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    Texas power grid changes come with big price tag


    June 24, 2022 - Bob Sechler

     

      Officials in charge of the state's electricity grid have repeatedly said Texans are benefitting from their efforts to manage the system more cautiously and with a greater cushion in the aftermath of its near collapse in February 2021 during a severe winter freeze.

      But the cost of that insurance policy is only now becoming clear: $685 million to $860 million just within the first five months this year.

      The estimate includes money spent by the Electric Reliability Council of Texas, which operates the grid, to procure higher levels of reserve power than before and to make it available faster.

      It also includes the impact of policy changes designed to make wholesale electricity prices rise quicker initially as conditions on the grid tighten, before topping out at a lower level than was allowed at the time of the February 2021 grid disaster. That move is designed to prompt more generators to come online sooner and help head off emergencies.

      In both cases, Texas ratepayers are ultimately on the hook for the costs as they pass through the system.

      Carrie Bivens, who serves as ERCOT's independent market monitor and developed the estimates, pegged the agency's price tag for buying more reserves from Jan. 1 through May 31 this year at $210 million to $385 million, and the impact of the policy-induced changes to wholesale prices at about $475 million over that time.

      Bivens didn't provide a forecast for the full-year amounts. If they merely double, however, the range would come in at $1.37 billion to $1.72 billion combined.

      ERCOT board members asked no questions regarding Bivens' cost estimates during a meeting Tuesday in which she discussed them.

      But earlier in the meeting, Texas Public Utility Commission Chairman Peter Lake reiterated his view that ERCOT's effort to manage the grid more conservatively is paying off for Texans through increased reliability. The utility commission oversees ERCOT, and Lake also serves as a nonvoting member of the ERCOT board.

      "There is a lot of unknowns (that can happen), which is why having that additional margin of safety is so, so important to ensure we can keep the lights on," said Lake, who has said he has "absolute confidence" that there won't be a systemic grid failure this summer that causes power outages.

      Still, a previous estimate provided by Lake of the costs associated with ERCOT's effort to operate with higher reserves appears low in light of Bivens' figures, a discrepancy that the utility commission didn't immediately clarify Tuesday.

      Lake said last month that the cost of buying additional reserves totaled about $380 million from June 2021 last year through early May this year, which he likened to $1 a month per household in the ERCOT system. He didn't estimate the cost associated with the policy shift aimed at making wholesale prices rise quicker.

      Including costs incurred during the second half of 2021, Bivens pegged the price tag to keep higher levels of reserves at the ready at a minimum of about $425 million through the end of May this year. That's about 12% higher than Lake's figure, although it also includes the full month of May.

      Regardless, consumer advocate Tim Morstad said it's past time that officials who oversee the grid start informing Texans of the cost of their policy decisions, saying he and others have been trying to obtain such information since last summer.

      "I appreciate the numbers are coming out now, but they should come out before decisions are made so the public can weigh in," said Morstad, who serves as associate state director of AARP Texas. "We knew there were associated costs, but they haven't been transparent" about the amounts.

      Changes clearly needed to be made to how the grid was managed, he said. But he said Texans can't be sure if officials in charge of the grid have chosen the most cost-effective measures, since "they didn't lay out the options and show us the price tags" before enacting them.

      In addition, Morstad said consumers in the state are suffering "death by a thousand cuts" when it comes to ERCOT.

      That's because Tuesday's cost estimates are on top of the amounts consumers will pay as a result of billions of dollars in bonds that state officials previously authorized to help electricity providers and natural gas companies manage huge debts racked up as prices skyrocketed amid the February 2021 grid calamity, when prolonged blackouts during a severe winter freeze contributed to hundreds of deaths and billions of dollars in property damage

      ERCOT and the utility commission also are in the process of considering other changes to how the state's power market operates, which Morstad said could have more financial ramifications.

      The ERCOT grid — which serves about 90% of Texas electricity customers — has been delivering huge amounts of power recently, resulting from unusually hot temperatures for June and the impact of booming statewide population growth. Peak demand on the grid topped 76,500 megawatts Monday, continuing a record-breaking stretch over the past week. The previous all-time high for peak demand was 74,820 megawatts reached on Aug. 12, 2019.

      One megawatt of electricity is enough to power about 200 homes on a hot day.

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