State agencies are proposing changes to the electricity market aimed at preventing mass blackouts

Midlothian Vistra Corp. power plant. The Texas Public Utilities Commission is recommending changes to the state’s electricity market aimed at ensuring a more reliable power supply during extreme weather events like the February 2021 winter storm that caused power outages in Texas. Credit: Shelby Tauber for The Texas Tribune

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After months of debating how to make Texas’ electricity market more reliable after a deadly 2021 winter storm, state officials have landed on what they say is a solution.

In the new proposal announced Thursday, power providers will be required to buy “performance credits” from power generators – which is intended to guarantee that both have enough electricity to meet the increased demand if the power demand is high enough to stress the electric grid. If the supplier does not buy the credits or the generator does not meet its end of the bargain, both can be financially penalized.

If the idea is implemented, “this will be the first time … that the company that sells power to households – to which you send your check when you pay your bill every month – this will be the first time that they are really responsible for making sure. they can deliver that power,” said Peter Lake, chairman of the Texas Public Utilities Commission, the board that regulates the state’s electric grid operators.

The public will have about a month to comment on the plan before the PUC’s final vote on Dec. 15.

But it is not clear how the grid will function in this framework in periods of unexpected heat or cold, said Alison Silverstein, a former senior adviser at the Public Utilities Commission of Texas, which manages ERCOT.

Consultants hired by the Public Utilities Commission, which oversees the heavily deregulated Texas electricity market, to analyze different proposals to reform the electricity market do not factor in how extreme weather events such as the 2021 winter storm will stress the grid operating on a credit system. – wrote in the report that “this kind of analysis is beyond the scope of this study.”

Silverstein pointed to this year’s unseasonal heat wave in May, which was forced six power plants offline.

“It’s not on anybody’s bingo card for ‘this is when we’re going to have reliability issues,'” Silverstein said.

Early heat in May did not cause power outages. But just over a year earlier, a February winter storm sent the state’s power grid near collapse when demand suddenly spiked, triggering power outages that left millions of Texans without power or heat for days in subfreezing weather. Hundreds of people died and the fallout from the storm caused a wave of reforms by state lawmakers, PUC and grid operators – including the current push to overhaul the state’s energy market.

State lawmakers last year ordered the Public Utilities Commission to look at ways to reform the market — which is largely unregulated and functions primarily on supply and demand. The system had devastating consequences during winter storms when electricity suppliers were allowed to charge huge prices as demand for electricity rose – but frozen equipment meant they still couldn’t meet that demand.

State officials have been working to find improvements that would make the grid more reliable without pushing up consumers’ electricity bills. Of the several options analyzed by E3, a California consulting firm, an overhaul of the “performance credit mechanism” seemed to win favor among the majority of members on Thursday’s five-member commission.

In theory, it would protect consumers from sudden spikes in their electricity bills because suppliers — including publicly owned power providers like Austin Energy and retail providers like TXU Energy or Reliant Energy — and generators, which operate the state’s power plants, agree in advance to have reserve power that enough during periods of peak demand, Lake said.

Consultant analysis said using performance credits will cost an estimated $460 million more per year. But Lake said competition among generators will theoretically lower the price of credits. By avoiding large energy price spikes like those seen during the 2021 winter storm, Lake said electricity customers “should not, based on this analysis, experience a significant impact on their bills.”


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This article originally appeared on Texas Tribune in https://www.texastribune.org/2022/11/10/texas-power-grid-market-reform/.

The Texas Tribune is a member-supported, nonpartisan newsroom that informs and engages Texans about state politics and policy. Learn more at texastribune.org.

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