Texas Governor Backs Market Overhaul for Power Grid; Lawmakers and Experts Push Back

Texas Governor Backs Market Overhaul for Power Grid; Lawmakers and Experts Push Back
Power lines in Houston, Texas, on June 15, 2021. (Brandon Bell/Getty Images)
Jana J. Pruet

Texas Gov. Greg Abbott has thrown his support behind the Texas Public Utility Commission’s (PUC) proposal to overhaul the market design of the state’s power grid.

On Tuesday, Abbott sent a letter to the PUC commissioners (pdf) expressing his support and urging them to adopt the grid’s redesign plan that was introduced in November. The PUC oversees the Electric Reliability Council of Texas, known as ERCOT, an independent nonprofit responsible for operating the grid.

State lawmakers ordered the PUC to develop grid reliability reforms following the February 2021 freeze that left millions of Texans without power for days. The statewide outage led to at least 246 deaths.

Chairman Peter Lake introduced the proposed market redesign called “performance credit mechanism,” or PCM, in November. This design would require electric companies to purchase electricity using credits awarded by the state to power plants that deliver during peak demands.

Abbott’s letter to his PUC appointees urging the adoption of the market redesign arrived two days ahead of the commissioners’ scheduled meeting to consider approving the plan.

“The PCM best meet this call because it is based on a reliability standard, incentivizes new dispatchable generation, and maintains Texas’ energy-only market,” Abbott wrote. “The fact that generators have already publicly committed to build thousands of new megawatts of dispatchable resources if the PCM is adopted and implemented by the PUC further supports this point.”

The PUC chair and its five commissioners are appointed by the governor.

Pushback From Lawmakers and Experts

The proposal has received pushback from some lawmakers and other experts.
In December, Republican state Sen. Charles Schwertner and the other eight members of the Senate Business & Commerce Committee sent a bipartisan letter to the PUC commissioners addressing their concerns over two market redesign proposals discussed during a November hearing, as reported by The Epoch Times.

“As was discussed during the November 17th Senate Business and Commerce Committee hearing, there is significant concern the proposals being considered by the Commission, including the Forward Reliability Market (FRM) and Performance Credit Market (PCM) options not only fail to meet the directives clearly stated in SB 3, but more importantly, will not guarantee new dispatchable energy in a timely and cost-effective manner,” the letter stated.

The senators asked the PUC to consider the “unintended consequences of any type of proposal that creates more uncertainty for market participants.”

“Further, any holistic market design change, including the PCM, that goes beyond the scope of SB 3 should not be adopted by the Commission without further consultation with the Legislature,” the letter continued.

A woman walks through falling snow in San Antonio on Feb. 14, 2021, during a winter storm that caused much of Texas' power grid to collapse. (Eric Gay/AP Photo)
A woman walks through falling snow in San Antonio on Feb. 14, 2021, during a winter storm that caused much of Texas' power grid to collapse. (Eric Gay/AP Photo)

Unproven Model

Energy consultant Ed Hirs said the PCM model is unproven and does not address the state’s problems with the grid.

“Everyone knows that power plants on the ERCOT grid have different costs of capital and different costs of operation. To maintain reliability, the state needs to make sure that the existing portfolio of plants and new-build plants can provide their owners with a return on investment,” Hirs told The Epoch Times in an email. “The PCM does not do that.”

The proposed model is designed to give the greatest financial benefits to generators that produce the cheapest electricity.

“Nothing in the PCM plan ensures that the current dispatchable power plants do not leave the ERCOT market because they are noneconomic,” Hirs added.

Power plant closures across the state add to the grid’s vulnerability.

The coal-fired Pirkey Plant in Hallsville, Texas, is among several upcoming closures.

Sabine Mining Company, which has operated the mine since its opening in 1984, said it supports keeping the 720-megawatt Pirkey Plant open, but operations will shutter in March due to the high cost of compliance with state and federal regulations.

“We believe the Pirkey Plant is a reliable and resilient asset, and the continued long-term operation of the facility is in the best interest of our employees, the local community, region, and the state,” Director of External Affairs David Straley told The Epoch Times in a statement.

“In addition to providing several hundred Texans with great careers, it provides thousands of Texans and other citizens in the SPP region with reliable and affordable electricity. We believe the U.S. electrical grid is becoming less dependable with the switch to intermittent energy sources, but keeping the Pirkey Plant operating will help with grid stability and reliability where it is needed most,” Straley continued.

Sabine was under an agreement with Southwestern Electric Power Company, a subsidiary of American Electric Power, to operate the mine through 2035.

Wind turbines are viewed at a wind farm in Colorado City, Texas, on Jan. 21, 2016. (Spencer Platt/Getty Images)
Wind turbines are viewed at a wind farm in Colorado City, Texas, on Jan. 21, 2016. (Spencer Platt/Getty Images)

Need for Dispatchable Energy

Lake also acknowledged the need for more dispatchable energy during the November hearing.

“Because these dispatchable generators are being displaced by wind and solar most of the time, it’s harder and harder for them to stay in business, which is why we want to build the reliability service you directed us to build,” Lake said during the November hearing.

Republican state Rep. Todd Hunter asked Lake if the PCM model would guarantee new power generation.

“Yes, sir,” Lake answered. “I think the PCM is the way to go to guarantee reliability.”

However, the PCM model could take years to implement.

“The PCM will take 2 to 4 years to implement if it can be implemented,” Hirs said. “That means Texans will be forced to participate in ERCOT weather roulette for the next several years.”

Abbott’s letter asked the PUC to develop a solution for the interim.

“During the transition to the new reliable market design and the construction of new dispatchable generation resources, the PUC should also put in place a bridge solution to ensure sufficient supply for the growing power demand in Texas,” Abbott wrote in his letter.

The governor reminded the PUC commissioners that the state’s growing population and the economy are adding stress to the grid.

“Time is of the essence,” Abbott wrote. “Texas is adding new residents and businesses every year, and the demands of the power grid will continue to grow. I have full confidence that you will be able to meet this new demand by adopting and implementing a new market design that prioritizes reliability and meets the directives passed during the last legislative session.”

Jana J. Pruet is an award-winning investigative journalist. She covers news in Texas with a focus on politics, energy, and crime. She has reported for many media outlets over the years, including Reuters, The Dallas Morning News, and TheBlaze, among others. She has a journalism degree from Southern Methodist University. Send your story ideas to: [email protected]
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