State regulators on Thursday delayed a long-awaited vote on proposed Texas electricity market reform amid disagreement among state leaders over the substance of the lead plan.
Peter Lake, chairman of the Texas Public Utilities Commission, said he now aims for a five-member panel to vote on the issue on January 19. be just a recommendation.
“We will look to the Legislature to provide us with feedback and take a different direction,” Lake said.
The legislature, which meets this week and will sit until May, can “tell us we’re off course, give us a different path, and we’re certainly happy to support and implement that,” he said.
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The Public Utilities Commission spent about 18 months trying to come up with a long-term plan to modernize the Texas electricity market by encouraging private investment in so-called controlled electricity, that is, power plants that can quickly turn on and off as needed.
The eventual market reorganization, which is being managed by the Texas Electric Reliability Board, is part of a broader effort to improve the reliability of the power grid following its near collapse during severe winter weather in February 2021. The disaster resulted in hundreds of deaths and billions of dollars in property damage across the state.
Dispatch generation in Texas is overwhelmingly referred to as natural gas or other fossil fuel powered plants, although wind farms and solar panels can be considered controllable when combined with energy storage batteries.
The proposal to encourage the construction of new controllable power plants, which appears to have the most support among members of the public utilities commission and received Gov. Greg Abbott’s approval this week, is called the “Performance Credit Facility” or PCM.
In short, it would oblige electric companies that provide electricity to homes and businesses to buy “performance credits” from generators that earn them by being available during times of the greatest load on the grid. Credits will be awarded to producers after the closure of compliance periods based on assessments of their availability.
Supporters say the plan will create a financial incentive for private investment in managed power plants while maintaining free market principles and the state’s “energy-only” grid status, as loans will only be awarded for performance. In energy-only markets, producers are paid solely for the electricity actually delivered, in contrast to capacity markets, where they are paid for the ability to produce energy if needed.
The Performance Credit Facility “best fits (the state’s power grid needs) because it’s based on a reliability standard, encourages new managed production, and supports the energy-only Texas market,” Abbott said in a letter to the public utilities commission Tuesday. .
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The idea remains untested
However, the idea of performance credits has yet to be tested: the consulting firm that analyzed it for the public utility commission noted that such a mechanism “has not been implemented in any market in the world to date,” meaning that difficulties in obtaining the system. and working.
Skeptics, including members of the State Senate Committee on Business and Commerce, also said the plan would increase costs for consumers without guaranteeing additional investment in controlled generation in the near term.
According to a report from the Public Utilities Commission released in November, the Performance Credit Facility will result in $460 million in additional annual system costs by 2026, about 2% more than projected system costs if it is not implemented. This is on top of the billions of dollars of extra spending already passed on to taxpayers to operate the grid more conservatively and with a larger cushion in the wake of the February 2021 disaster.
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Act fast or think again?
State Senator Charles Schwertner, R-Georgetown, who chaired the Senate Business and Commerce Committee during the previous legislative session, sent a letter to the Utilities Commission on Wednesday urging it to “postpone action to implement the ERCOT market redesign until further discussion.” in consultation with the Texas Legislature.”
The letter was a follow-up to a similar letter from the commission last month, which was signed by all nine members of the Schwertner committee.
At the time, they called the Performance Credits plan “an administratively complex and novel concept”, questioning its cost-effectiveness and stating that it could create uncertainty for private companies and thus delay necessary investment in the network while it is being implemented.
However, in approving the plan this week, Abbott said “time is of the essence” and urged the public utility commission to move forward.
“There are new residents and businesses in Texas every year, and the demands on the power grid will continue to rise,” Abbott said in his letter. “I am fully confident that you will be able to meet this new demand by adopting and implementing a new market design that prioritizes reliability and is in line with the directives passed in the last legislative session.”
