Texas regulator wants to pay power plants to help avoid deadly blackouts

Texas regulators are throwing their support behind a plan to pay power plants to be on standby to provide backup electricity to the state’s grid to help avoid a repeat of the deadly blackouts during a 2021 winter storm.

In a unanimous vote Thursday, the five-member Public Utility Commission of Texas adopted a proposal that would require electricity retailers to pay power plants a fee to ensure they’re ready to be online when the grid needs them most. The commission said it won’t move forward to implementing the plan until the state legislature has had a chance to review it.

State Senator Charles Schwertner, who authored the legislation that required the commission enact electricity market reforms, said the proposal was “unacceptable,” according to a Twitter post after the vote. “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,” Schwertner said in the post.

The move by the commission is designed to encourage developers to build more plants in Texas and would be a stark shift for the state, which has long relied on market forces to ensure the system has enough capacity to meet demand. The added fees are expected to costabout $460 million a year, according to independent consultants hired by the state. Critics, however, warn it will increase consumers’ costs without guaranteeing more plants are actually built.

Key industry groups including the Texas Oil & Gas Association and the Texas Association of Manufacturers raised concerns Thursday about the proposals’ costs and ability to make the grid more reliable. 

“We acknowledge the commissioners’ comments to maintain competition and innovation in the solutions, but concerns remain regarding shifting risk away from generators and toward consumers,” Todd Staples, president of the Texas Oil & Gas Association, said in a statement. 

The plan will provide a significant new source of revenue for power-plant operators including Vistra Corp., NRG Energy Inc., Calpine Corp. and Constellation Energy Corp. The Texas Competitive Power Advocates, an industry group that represents major generators, has said its members have committed to building 4.5 gigawatts of capacity if the rule is adopted.

Previous attempts to start similar programs, called capacity markets, in Texas have been defeated in the last decade. While power-plant owners support the current initiative, it has drawn opposition from consumer groups, environmentalists and others. It does, however, have backing from Texas Governor Gregg Abbott.

© 2023 Bloomberg L.P.

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