Doubts continue about Texas power grid's market redesign

On Monday, the House State Affairs committee came during an update on a proposed market redesign for the power grid by Public Utility Commission (PUC) Chairman Peter Lake.

"And we know at the end of the day, we will have the reliable power that we need," said Lake.

Shortly after making that promise, Lake was pressed by Corpus Christi Republican Todd Hunter. He wanted to know about an important piece of the redesign.

"Does your plan guarantee, and I want to put that word here today, new generation?" asked Hunter.

Lake answered simply by saying, "Yes sir."

Getting companies to build new power plants in Texas hinges on redesigning how power companies buy and sell electricity. The proposal being reviewed by the PUC is called Performance Credit Mechanism. 

"For the first time ever companies that you send your check to every month for electricity when you pay your electric bill will actually be required to ensure they can deliver," said Lake.

The idea is to have companies get special rates by being part of a new power credit exchange. It’s not mandatory and those in it must guarantee they can provide power a year in advance.

"This is not just some payment for sitting on the sideline or some extra revenue stream that you happen to get, assigned as some kind of bureaucratic exercise, this is a market driven performance based incentive to bring more reliable generation to ERCOT," said Lake.

"This whole approach by the Public Utilities Commission, as directed by the governor, is just wrong," said Energy analyst Ed Hirs, with the University of Houston.

Hirs called the proposed, a Capacity Market.

"And while the consultants pointed out that these capacity markets have long been used, they failed to point out that they don't work at all. California's grid has had a capacity market for years and years, and yet they have had real challenges," said Hirs.

The PUC plan, if approved by state lawmakers is not expected to start until 2026. Hirs warned that’s a long time, especially for companies that have old coal and gas power plants.

"They're going to leave unless they get paid, and they're going to go just like the nuclear power plants have threatened in California, Ohio, and Connecticut. New York even got a bailout from their government. And it's just it's not a bailout, per se. It's a recognition that we need to pay to have backup," said Hirs.

It’s estimated the PUC plan will cost consumers $460 million a year. The message for consumers, according to Hirs, does not have a lot of options.

"Consumers need to be ready to pay more in their electricity bills. They can counter this by taking more measures for conservation, more insulation, smart thermostats, paying attention to how they use electricity during the day," said Hirs.

A public comment period on the Market Redesign plan ends in a few days. The PUC is expected to vote on endorsing the plan at the end of the month.