AUSTIN, Texas — The Public Utility Commission of Texas has a new plan to improve the electricity grid, but critics say there’s no incentive for companies to take part and ultimately the consumer will pay for the plan.
After the deadly winter storm in 2021 killed hundreds of Texans, Gov. Greg Abbott signed a bill directing the Public Utility Commission of Texas to make the grid more reliable.
The PUC’s plan calls for implementing a performance credit mechanism model (PCM). Companies will get paid if they promise to provide power on a future date.
“There will be money available to provide an incentive to retain your generation and then to build new,” said PUC Commissioner Will McAdams on Thursday.
In a letter to the PUC, Abbott said he supports the PCM model because it “is based on a reliability standard, incentivizes new dispatchable generation, and maintains Texas’ energy-only market.”
But energy expert Ed Hirs said there’s no incentive for companies to generate more power, or build new plants, because they’re not contractually obligated. And, he said the PCM could take up to four years to implement.
“We know from 2021 that for those companies that failed, they still got bailed out. So where’s the incentive for the generation companies to actually do what they say they’re going to do? They can take the money and run if they want,” Hirs said.
Lt. Gov. Dan Patrick said he will not end the legislative session in May if lawmakers haven’t incentivized natural gas production in the state. He argued that would help prevent another power grid crisis.
“I personally cannot see myself leaving this building knowing that another Uri could happen,” Patrick said last November. He reiterated his commitment to fixing the grid during his inaugural speech last week.
“This new plan does not address Lt. Gov. Patrick’s desire,” Hirs said. “The consultant said this is an unproven, untested, untried approach to trying to resolve an issue with the grid… The very fact that the Public Utility Commission’s order is really just a wish list of things that need to be done, rather than concrete steps that need to be taken, really points that up. So we’re two to four years out from maybe this plan being implemented. That means the consumers of Texas are forced to play ERCOT weather roulette for the next two to four years. Dan Patrick’s plan would, if it’s implemented correctly, guarantee companies that come in to generate power at a rate of return on their equipment for some period of time… 5 years, 10 years. That’s what needs to be done.”
Hirs said power generators will not invest more money into their plants unless they make a return on their investment. He said a more successful market would be one that focuses on a rate of return on capital for power plant owners, not on price. Currently, generators buy into the market and sometimes withhold power to drive up prices.
Hirs said it’s time for lawmakers to pass legislation to reward the building of new dispatchable energy.
“At this point in Texas, our growth has outstripped the available supply on peak winter days and peak summer days,” he said. “We have not expanded the capacity of the grid far enough, fast enough, to keep up with our economic growth. And we need to do something about that now.”
Senator Charles Schwertner, R-Georgetown, tweeted that the PUC plan is costly, complex and unacceptable. He wrote, “In the weeks ahead, the Texas Senate will hold hearings and consider whatever legislation is necessary to correct this error and fulfill our obligation to the people of Texas.”
Todd Staples, the president of the Oil and Gas Association, pointed to the economic impact of this plan. He wrote the PCM would cost nearly $6 billion. Oil and gas companies consume a lot of electricity.
“The conversation… discussed pay for actual performance which is encouraging but not sufficiently defined and has yet to be modeled to understand the full cost to consumers,” Staples wrote in a statement.
Hirs said Texans will end up paying for the PCM because retail electricity providers will raise prices to pay for it.
“The money’s going to come out of the taxpayer's pocket or the consumer pocket,” Hirs said. “In Texas, it’s the same pair of pants.”