Last winter’s statewide blackout was caused not only by a failure of power infrastructure but also the state’s competitive energy market. Officials now concede that the unique way electricity is bought and sold in Texas incentivized scarcity and increased the risk of power shortages.
On Thursday, regulators at the Public Utility Commission of Texas may take steps toward overhauling that system, though many consumer advocates and energy analysts fear the changes could increase bills without significantly improving the grid.
The purpose of the proposed market overhaul is to boost grid reliability. The current system, known as an “energy-only” market, pays power generators only for energy they sell on the grid. The price of that power is dictated by supply and demand, meaning that the scarcer energy becomes, the higher the price power plants and energy traders can get for it.
It is what PUC Chair Peter Lake, upon taking the job last summer, referred to as a “crisis-based business model.”
"We need to have a market design so that if you provide reliability, that's where the financial incentive is presented," Lake told a state legislative committee last July.
To do that, the commission is considering a series of proposals which, it says, would reduce the risk of blackouts without altering the fundamental structure of the energy-only market.
Among those proposals: changing the benchmarks at which wholesale power sellers can charge more money per megawatt; mandating that retail electric companies and public utilities sign more “firm” contracts for electricity they anticipate their customers will need in the future; creating incentives to pay generators that promise to be able to supply “dispatchable” energy at quick notice; and devising new ways the state’s grid operator can buy “ancillary services” to balance supply and demand on the grid when needed.
Lake has suggested that he’d like to see the commission make preliminary decisions about at least some of the proposals on Thursday. But, in a media call on Wednesday, a group of energy experts and consumer advocates said the proposals may significantly increase people’s electric bills without shoring up grid reliability.
“We have no idea what the hell these costs are going to be, and that scares us, and it should scare you, and it should scare other Texans,” Alison Silverstein, a former PUC and Federal Energy Regulatory Commission official, said in the media call sponsored by the Advanced Power Alliance.
Silverstein, who now works as a consultant, filed a report with the Texas Consumer Association estimating that energy bills could rise 14.4% per year when the impact of the market redesign proposals are combined with the financial cost of the 2021 blackout.
But, in the media call, she said that estimate was a “ballpark” figure gleaned from the minimal information the PUC has made available.
“Given the lack of clarity about both reliability ... and cost impacts, how the heck will we make sure that Texans are getting the reliability that we're being asked to pay for?” Silverstein said.
Speakers also voiced concerns over what the market proposals could mean for Texas’ renewable energy sector and said strong energy efficiency goals and demand response programs could solve many reliability issues without significantly increasing costs.
“We're really concerned about the cost to consumers,” said Tim Morstad, associate state director of AARP Texas. “It’s time to tap the breaks.”
