AUSTIN - Energy experts and electric industry groups are calling a Texas Senate plan to back up the state's power grid with state financed fossil fuel power plants the end of the free market in the Texas' electricity economy.
Senate Bill 6 is one of nine bills the Senate unveiled earlier this month as a suite of fossil fuel centric bills that take aim at Texas' booming renewable energy sector under promises of greater grid stability. The bill from Georgetown Republican Sen. Charles Schwertner could use taxpayer money to finance the construction of 10,000 megawatts of natural gas fueled power plants - enough energy capacity to fuel an estimated 7.5 million homes.
Building the plants would cost an estimated $10-$18 billion. They would be required to be ready sometime in 2027 or 2028.
Schwertner has called the idea a "backup generator" for a Texas power grid that nearly collapsed amid severe, extended winter weather in 2021. But energy experts warn that it would undo 20 years of free market principles that have kept electricity prices low and that the bill would do the opposite of what its author and Senate leader Lt. Gov. Dan Patrick have promised - encourage new natural gas power generation.
"It strikes me that we built this whole state's power system mostly based on competition and this destroys that competition forever," said Alison Silverstein, an energy consultant who formerly worked with the Federal Energy Regulatory Commission and the Public Utility Commission.
The energy industry group Texas Competitive Power Advocates, which represents power production companies such as Irving-based Vistra Corp., NRG and Calpine, also warned that SB 6 "signals the end of competitive market" and would hasten the closings of older coal and gas power plants in Texas.
"Texas' competitive electric market has been the envy of electricity markets around the world, but these bills would scuttle that prized market," the group's comments said.
Texas Competitive Power Advocates provided their input to The Dallas Morning News ahead of a Thursday meeting of the Senate Business and Commerce Committee, which Schwertner chairs and is the first legislative stop for the energy bills he filed along with Weatherford Republican Sen. Phil King.
Taken together, some industry insiders believe the bills could unravel billions of proposed investment in wind, solar and battery storage in Texas as well as fundamentally restructure Texas' competitive retail market by imposing caps on market share.
But some consider SB 6 s promise of a fleet of government-backed natural gas power plants as the most disruptive aspect of the plan. As it is proposed, a company building power plants imagined in the bill would get up to a 10% guaranteed rate of return on power plant infrastructure they might not have paid for.
"It is ... interesting to see 40 years of pro-market orthodoxy thrown out the window to play favorites and use the government to pick and choose winners," said Michael Webber, Josey Centennial Professor in Energy Resources at the University of Texas at Austin.
In a recent interview, Schwertner said power plants built through SB 6 can work alongside the Texas' laissez faire energy market. He has dubbed the program the Texas Energy Insurance Program.
"The energy-only market obviously, from a financial standpoint, is very affordable and incentivized companies to move here. We maintain that," Schwertner said. "If you look at the backup, that's an out-of-market backup, so it has the least amount, I think, of permutations on the energy-only market."
For more than 20 years, the ERCOT power grid, which provides electricity to 90% of Texans, has been a deregulated market. Companies that produce power for the grid have largely only been able to make money by selling electricity when they produce it. The market was designed to increase price competition to drive down consumer costs.
Schwertner's plan recalls elements of a 2021 proposal from billionaire Warren Buffett's investment conglomerate Berkshire Hathaway to build a back stop of power plants that an energy subsidiary would pay to build with a guaranteed rate of return on investment similar to how companies build transmission lines.
Those power lines that bring electricity from power plants to households and businesses are paid through a line item on consumer electric bills.
While the bill does not name Berkshire Hathaway, its generation capacity and asset requirements for participation in the program disqualify even Texas' largest producers of electricity. Schwertner carried a bill that would have forwarded the Berkshire Hathaway plan in 2021. It did not pass.
Schwertner told The News the financing of construction of the power plants could come in many forms, including government-backed bonds or having investors shoulder the cost. But he is keeping the door open for the use of taxpayer funds to pay for their construction.
Schwertner has filed Senate Joint Resolution 1, which would allow the lawmakers to sidestep a budget spending cap in the Texas Constitution.
"We probably have the budgetary capacity to self fund directly out of existing money if we wanted to," Schwertner said.
Using taxpayer funds to build the power plants would require approval from a two-thirds majority vote in both chambers of the Legislature, meaning Republicans would have to convince at least some Democrats to support the measure. The question would then be put to voters.
Schwertner said Texans will understand that making a more resilient power grid will come with a cost and that doing so will encourage companies to invest in Texas.
"They're not going to move to a third-rate country and build a massive plant where electricity to that plant is variable and unreliable," Schwertner said. "So there's a balance that has to be struck. I think people appreciate that. That, yes, they want things to be cheap, but they also want it to be reliable and trustworthy."
"There's no hiding that reliability comes at a cost," he said. "People are demanding that we address it."
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