State Regulators Approve Controversial Texas Electricity Market Reform

Subscribe to The Brief, The Texas Tribune’s daily newsletter that keeps readers up to date with the most important Texas news.

On Thursday, the Public Utilities Commission voted to make significant changes to the state’s electricity market in a controversial attempt to make the entire system more reliable. The agency said it would allow the Legislature to review its plan before proceeding with its implementation.

The idea, known as the Performance Credit Facility, is the first of its kind. It is designed to help produce enough energy when extreme heat or cold increases demand and electricity production drops for various reasons, such as a lack of sun or wind to produce renewable energy, or equipment breakdowns in gas or coal-fired power plants.

Under the new concept, with many details yet to be worked out, companies like NRG are committed to being ready to produce more power during these challenging times. The companies will sell loans to electricity retailers such as Gexa Energy, municipal utilities and cooperatives that sell electricity to homes and businesses.

The loans are intended to give electricity producers an additional source of income and pay for the construction of new power plants.

In theory, loans help retailers and shoppers by smoothing out unsustainable price spikes when demand is high, but there’s a lot of controversy over whether this will happen in practice. Some electricity providers filed for bankruptcy after the 2021 winter storm because they had to pay so much for electricity.

Critics of the plan say the idea is risky because it has not been properly analyzed and has never been tested elsewhere. Members of the Senate Business and Commerce Committee wrote to the PUC in December that they had “serious concerns” about whether the proposal would work.

Following the PUC vote, State Senator Charles Schwertner, R-Georgetown, shared a letter on Twitter calling the decision a “substantial departure from the legislative intent” of a bill passed by lawmakers in 2021 that required a fix to the network.

The PUC consultant calculated that the loans could cost retailers $5.7 billion a year, an amount they said could be significantly offset by overall lower energy costs. However, experts argue that consumer bills will increase under the plan, though they disagree on how much bills will rise.

This is of particular concern to groups such as the Texas Manufacturers Association, which includes industries that consume significant amounts of electricity and expect to receive higher bills.

But power companies are backing the plan because they say the loans will give them a reason to build the new needed power generation capacity to meet demand in the growing state. Gov. Greg Abbott also expressed support for the idea.

Abbott’s nominee, PUC Chairman Peter Lake, moved him forward on Thursday.

“I think we’re not only protecting the product itself, but … we can protect the process,” Lake said before announcing the vote.

PUC commissioners have been working on how to improve the state’s power grid, which operates largely independently of other grids in the country, shortly after a February 2021 storm that left millions without power for several days in freezing weather. When the network was close to collapse, hundreds of people died due to hypothermia and other causes.

Following the storm, the Legislature directed PUC to prepare the grid for extreme weather and times when solar and wind power production is low. Solar and wind make up the majority of the Texas electricity market; at one point on a Thursday afternoon, they accounted for 27% of the electricity on the grid.

The changes are already in place: To push power plants to start producing electricity earlier when demand looks limited relative to supply, the PUC has told grid operators to increase the trigger when they can raise the price of electricity, giving generators a financial incentive to meet that demand.

The agency also instructed grid operators to reduce the maximum electricity price from $9,000 per megawatt-hour to $5,000 per megawatt-hour.

During the 2021 storm, the gas-fired power plants had problems operating because they could not get enough natural gas when the gas generator equipment froze and production stopped. The PUC also required the power generators to winterize their equipment to reduce failures during extreme cold weather.

The commissioners spent Thursday going through a document line-by-line that outlines the proposal, including the intention to set a reliability standard for the state grid for the first time – for example, the grid’s goal is to produce enough energy to meet demand for everyone but one day every 10 years.

Experts disagree over whether efficiency credits will really convince energy companies to build more natural gas-fired power plants, which are dirtier than wind and solar but can be started at any time. Some say that new plants will be built anyway. Others say companies can simply use the loans to make more money from their existing plants without building more.

Michelle Richmond, executive director of Texas Competitive Power Advocates, wrote in her comments to the panel that group members are “ready to provide more than 4,500 [megawatts] additional generation” into the state grid if the new system is adopted. This would be enough to power 900,000 homes. The group includes Calpine, Luminant and NRG.

She wrote that if PUC does not change the market, there will not be sufficient reason to invest in building new power generation capacity and maintaining existing capacity.

The Lone Star Sierra Club chapter was among the groups that asked the PUC to spend more time considering whether new loans are the best solution, “before making fundamental changes to our market that will increase costs for consumers,” Conservation Director Cyrus wrote. Reid. .

Independent market watcher Potomac Economics, who is paid by the PUC to watch the market for manipulation and look for potential improvements, does not support the idea. The group believes that enough fixes have already been made to ensure that the network is reliable.

Still others, such as Alison Silverstein, a former senior adviser to PUC and the Texas Catering Association, which is made up of municipal utilities, warned that there was not enough reliable information and analysis about the loans offered to make such an important decision.

Network reliability must improve, Silverstein wrote in PUC, but “we cannot do this at any cost, and we cannot do this by using poorly understood, poorly analyzed, or unproven market mechanisms to address fuzzy problem and goal definitions.”

Silverstein added: “If the board makes a bad decision on… market reform due to haste, misidentification of the problem, sloppy analysis, or misguided rationalizations, all Texans will suffer the consequences for years due to higher energy costs, lower reliability, and a slower economy.” . and millions of low-income Texans will suffer declining health and comfort as they sacrifice themselves to pay their electricity bills.”

The Commissioners voted unanimously to approve it. Network operators said the plan would take at least two years to complete.

Disclosure: Calpine, Texas Competitive Power Advocates (TCPA), and Texas Public Power Association provided financial support to The Texas Tribune, a non-profit, non-partisan news organization funded in part by donations from members, foundations, and corporate sponsors. Financial sponsors play no role in Tribune journalism. Find their complete list here.

Content Source

Dallas Press News – Latest News:
Dallas Local News || Fort Worth Local News | Texas State News || Crime and Safety News || National news || Business News || Health News

texasstandard.news contributed to this report.

Related Articles

Back to top button