A Texas district judge has reversed an order from the state’s Public Utilities Commission (PUC) to award billions of dollars in transmission projects relating to Competitive Renewable Energy Zones (CREZ), ruling that the regulatory agency should suspend the process until the PUC adequately weighs the costs and benefits to electric customers.

District Judge Stephen Yelenosky’s decision on Friday was made in a case brought to the 345th District Court in Austin by the City of Garland’s municipally owned utility against the PUC. The city had alleged that the PUC failed to properly consider the needs of electric customers when it awarded the wind-related projects last February.

“The court reverses and remands the agency decision because it is in excess of the agency’s statutory authority, not reasonably supported by substantial evidence, and arbitrary and capricious,” the judge ruled. The case now returns to the PUC for reconsideration.

The PUC’s awards of $5 billion of transmission projects followed the July 2008 selection of a transmission scenario that it expects will eventually transmit 18,456 MW of wind power from power-heavy West Texas and the Panhandle to highly populated metropolitan areas of the state.

Garland’s utility, which provides power to some 200,000 customers, had reportedly submitted a proposal in 2008 to participate in CREZ. It alleged that though the PUC staff had initially recommended that Garland and another municipally owned utility receive a substantial portion of the construction projects—worth some $400 million—the agency “unexpectedly” reversed itself and awarded CREZ development projects to other potentially higher-cost plans.

The 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 the region’s grid, the Electric Reliability Council of Texas (ERCOT).

The decision was lauded by Garland City Attorney Brad Neighbor. “This decision simultaneously encourages customer protection and the development of clean energy — goals that benefit all Texans,” he said in a statement on Friday. “The PUC should not put the interests of big transmission line developers before the interests of Texas ratepayers.”

PUC spokesman Terry Hadley said that the commission did not expect the review of “a few of the arguments Garland made” to cause delays.

The judge’s decision comes as the American Wind Energy Association, an industry group, announced that Texas led the nation with 9,000 MW of installed wind power—more than twice as much as the next state. According to ERCOT (PDF), wind accounted for 6% of power produced by the region in 2009, up from 4.6% in 2008.

The state added about 1,000 MW of new wind capacity in 2009, the latest which was NRG Energy’s 150-MW Langford Wind Power Project south of San Angelo. That project employs 100 General Electric (GE) 1.5-MW turbine generators.

Among the major obstacles faced by wind developers in Texas, however, is the development of major power lines needed to relieve congestion on the existing network.

Last week, T. Boone Pickens cancelled plans to build his much-publicized 4,000-MW wind farm, citing the lack of transmission, low prices for competing natural gas, and tight credit. The billionaire oilman said in a statement he had halved his $2 billion wind turbine order with GE, and that he would instead put up turbines in Minnesota and Canada when they are delivered in 2011.

Sources: Garland City Attorney, POWERnews, Texas PUC, The Wall Street Journal