Dec. 6—Texas Competitive Power Advocates, the state's largest trade group for thermal generation, said late Monday its members could build as much as 4,600 megawatts of power — enough to cool nearly 1 million homes on a summer day — if their preferred plan for the ERCOT power market redesign is enacted as proposed.
Michele Richmond, the group's executive director, told the Texas House State Affairs Committee at a hearing that the ERCOT market does not incentivize investors or companies to build new natural gas generation, especially with rising fuel and operating costs. But she said one of the market redesign proposals introduced last month by the Public Utility Commission of Texas, known as the Performance Credit Mechanism or PCM, would create enough certainty and opportunities for growth for companies to begin building more.
"Investors and lenders need policy certainty, both regulatory certainty and legislative certainty," she said. "The PCM, if adopted by the PUC and supported by the Legislature, will provide that policy certainty. Then investors can make their bets and take on the financial risk."
The PCM model would give generators a performance credit for being available during certain hours on days with the lowest reserve power margins. Those credits would be paid for by retail electricity providers, the companies that sell residential power plans and whose names show up on monthly power bills, as well as cooperatives and municipal utilities.
Some consumer advocates, including AARP, have come out against the plan, worried that consumers will be left with much larger bills without the guarantee that new generation will be built. In a third-party study commissioned by the PUC, energy economics consultants E3 said the PCM could cost customers and additional $460 million a year, but Tim Morstad, associate state director of AARP Texas, said that might not tell the whole story.
"Those costs could be understated. I say might because we don't know, this is a novel approach," he said. "There's no guarantee new generation will be built, and this is a lot to ask of consumers."
Richmond, whose membership accounts for 82 percent of the state's natural gas power generation, said the 4,600 megawatt figure came from her individually polling members and taking the sum of the amount they said they would create.
"My members are telling you as big a guarantee as you will get in a competitive market, we will get reliability," she said in an interview. "But it hinges on the market design supporting investment."
Although the PUC had been publicly debating and studying three proposals for redesigning the ERCOT power market, it surprised some last month with the release of a study recommending a new proposal that had not been seen before that meeting — the PCM.
Katie Coleman, who represents the Texas Association of Manufacturers, said it is similar to what's known as a capacity market, which pays generators for having assets. She said the E3 report for the proposals with capacity market-like constructs shows they would cost ratepayers an additional $5.7 billion, not $460 million.
"I'm very much concerned this scenario comes at an extremely high cost, and we're not getting additional reliability," she testified Monday.
Richmond, with the generators' trade group, disputed that figure but said more money would be needed to make new generation a reality.
"Reliability isn't free, we all know that," she said.
This is a developing story, check back for updates.
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