SPI Insights

Texas lawmakers from the House and Senate have asked the Public Utilities Commission (PUC) to pause its planned electricity market redesign until it can be evaluated by the Legislature.

The Texas Legislator ordered the PUC to make changes to the power grid after the winter storm of February 2021 which left millions without power and caused hundreds of deaths. Changes required by the Texas government include requiring power plants to implement a reliability standard for the state’s electricity market.

PUC proposed a model similar to the current market. The supply-and-demand model will give financial benefits to generators that produce the cheapest power. The new model would add financial incentives for power plants that can quickly produce power when demand is at its highest, like during extreme temperatures. At the same time, the system would financially penalize generators who failed to produce promised power.

Senators expressed concern that PUC’s proposal may fail to meet the requirements of Senate Bill 3, and that new power generators would not be built in a timely and cost-effective manner.

The fastest growing power sources in Texas are renewable wind and solar plants. These energy sources typically provide less energy in the winter. The proposed changes will prioritize power generation technology that can quickly switch power on and off throughout the grid to balance drops in renewable power generation. In Texas, that likely means new natural gas power plants. While power companies are prepared to build new gas-fired plants, it’s unlikely they will begin investing in the projects before the law is clear.

Currently, Texans can expect one day of rolling blackouts per year. The PUC’s proposal intends to reduce that frequency to once per decade. The market redesign is expected to launch in January after the public has had a chance to comment on it.