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    PUC vote takes step toward redesign of ERCOT electric market

    January 20, 2023 - Shelby Webb, Houston Chronicle


      Jan. 19—AUSTIN — The Public Utility Commission on Thursday voted unanimously to overhaul how electricity is bought and sold within the Electric Reliability Council of Texas, a decision that could have sweeping impacts for the grid's performance and for ratepayers' monthly power bills.

      After debating options for roughly 18 months, the PUC's five commissioners coalesced around what is called a performance credit mechanism, which would would give power generators a credit for being available during certain hours on days with the lowest reserve power margins. The PCM proposal was first floated in November and quickly won support from Gov. Greg Abbott and owners of thermal generators, such as natural gas and coal units.

      The vote marks one of the most significant milestones in reforms mandated by the Texas Legislature after the February 2021 freeze, which knocked more than 48 percent of the state's power generation offline and led to dayslong power outages to tens of millions of people. More than 200 deaths have been blamed on the storm and subsequent power failures.

      "This is a big step within ERCOT, and we appreciate the guidance and support from the Legislature and governor coming from the last session, which resulted in the vote today," PUC Chairman Peter Lake said after the vote was taken.

      Effect on consumers?

      Lake cautioned, however, that the vote was not the final action on redesigning ERCOT's power market. Specific parameters of the new model will still need to be studied and proposed by ERCOT, and the Legislature will still have the chance to change the direction of the future of ERCOT's market.

      The additional costs associated with the plan are expected to be passed on to consumers. But it might take two to four years before bills increase as details get ironed out.

      And the plan still faces significant hurdles in the Legislature, including opposition from the lead author of the bill that kick-started the redesign process and others in key committees.

      The performance credit mechanism would give generators performance credits, paid for by electricity retail providers and their ratepayers, that would be awarded to those that are available during certain hours on days when grid conditions are at their tightest.

      Details to be worked out

      But major details of the plan have yet to be determined. The PUC approved a series of guiding principles and a broad blueprint for how it would like the market to work, and it directed ERCOT and PUC staff to study and submit proposals for how to best implement the new market structure.

      Some specific recommendations proposed Thursday, however, caused friction at the meeting.

      Most of those points were raised by Commissioner Jimmy Glotfelty when he described what he would like to see added to the PCM proposal. He worried that if generators and their affiliated electric retailers, such as NRG and Reliant or Vistra and TXU, sold and bought performance credits among themselves, they could hypothetically game the market and concentrate market share.

      Lake said that would be unlikely because those transactions would be centrally cleared through ERCOT.

      "The New York Stock Exchange has market manipulation all the time, and it's still centrally cleared," Glotfelty said.

      The commissioners ultimately tasked ERCOT staff to study whether implementing that type of ban would have a negative impact on the market.

      Glotfelty also asked if the market design could include a clawback provision, referencing a trade group comprised of thermal generators that pledged to build more than 4,500 megawatts of natural gas-powered generation units if the PCM is approved as proposed and not substantially changed by the Legislature. That could potentially open the door for the commission to recoup performance credit funds given to generators that promised to either build more generation or keep their units online and failed to do so.

      Not a done deal

      To track that, Lake directed ERCOT to study and report about generation building and progress, but the commission did not direct staff to come up with a clawback mechanism or other accountability measure.

      While the gears are now in motion to solidify how the PCM would work, the Legislature will have the final say in what the ERCOT market looks like. Lawmakers could pass a bill to endorse, tweak or do away with the PCM altogether in favor of another alternative.

      Hours after the PUC voted on the proposal, state Sen. Charles Schwertner, who authored the legislation mandating the market redesign process, sent the commission a letter saying the Legislature never intended for the PUC to take such sweeping action.

      "To be clear: SB 3 did not direct the PUC to replace the state's energy-only market with an unnecessarily complex, capacity-style design that puts the competitive market at risk without guaranteeing the delivery of new dispatchable generation," he wrote.


      (c)2023 the Houston Chronicle

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      Distributed by Tribune Content Agency, LLC.


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