load under the studied system stresses) were both

reasonable and consistent with historical ERCOT practices. The Complainants have not

presented any new evidence in this Motion for Rehearing demonstrating that ERCOT violated

5 See ERCOT Ex. 2 (Billo Dir.) at 19 and JB-1 at Bates 49 (ERCOT Independent Review of HoustonImport RPG Project at 9).

6 Id.

' id.8

Calpine/NRG Ex. 4 (Baughman Reb.) at 6.

9 E.g., see ERCOT's Post-Hearing Brief at 14-24 (Oct. 31, 2014); Cross Texas Transmission, LLC andCity of Garland's Post-Hearing Brief at 8-11 (Oct. 31, 2014); Luminant's Post-Hearing Brief at 5-12(Oct. 31, 2014); and TIEC's Post-Hearing Brief at 7-18 (Oct. 31, 2014).

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any relevant law as required under P.U.C. Proc. R. 22.151(b). The Motion for Rehearing should

be denied.

A. The Commission's Order is reasonable and supported by the recordevidence; the Complainants failed to meet their burden to identify anyviolation of any applicable planning requirement.

The evidence in this case overwhelmingly shows that ERCOT did not violate any rule,

order, procedure, or protocol applicable to the HIP study process. The Complainants' points of

error rehash arguments regarding the scope of the ERCOT Protocols and Planning Guide

requirements that were repeatedly addressed during the Regional Planning Group (RPG) process

and again during the course of this case. The Commission properly rejected those arguments in

the Order based on the clear and extensive evidence in the docket. Complainants have brought

forth no material new arguments and therefore the Commission should deny the Motion for

Rehearing.

The Complainants' arguments that ERCOT's planning assumptions inappropriately drove

the finding that new import capability is needed into the Houston area by 2018 are belied by the

facts before the Commission. The evidence in this docket shows that, in response to the same

complaints raised by Calpine and NRG during the HIP review process, ERCOT ran a number of

additional sensitivity cases to make sure that no single assumption or combination of

assumptions was driving the reliability findings.10 Each of these sensitivity cases identified

overloads on at least one circuit starting in 2018, and verified the need for additional import

capacity into Houston.il Thus, the evidence before the Commission clearly demonstrates that

ERCOT made every reasonable effort to address Calpine and NRG's questions and concerns

during the stakeholder process, resulting in an analysis that went beyond the requirements of the

applicable protocols and Planning Guide and thus was transparent and thorough. The evidence

presented by Complainants failed to satisfy their burden to show that ERCOT violated any

relevant law in its original analysis or any of the sensitivity cases. Therefore, the Commission's

Order should stand.

10 The Complainants' primary allegations are that the load levels ERCOT assumed in the HIP study werenot "reasonable" variations of the SSWG load forecast, as permitted by Planning Guide § 4.1.1.1(5),and were not "normal" conditions under § 3.1.4.1(1). ERCOT Ex. 2 (Billo Dir.) at 17-19.

11 Id. at 19.

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In their Motion for Rehearing, Calpine and NRG again argue that ERCOT did not follow

Planning Guide § 4.1.1.1(5), which allows ERCOT to make variations to the generation dispatch

and commitment assumed in the Steady State Working Group (SSWG) Base Cases, but does not

require that any such adjustments be made.12 Again, the evidence clearly shows that the

variations that ERCOT made to the SSWG base case-the required starting point for the

Regional Transmission Plan (RTP)-were all reasonable and consistent with Planning Guide

§ 4.1.1.1(5).13 The Complainants' arguments that reducing the total load from the SSWG base

case to the level assumed in the HIP study was "unreasonable" or a violation of § 4.1.1.1(5) are

unsupported by the evidence in this proceeding and were appropriately rejected by the

Commission.

The Complainants' other arguments are similarly without basis. As the testimony in this

docket demonstrates,14 the decisions made to divide the ERCOT region into two study areas,' 5 to

use standard load scaling,16 and to use the "higher of' load forecastl7 are all reasonable,

consistent with ERCOT's prior practice, and consistent with applicable protocols and Planning

Guide provisions.

Throughout this case, the Complainants have tried to complicate the basic question

before the Commission-whether ERCOT violated any law, rule, protocol, or other applicable

requirement-by attempting to inject irrelevant policy considerations and recommendations for

revisions to the current planning process. However, those issues were not before the

Commission in this appeal. Ultimately, the Complainants failed to present evidence that any

applicable requirement was violated, and the Motion for Rehearing offers no reason for the

Commission to reverse its reasoned and substantiated basis for issuance of the Order. The

Commission should deny the Complainants' Motion for Rehearing.

12 Planning Guide §§ 6.1 (describing the SSWG base case as a "starting point") and 4.1.1.1(5) (allowingERCOT to make reasonable adjustments to the SSWG base case).

13 E.g., TIEC Ex. 1(Griffey Dir.) at Bates 37.

'a See ERCOT's Post-Hearing Brief at 14-24.ls Cross Texas and Garland's Post-Hearing Brief at 13-14.16

CenterPoint's Post-Hearing Brief at 16-20 (Oct. 31, 2014).

17 Luminant's Post-Hearing Brief at 4-7 (Oct. 31, 2014).

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B. The Commission properly excluded portions of the Complainants' direct andrebuttal testimony because the testimony addressed policy issues beyond thenarrow scope of this case.

The Administrative Law Judge's (ALJ's) decisions striking portions of the Complainants'

direct and rebuttal testimony in Order Nos. 11 and 18 were correct and consistent with the

appropriate scope of this case. Order No. 11 was previously appealed, and that appeal was

appropriately denied by the Commission.18 Pursuant to the Commission's Preliminary Order

issued July 11, 2014 and P.U.C. Proc. R. 22.251, the Commission's review in this case was

limited to whether ERCOT's decision to endorse the HIP was "in violation or claimed violation

of any law that the commission has jurisdiction to administer, of any order or rule of the

commission, or of any protocol or procedure adopted by ERCOT pursuant to any law that the

commission has jurisdiction to administer." 19 This narrow scope was emphasized by the

Commissioners at the August 7, 2014 Open Meeting,20 as well as at the July 10, 2014 Open

Meeting.21 As the Commissioners noted, the Complainants' issues regarding the current

transmission planning process "might merit making changes on a going-forward basis,"22 but this

case is not the right forum for addressing those policy decisions.23 The Commission made clear

that the applicable inquiry was whether ERCOT violated any planning requirements in place at

the time of the HIP study-not whether those requirements should have been different to suit the

Complainants' preferences. As the Commission has repeated numerous times during the course

of these proceedings, such planning policy decisions should be addressed through a "larger

discussion at ERCOT"24 among the stakeholders, where all interested parties can weigh in on

changes that would apply prospectively and would not impact the outcome of this proceeding.

The ALJ was correct to strike testimony that addressed these prospective changes and extraneous

18 Motion for Good Cause Exception For Leave To Appeal Order No. 11 (Sept. 25, 2014); Order DenyingMotion (Oct. 24, 2014).

19Order at Finding of Fact 17; P.U.C. Proc. R. 22.251(b).

20 See Open Meeting Tr. at 23-31 (Aug. 7, 2014).

21 See Open Meeting Tr. at 59-63 (July 10, 2014).22

Commissioner Anderson, Open Meeting Tr. at 27 (Aug. 7, 2014).23

Commissioner Anderson, Open Meeting Tr. at 59 (July 10, 2014); see also Chairman Nelson, OpenMeeting Tr. at 27 (July 10, 2014) ("I would caution the complainants here that we're... we are nottaking up these issues.").

24Commissioner Marquez, Open Meeting Tr. at 61 (July 10, 2014).

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policy issues through Order Nos. 11 and 18 and the Commission was correct to deny the appeal

of Order No. 11. Complainants have raised no new grounds that should cause the Commission

to reconsider its decision.

C. The Commission's Order complied with APA § 2001.141. (Point of ErrorNo. 14, citing to Finding of Fact 51 and Conclusion of Law 5)

The only point of error that goes directly to an alleged legal sufficiency of the

Commission's Order is Point of Error No. 14.25 As noted above, the claims made by

Complainants are thoroughly refuted by the evidence of record, and included in the Order in its

findings of fact and conclusions. Complainants argue that the Order fails to comply with the

APA requirement that findings stated in terms of statutory requirements must be supported by

underlying findings.26 This assertion is without merit.

Long-standing case law makes clear that the APA simply requires an agency to provide

an aggrieved party sufficient notice of the basis of the decision and to allow a court to conduct

proper judicial review.27 Point of Error No. 14 cites to Finding of Fact 51 and Conclusion of

Law 5,28 both of which state:

ERCOT did not violate any law that the Commission has jurisdiction toadminister, any order or rule of the Commission, or any protocol or procedureadopted by ERCOT.

APA § 2001.141(d) states "Findings of fact, if set forth in statutory language, must be

accompanied by a concise and explicit statement of the underlying facts supporting the findings."

Complainants fail to demonstrate that "the Commission's failure to include specific facts

or findings that would support its ultimate finding and conclusion deprives Complainant of a

meaningful ability to challenge the sufficiency of the evidence the Commission believed

supported its ruling."29 The Commission's Order provides numerous underlying findings that

support Finding of Fact No. 51 and Conclusion of Law 5. See, for example, Findings of Fact

25 Motion for Rehearing at 22-23.21 Id.; APA § 2001.141(d).

27 Eg., Goeke v. Houston Lighting & Power Co., 797 S.W.2d 12, 15 (Tex. 1990).

28 Point of Error Nos. 12 and 13 also cite to Finding of Fact 51 and Conclusion of Law 5, respectively,however, those two points of errors raise substantial evidence concerns. Motion for Rehearing at 21-22.

29 Motion for Rehearing at 22-23 (emphasis added).

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Nos. 36 through 38 (Applicable Standards) and Findings of Fact 39 through 50 (ERCOT's

Analysis).

A litany of cases, including Texas Supreme Court and Third Court of Appeals cases,

demonstrate that APA § 2001.141(d) does not require extensive findings, but rather findings that

are sufficient to provide adequate notice of the basis for the agency decision.30 In addition, the

Third Court of Appeals speaks straight to Complainants' claim that it is deprived of a meaningful

ability to challenge the Order:

An agency is not required to indicate which underlying facts support eachultimate finding, as long as the reviewing court can fairly and reasonably say thatthe underlying or basic facts support the agency's conclusion on the ultimate orstatutory criteria. The findings should be sufficient to "inform the parties and thecourts of the basis for the agency's decision so that the parties may intelligentlyprepare an appeal and so that the courts may properly exercise their function ofreview." The Board's findings here do this, as evidenced by the fact that bothparties' briefs identified specific statements implicated by the Board's findingsof fact. Furthermore, there is no precise form in which an agency must articulateits underlying findings and the reviewing court may not subject the agency's orderto a "hypertechnical standard of review."31

The findings are clear and comprehensive, and sufficient to support the Commission's

conclusions on the ultimate finding and conclusion. Complainants are clearly aware of the

evidence the Commission believes supports its ruling, as evidenced by the Complainants'

extensive briefing and Motion for Rehearing. Therefore, the statement of underlying findings,

Finding of Fact 51, and Conclusion of Law 5 satisfy the requirements of the APA § 2001.141(d),

and Point of Error No. 14 should be rejected.

30 For example, in Smith Motor Sales, Inc. v. Texas Motor Vehicle Comm 'n, the Court held: "A statementof underlying findings is sufficient if it serves the purposes behind the requirement that the findings bemade." 809 S.W.2d 268, 271 (Tex. App.-Austin 1991, writ denied) (citing Goeke v. Houston Lighting &Power Co., 797 S.W.2d 12, 15 (Tex. 1990)). "[The findings] should inform the parties and the courts ofthe basis for the agency's decision so that the parties may intelligently prepare an appeal and so that thecourts may properly exercise their function of review." Id.; see also Texas Health Facilities Comm 'n v.Charter Med-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984) (quoting Miller v. RR Comm 'n, 363S.W.2d 244, 245-46 (Tex. 1962)).31 Finder v. Texas Med. Bd., No. 03-10-00004-CV, 2010 WL 4670510, at *6 (Tex. App.-Austin 2010,pet. denied) (mem. op.) (citing Goeke, 797 S.W.2d at 15; State Banking Bd v. Allied Bank Marble Falls,748 S.W.2d 447, 448-49 (Tex. 1988); Smith Motor Sales, 809 S.W.2d at 271-72) (emphasis added).

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III. CONCLUSION

For the reasons discussed herein, the Complainants' Motion for Rehearing should be

denied. Fundamentally, Calpine and NRG have not met their burden to prove that the

Commission's Order violated any of the Complainants' substantive rights by excluding certain

testimony and concluding that ERCOT did not violate any law that the Commission has

jurisdiction to administer, any order or rule of the Commission, or any Protocol, procedure,

Planning Guide, or other applicable planning requirement. ERCOT's study process satisfied all

applicable planning requirements and was transparent and consistent with historical practices.

All findings of fact in the Commission's Order were properly based on the record evidence. The

Commission should deny Calpine and NRG's Motion for Rehearing.

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Respectfully submitted,

Jason M. RyanVice President and Associate General CounselState Bar No. 24033150Email: jason.ryan@centerpointenergy.comStephanie Bundage JuvaneSenior CounselState Bar No. 24054351Email:stephanie.bundage@centeEpointenergy.comCENTERPOINT ENERGY SERVICECOMPANY, LLCP.O. Box 61867Houston, Texas 77208(713) 207-7261(713) 574-2661 (facsimile)

James W. Checkley, Jr.State Bar No. 04170500Email: jcheckleykcrosstexas.comCROSS TEXAS TRANSMISSION, LLC1122 South Capital of Texas HwyCityview Center, Suite 100Austin, Texas 78746-005(512) 473-2700(512) 276-6130 (facsimile)

Andrea Moore StoverState Bar No. 24046924Email: astoverggdhm.comThomas B. Hudson, Jr.State Bar No. 10168500Email: thudsonggdhm.comLauren D. DamenState Bar No. 24078394Email: ldamenAgdhm.comGRAVES DOUGHERTY HEARON ANDMOODY, PC401 Congress Avenue, Suite 2200Austin, Texas 78701(512) 480-5727(512) 536-9927 (facsimile)

ATTORNEYS FOR CENTERPOINTENERGY HOUSTON ELECTRIC, LLC

• ^ e^'

Shannon K. McClendonState Bar No. 13412500Email: shannonkcr^webmclaw.com1302 Overland Stage Road, Suite 200Dripping Springs, Texas 78620(512) 264-3656(512) 852-4633 (facsimile)

ATTORNEYS FOR CROSS TEXASTRANSMISSION, LLC

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Brad NeighborState Bar No. 14869300City AttorneyMichael J. BetzState Bar No. 00783655Deputy City AttorneyCITY OF GARLAND200 North 5th Street, Suite 416Garland, Texas 75040(972) 205-2380(972) 205-2389 (facsimile)

Lambeth TownsendState Bar No. 20167500Email: ltownsend@l glawfirm. comGeorgia N. CrumpState Bar No. 05185500Email: crumpglglawfirm.comLLOYD GOSSELINK ROCHELLE &TOWNSEND, P.C.816 Congress Avenue, Suite 1900Austin, Texas 78701(512) 322-5830(512) 472-0532 (facscimile)

ATTORNEYS FOR THE CITY OFGARLAND

rKirk D. mussenState Bar No. 24013374Emily R. JollyState Bar No. 24057022ENOCH KEVER PLLC600 Congress Avenue, Suite 2800Austin, Texas 78701(512) 615-1203(512) 615-1198 (facsimile).

ATTORNEYS FOR LUMINANT ENERGYCOMPANY LLC AND LUMINANTGENERATION COMPANY LLC

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Phi lip OldhamState Bar No. 00794392Katherine ColemanState Bar No. 24059596Jill R. CarvalhoState Bar No. 24087266THOMPSON & KNIGHT LLP98 San Jacinto Blvd., Suite 1900Austin, Texas 78701(512) 469.6100(512) 469.6180 (facsimile)

ATTORNEYS FOR TEXAS INDUSTRIALENERGY CONSUMERS

CERTIFICATE OF SERVICE

I, Jill R. Carvalho, Attorney for TIEC, hereby certify that a copy of this document wasserved on all parties of record in this proceeding on this 15ffi day of January, 2015 by electronicmail, facsimile and/or First Class, U.S. Mail, Postage Prepaid.

Jill . Carvalho

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