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After several months of figuring out how to make Texas’ electricity market more reliable in the wake of 2021’s killer winter storm, state officials have landed on what they say is a solution.
As part of a new proposal unveiled on Thursday, electricity suppliers would be required to buy ‘performance credits’ from electricity generators – which aim to ensure that both have enough electricity to meet increased demand when electricity demand is high enough to stress the power grid. If suppliers fail to buy the credits or if generators fail to fulfill their end of the bargain, both could face financial penalties.
If the idea is implemented, “it will be the first time… that the companies that sell electricity to households – to whom you send your check when you pay your bill each month – it will be the first time that ‘They’ll actually be responsible for making sure they can deliver that power,’ said Peter Lake, chairman of the Texas Public Utility Commission, the board that regulates the state’s electric grid operators.
The public will have about a month to comment on the plan before the PUC’s final vote on Dec. 15.
But it’s unclear how the grid would perform in this setting in times of unexpected heat or cold, said Alison Silverstein, a former senior adviser to the Public Utility Commission of Texas, which regulates ERCOT.
A consultant hired by the Public Utility Commission, which oversees the largely deregulated Texas electricity market, to analyze various proposals to overhaul the electricity market failed to take into account how extreme weather events such as the winter storm of 2021 would strain the network operating under the credit system — writing in the report that “such an analysis is beyond the scope of this study.”
Silverstein pointed to this year’s off-season heat wave in May, which forced six power plants offline.
“It wasn’t on anybody’s bingo card for ‘this is when we’re going to have a reliability issue,'” Silverstein said.
The heat of early May did not trigger widespread power outages. But just over a year earlier, a February winter storm had nearly collapsed the state’s power grid when demand suddenly surged, causing power outages that left millions of Texans without power or heating for days in freezing weather. Hundreds of people have died, and the fallout from the storm has prompted a wave of reforms from state lawmakers, the PUC and the grid operator, including the current drive to overhaul the electricity market. state energy.
Last year, state lawmakers ordered the Public Utilities Commission to consider ways to overhaul the market — which is largely unregulated and operates primarily on the basis of supply and demand. This system had disastrous consequences during the winter storm when electricity providers were allowed to charge sky-high prices as electricity demand soared – but frozen equipment meant they still could not meet this application.
State officials worked to find a solution that would make the grid more reliable without further increasing consumers’ electricity bills. Among several options analyzed by E3, a California-based consulting firm, the “performance credit mechanism” solution appeared to win favor with a majority of members of the five-member commission on Thursday.
Theoretically, this would protect consumers against sudden increases in their electricity bills, as suppliers – including public electricity providers like Austin Energy and retail providers like TXU Energy or Reliant Energy – and generators, which operate state power plants, agree in advance to have enough reserve power during peak periods, Lake said.
According to the consultant’s analysis, the use of performance credits would cost approximately $460 million more per year. But Lake said competition among generators would theoretically lower credit prices. Avoiding massive energy price spikes like those seen in the 2021 winter storm, Lake said electricity customers “should not, based on this analysis, experience a significant impact on their bills.” .
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