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Texas utility regulators approve blueprint that could hike electricity bills to improve power grid

A top Senate lawmaker blasted the plan saying it "represents a substantial departure" from the legislature's intent. He promised hearings and new legislation.

AUSTIN, Texas — The five members of the Texas Public Utility Commission (PUC) unanimously approved a framework for incentivizing building new power plants.

The plan would eventually pay power generators for being available during the “hours of highest reliability risk,” according to commission documents. It’s called a “performance credit mechanism,” or PCM. Retail electric companies would buy those power credits and then would likely pass those costs on to consumers.

“It’s a good product,” commissioner Will McAdams said. “We need to be able to defend this, and I believe given all of our input I believe we can.”

It’s projected to cost about $460 million annually, or about $2 a month on an $100 electricity bill.

Commissioners delayed moving forward with implementing the plan until Texas lawmakers weigh in during the current legislative session. Senate Bill 3, which passed last session, directed the PUC to devise the plan. Lawmakers passed SB 3 in the fallout from the 2021 winter storm that nearly shut down the power grid in Texas. 

However, within hours of the plan's approval, a top lawmaker blasted the plan as a "substantial departure from the legislative intent" of SB 3. 

"To be clear, SB 3 did not direct the PUC to replace the state's energy-only market with an unnecessarily complex, capacity-style design that puts the competitive market at risk without guaranteeing the delivery of new dispatchable generation," State Sen. Charles Schwertner wrote. 

Schwertner authored SB 3, and chairs the Senate's Business and Commerce Committee, which is overseeing implementation of the law.

"My colleagues and I intend to hold hearings and consider new legislation to fulfill our obligation to protect the people of Texas," Schwertner wrote. 

The commission’s vote came after its members spent the day deliberating the final form the plan would take. But even with today’s decision, it’s expected to take about three years to design and implement the plan. 

Commissioners agreed that the plan would reward “eligible resources” for being available during the “hours of highest reliability risk.” That means it’s possible that other types of resources, such as energy efficiency, could be eligible for the performance payments if they meet the requirements. 

Chairman Peter Lake’s original memorandum had said that “generators” would be rewarded with the payments. But commissioner Jimmy Glotfelty successfully pushed his fellow commissioners to use the term “eligible resources” rather than “generators.”

“The reason for this is I don’t believe we can just consider this a supply side issue,” Glotfelty said. 

Glotfelty told his fellow commissioners that he believed energy efficiency and “distributed resources” should be eligible if they can meet the requirements. Distributed resources are things like smart thermostats that could be turned up or down remotely, or batteries with two-way flow.

“My principle is that energy efficiency, demand response and distributed resources ought to be eligible for credits,” Glotfelty said.

Glotfelty also successfully got his fellow commissioners to agree that eligibility for the performance credits would be “technology neutral” as long as the requirements are met.

Commissioners also:

  • Required that payments be made in such a way through ERCOT that ensures that power generators who also have retail affiliates do not engage in self-dealing and market manipulation.  
  • Directed that the value of the performance credits would decrease when then there’s excess electricity, thereby lowering costs for consumers. 
  • Ordered that steps be taken to stop bid-rigging or other potential abuses.

Commissioners also made clear that they wanted to be involved in every step of the process, and not just defer to ERCOT.

That includes determining how the performance credits would be earned and awarded, when there should be penalties for failing to perform and how and when the payments could be clawed back.

“I think the commission needs to be in the high-level driver’s seat of making the high-level policy calls that are going to impact the market, the state, the consumers,” said commissioner Lori Cobos. 

“Every step of the way we need to keep the consumers in mind,” Cobos added.

The commission also directed ERCOT to report back to them on what could be done in the interim to retain existing power generators and build new generation until the PCM can be fully implemented.

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