AUSTIN (Nexstar) — The Public Utility Commission of Texas on Thursday approved a redesign of the state’s electric market, recommending a new model they said will improve grid reliability, but critics said could pass more costs onto the consumer.
The Commission unanimously approved a memo that recommends the legislature adopt the “Performance Credit Mechanism.” It’s a convoluted new market design that will essentially give power generators credit for producing more power when supply is low, ostensibly to incentivize the free market to produce more power when Texans need it.
“The way the way the bulk of the ERCOT market works is that power plants are paid for the electricity that they produce. They bid into this auction system every 15 minutes, and then they’re dispatched. The Performance Credit Mechanisms seeks to add another layer on top of that,” University of Texas energy research scientist Dr. Joshua Rhodes said. “[It] essentially would pay power plants that are available to produce during a certain number of high-stress hours. Whenever supply is close to demand, the grid is under a lot of stress. The idea is that would provide more money through power plants that are available during those times.”
PUC Chairman Peter Lake and Gov. Greg Abbott have been some of the most powerful state officials in support of the design.
“Today, we take another historic step toward building the grid of the future by adopting a new reliability service, the Performance Credit Mechanism,” Chairman Lake said.
In a Jan. 10 letter, Abbott argued the PCM best meets the legislature’s reliability requirements because “it is based on a reliability standard, incentivizes new dispatchable generation, and maintains Texas’ energy-only market.”
“The fact that generators have already publicly committed to build thousands of new megawatts of dispatchable generation resources if the PCM is adopted and implemented by the PUC further supports this point,” he said.
Critics, however, worry electricity providers will simply pass on the credits they pay to generators onto consumers. They also argue the new market force does not directly address the failures of the 2021 winter storm.
“It doesn’t touch the fuel side at all. It’s great if you have a power plant that can operate, but if it can’t get fuel, it’s not going to make electricity, and you end up with the same result of the power being out,” Rhodes said. “If we add more money to [the market], then that money will have to come from somewhere and it will come from customers. That’s just kind of how it always works. Now, maybe folks are willing to pay a little bit more for electricity, if it is more reliable, but we just need to make sure that we’re getting the reliability that we’re paying for.”
In addition to adoption of the PCM, the Commission directs ERCOT to develop bridging options to retain existing power plants and build new generation resources until the PCM can be fully implemented.