Texas Regulators Approve Controversial Reliability Credit System

By Christian Roselund

On 19 January 2023, the Public Utilities Commission of Texas (PUCT) voted to recommend the creation of a system of credits to ensure that the state has enough power online during periods of supply/demand mismatch. E3 Consulting proposed the Performance Credit Mechanism (PCM) in a report to comply with the 2021 legislation ordering Texas’ grid operator to study ways to restructure the state’s electricity market in the wake of the extensive power failures caused by Winter Storm Uri in 2021.

Unlike other electricity markets in the U.S., the Electric Reliability Council of Texas (ERCOT) market is an energy-only market and does not offer capacity payments to generators. The PCM proposal would create a new system to provide credits to generators that can guarantee that they will be available during the hours when the grid most needs power. The proposal approved by PUCT includes a set of principles such as a defined reliability standard and clear performance standards that generators must meet to qualify for the credit.

While natural gas-fired power plants would qualify for the credit, PUCT Chair Peter Lake has stated that demand response programs would not. Despite this new subsidy for gas plants, E3 expects that solar and wind will still represent an increasing share of Texas’ electricity mix.

E3 estimates the total cost of the program at $460 million annually, and it is expected to add $2 to the monthly bill of the average residential customer. The proposal now goes to the Texas Legislature, where it must be approved by both houses before being implemented by Texas’ grid operator.

The PCM system is supported by Texas Governor Greg Abbot. However, it is strongly opposed both by Sierra Club and the author of the 2021 bill that mandated the report’s creation. In a Twitter thread, Texas Senator Charles Schwertner called the PCM “unacceptable,” stating that it is a “substantial departure from the legislative intent” of the 2021 legislation. Senator Schwertner has further stated that the legislature has the responsibility to build a reliable and resilient electric grid “within the confines of the energy-only market.”

News analysis: How Texas’ electricity plan could change the grid (E&E News)

News analysis: Texas regulators adopt performance credit in market overhaul proceeding, teeing up battle with lawmakers (UtilityDive)

Source: Wholesale Electric Market Design Implementation (PUCT)