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Texas’ Proposal to Overhaul Electric Power

The Public Utility Commission of Texas unveiled a proposal (supported by Chair Peter Lake) that intends to pay power generators to make sure they have enough reserve electricity to feed the state’s electrical grid during extreme demand. After proving an ability to keep the lights on during those periods, power generators would receive performance credits. This will cost power customers an additional $460 million yearly, according to the PUC’s estimate. The plan’s complexity and the time it would take to implement such a novel system is in question as well.

There are huge reliability stakes and huge dollar stakes… Texas needs certainty, but there are ways to create certainty without potentially costing billions!

Last year the Texas Legislature ordered the commission to overhaul the state’s energy market, which functions mostly off of supply and demand. During their first chance to weigh in on potential reforms to the market, lawmakers on a key Senate panel this week made it clear they’re not impressed with the commission’s main proposal.

The plan is convoluted and has a long timeline… it’s a set-up for failure for Texas’ residents. The additional costs of the plan will ultimately be paid by power customers too. Many have expressed frustrations with making the state’s power customers pay more for an untested system on top of paying off billions of dollars in costs incurred during the storm event.

Texas residents have had a hard paying for electricity this year. As many cranked up their air conditioners during another sweltering summer, some 45% of Texans had to cut back on other necessities such as food and medicine to pay their electric bill. This is higher than the national average of 34% according to LendingTree.

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Peter Lake of the PUCT defended the performance credit idea as a way to make the grid more reliable by providing a “market-based solution” to motivate power generators to ensure they produce enough electricity during periods of high demand. He thinks it will deliver an improvement in reliability for less money than.

In adding more money to the flames, the Texas commission paid E3, a California consulting firm, more than $600,000 to figure out what changes to the state’s electric market needed to be made to avoid blackouts during weather events. Of course Peter Lake denied the recommendation to overhaul the grid, which would require electric providers to buy reliability credits.

The good ‘ol boy club flexed its muscle.

But some lawmakers have pointed to what they call flaws in E3’s report, chief among them the fact that the consultant did not take into account weather conditions as severe as those that caused blackouts during the 2021 winter storm. Without that, man say that it’s difficult to know how the grid would hold up during extreme cold or heat as a result of any change — or how much consumers’ energy bills would go up.

According to the E3 report, the consultant does not expect the same levels of outage would be observed during similar weather conditions because of reforms such as new weatherization standards enacted. A PUC spokesperson said the study ran thousands of severe weather scenarios based on historical weather data. But climate change is making weather patterns more erratic creating more and more anomalies. The E3 report also assumed generators would have unlimited access to fuel in case of extreme weather, though many power plants struggled to obtain natural gas to keep running during the winter storm.

Worries also abound that the performance credit system will take too long to implement… up to four years, which will dissuade investment in new power production. Texas has made marginal improvements to the electrical grid but would still see a massive shortfall in power supply should a similar winter storm hit the state in the coming months, according to an October analysis by the Federal Energy Regulatory Commission.

There could be a gap and big risk, which is why the case for change is so urgent.

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