The Significance of the Texas CREZ Process for Transmission Planning Today

The Texas Competitive Renewable Energy Zones (CREZ) process remains highly relevant to current transmission planning. Its significance lies not in providing a template to be copied mechanically, but in showing how a regulator can address a transmission "chicken and egg" problem that ordinary incremental planning is poorly equipped to solve. Senate Bill 20 of 2005 required the Public Utility Commission of Texas (PUCT) to designate renewable zones and develop transmission to deliver their output "in a manner that is most beneficial and cost-effective to the customers." In 2008 the Commission approved a transmission plan capable of supporting about 18,500 MW of wind generation, and by early 2014 nearly 3,600 miles of new transmission had been built. The process may be understood as a hybrid institutional mechanism combining legislative mandate, regulatory planning and backstop, and negotiated implementation in provider selection and siting. The CREZ experience also illustrates the limits of anticipatory transmission planning: it relied on only partial ex ante cost -benefit discipline, imposed local burdens that were not always fully compensated, and used a competitive designation model that Texas later curtailed. Current transmission policy could recover the logic of CREZ, but improve the instruments: by using more explicit benefit tests, transparent cost allocation, better treatment of local burdens, safeguards against incumbent control, and deliberate use of negotiated-settlement techniques under a regulatory backstop.