A plan to overhaul the Texas grid has set up a showdown at the state Capitol
It’s been almost two years since the big blackout of 2021, and most people agree the Texas power grid still needs "fixing.” The question is how.
Now, a fight is brewing at the state Capitol over that very issue. It pits powerful industries, politicians and regulators against each other, and it will have an impact on energy bills, grid reliability and the environment.
But it all hinges on a wonky policy proposal out of the Public Utility Commission of Texas.
After the last big blackout, state lawmakers passed Senate Bill 3, telling the commission to improve grid reliability. So, commissioners have been working on changing the state’s electricity market. They want to reform how energy is bought and sold on the power grid to create a market that makes sure power is there when people need it.
To do that, the commission hired a consulting firm that came up with a plan called a Performance Credit Mechanism, PCM for short.
Basically, this plan would create reliability credits that electricity providers (the companies most Texans pay their power bills to) have to buy from power generators (the companies that own the power plants). The credits represent a commitment from those power generators to deliver electricity when the grid is most stressed.
“I believe that PCM is the right solution because it's a comprehensive solution that sets a clear reliability standard as required by [Senate Bill] 3,” Peter Lake, chair of the Public Utility Commission, said earlier this month.
The consulting firm that came up with the plan says it will cost $5.7 billion more a year. Supporters say power generators will use that money to invest in new power plants and to keep the energy supply humming in extreme weather. They also argue that not all that extra money will be shouldered by consumers. But, in Texas, consumers typically end up eating extra costs.
State of play
The plan is supported by power plant owners, who stand to earn money from the credits. The Electric Reliability Council of Texas, the state’s grid operator, is in favor of it. Gov. Greg Abbott and Public Utility Commissioners, including Lake, who are appointed by Abbott, also support the PCM.
The list of opponents appears to be significantly longer.
The independent market monitor, a position that serves kind of as a third-party auditor for the Texas grid, does not think it is a good plan. Consumer and environmental groups oppose it or are skeptical. The Texas Association of Manufacturers, a group that represents big industrial energy users in the state, is against it. The oil and gas lobby is not convinced it will work, and many state politicians also oppose it.
This group of opponents represent diverse interests, so their reasons for opposing the PCM vary.
Environmentalists point out that the plan is designed to bring more natural gas power plants to Texas, which is bad for climate change and air pollution.
Others, who want more natural gas plants built, argue that the PCM may not accomplish that goal. Some would prefer more direct subsidizing of new plants instead of the addition of a new layer of rules into the already complex Texas energy market.
And others say a big overhaul of the energy market is not even necessary, and that the grid can be improved without investing billions in building more power plants.
“I think we have an operational flexibility problem,” Carrie Bivens, the PUC's independent market monitor, told a state Senate Committee late last year. “I do not believe we have [an energy] capacity problem.”
One thing all opponents agree on is that the plan is untested. It will cost billions, but there’s no real-world example to show it will work.
Despite those concerns, the Public Utility Commission approved the PCM plan last week, setting up a showdown at the Texas Legislature.
In a vote Thursday, the commission adopted an outline of the plan, but said it would delay implementing it “until such time as the 88th Legislature has had an opportunity to render judgment on the merits of the PCM and/or establish an alternate solution.”
That could mean lawmakers are invited to weigh in with new legislation. But if they don’t, state regulators will take that inaction as a green light to move ahead with the plan. KUT emailed the Public Utility Commission for clarity on how it expects the legislature to weigh in, but has not yet heard back.
Either way, state lawmakers have already started reacting. State Sen. Charles Schwertner, who authored last session’s big grid overhaul bill, called the Public Utility Commission's approval of the PCM “unacceptable” hours after the vote.
"Today, the [Public Utility Commission] chose to ignore the clear direction of the [Legislature]” by approving the PCM, Schwertner tweeted. “In the weeks ahead, the Texas Senate will hold hearings and consider whatever legislation is necessary to correct this error and fulfill our obligation to the people of Texas."