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PUC to take next step on ERCOT market redesign

Shelby Webb, Houston Chronicle  


    Jan. 19—The marching orders from the Texas Legislature to the Public Utility Commission and ERCOT coming out of the 2021 session, and the February 2021 freeze, were stern: Don't let the lights go out again.

    Lawmakers passed Senate Bill 3, which mandated, among other things, that power generators weatherize their equipment. As a result, the Electric Reliability Council of Texas and the PUC changed how they operate, bringing on generation more quickly in tight conditions and changing their pricing formulas to incentivize generators to turn on before grid conditions get tight.

    On Thursday, the Public Utility Commission will vote to satisfy one of the final steps in implementing the changes mandated by the Legislature — choosing how they would like to redesign ERCOT's electricity market, a decision that could effect tens of millions of Texans.

    Gov. Greg Abbott, PUC Chairman Peter Lake and thermal generators such as natural gas and coal-fired units operating in the state have thrown their weight behind a plan that would create a new market to coexist with ERCOT's current market.

    Critics say the process to get to this point has been dominated by market insiders, lobbyists and those with large financial stakes in the decision.

    "Have consumers been front and center when talking about these billion-dollar proposals?" said Tim Morstad, associate state director of advocacy and outreach at AARP Texas. "No, they just haven't."

    Lawmakers, including Lt. Gov. Dan Patrick, have said ensuring that more dispatchable generation is built within ERCOT — or generation "with an on-off switch" typically run by natural gas or coal — is among their top priorities this legislative session. And since the fall of 2021, the PUC has debated how to create new market mechanisms or a whole new power market to make that a reality.

    But the conversations about how, and what, should be done to tweak or totally change the state's deregulated power market have evolved from SB 3's original intent, said state Sen. Charles Schwertner, who was the bill's main author.

    "That term — redesign — never came into existence until the interim," Schwertner said. "What the Legislature asked was to really work and charge the PUC with creating reliability standard and also an ancillary service that incentivizes dispatchability and reliability."

    There are now five options before the PUC.

    Early plans were the Backstop Reliability Service, which has two iterations that would have older thermal plants contribute when reserves are at or near emergency conditions; Dispatchable Energy Credits, to be awarded to new generation plants that can ramp on and off quickly (within 30 minutes or less) to deal with tight grid conditions; and the Load-Serving Entity Obligation, in which generators would negotiate directly with load-serving entities such as retail electricity providers, municipal providers or power cooperatives over the rates they would charge for power in the coming year.

    They were joined in November by two more, the Performance Credit Mechanism, which would give generators a credit for being available during certain hours on days with the lowest reserve power margins; and a combined Backstop Reliability Service and Dispatchable Energy Credits plan.

    Schwertner, the author of SB 3, said once the PUC votes on what he considers a recommendation, it will be up to the Legislature to be the voice for everyday Texans and implement a plan that best suits them.

    "I think there is still work to be done, and I think the PUC understands that," he said. "I know the Legislature does."


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