Lawmakers mulling grid redesign proposals
Lawmakers are questioning the findings of a report that could serve as the basis for redesigning Texas power markets, calling some of the study’s assumptions about the operation of the state’s power grid flawed.
The hearing Thursday by the state Senate’s Business and Commerce Committee represented the first opportunity for lawmakers and industry insiders to weigh in on the study, published last week, and the Public Utility Commission’s proposals for revamping wholesale power markets.
Lawmakers quickly focused on the shortcomings of a document meant to serve as the definitive guide for lawmakers and PUC officials as they seek to overhaul the state’s deregulated power markets “I feel like the study is flawed because it’s based on assumptions that are not necessarily true,” said Sen. Donna Campbell, R-new Braunfels. “I’m not convinced at all that this was a great study.”
The Legislature and the PUC are looking to overhaul the power system in response to the failures of February 2021, when a winter storm led to widespread outages that lasted for days and contributed to the deaths of at least 200 people. The $600,000 study, conducted by wellknown energy consulting firm E3, laid out the cost and benefits of three market redesign plans that had been discussed for about a year, as well as two new concepts introduced when the report was released last Thursday.
Since its release, the report has weathered criticism about what it did and did not include. For example, it did not include the February 2021 freeze on winter peak demand and other analyses, and it assumed that generators would have access to all the fuel they needed during severe weather events, even though problems with natural gas supplies to power plants contributed to the blackouts that plunged millions of Texans into freezing darkness.
PUC Chairman Peter Lake on Thursday said those considerations were omitted because the PUC and Electric Reliability Council of Texas, the state’s nonprofit grid operator, have mandated new weatherization and fuel standards that he said alleviated many of those issues.
But Carrie Bivens, the independent market monitor for ERCOT, said the study also overstated the chance of blackouts in the future, inaccurately modeled current market frameworks and overstated how much generation could come offline. The study estimated 11,000 megawatts of coal and gas powered generation could come offline by 2026, enough to power about 2.2 million homes on a hot summer day.
“We don’t see 11,000 megawatts of retirement,” Bivens said.
E3 officials were not present to explain their methodology or findings
“And we paid them how much money?” Sen. Charles Schwertner, R-bryan, asked when told they were not at the hearing.
Apart of questions about the report, some senators worried about what the various proposals could mean for customers’ bills.
The redesign proposal recommended by PUC staff and Lake would set a reliability standard that generators must meet and offer credits for power produced during times of tight grid conditions. Generators would let ERCOT know a year ahead when power would be available and how much they would generate. If they produced the promised power during peak demand hours, they would get a credit.
Lake said that would provide incentives for generators to come online before the power supplies become dangerously short, moving away from the current “crisis” model where price signals tell generators to come online when the supplies are tight.
“What we have in front of us is a market-based solution the analysis says would give us 10 times the reliability for less money customers would pay in the absence of action,” he said.
E3 estimated it would take three or four years to implement, but Julia Harvey, vice president of government relations for Texas Electric Cooperatives, said it may not provide enough incentive for power generators to build new plants in the state.
“Because it’s a new approach to cost allocation and valuing resources based on simply availability during a time period doesn’t provide a lot of confidence among our members for capital investments,” Harvey said. “It’s the novelty of it.”
Sen. Lois Kolkhorst, R-brenham, said it appeared the plan would serve to increase costs for what the grid already has without a guarantee that new generation would be built.
“I think this plan is so convoluted and has a long timeline to be put in place, but it’s a setup for failure. It’s not equitable, and I think it’s going to be costly for (power retailer providers),” she said. “The big loser is the consumer who is having to pay for a market that is uncertain.”
As the portion of the meeting discussing the power market redesigns came to a close, lawmakers did not coalesce around any one of the now five power market redesign proposals mentioned in the report.
“I’ve only been here 4 years, and I’ve yet to see any issue this important with this many diverse opinions among so many people who know what they’re talking about,” said Sen. Nathan Johnson, D-dallas. “I think it’s important we maintain an open mind and listen to what they have to say.”