Texas regulators approved reforms to the state’s wholesale electricity market to make the grid more resilient in response to last winter’s catastrophic blackouts.
The Public Utility Commission of Texas ordered the main state grid operator, Electric Reliability Council of Texas Inc., to begin using a new method of pricing power during shortages starting January, according to Thursday’s commission meeting.
Ercot must also submit a plan for implementing the rest of the first phase of reforms by Jan. 10, such as increasing services to cut demand during tight periods, providing voltage support to maintain uninterrupted power flow, and compensating generators for securing fuel.
“Texans shouldn’t have to worry about whether they can power their lives or power our economy,” PUC Chairman Peter Lake said at the meeting. “When they flip the lights on, the lights should come on. And these efforts go a long, long way to ensuring that.”
The four commissioners unanimously backed the broader blueprint filed earlier this month to reform the power market. The state has long prided itself on maintaining an “energy only” power market, where extreme prices in tight conditions drive investments to maintain reliability. That failed in February when blackouts left millions in the dark, more than 200 people dead and billions of dollars in damages.
Texas has to “move away from the crisis-based business model and to redesign as needed our market to ensure a resilient, reliable grid,” Lake said.
The first rule to go into effect is a tweak to the so-called Operating Reserve Demand Curve, which sets how high and how fast prices can climb when demand jumps. By shifting the curve, prices can jump higher faster in less extreme conditions. Ercot will have to maintain daily reserves of 3,000 megawatts, up from 2,800 megawatts.
Other reforms aim to ultimately increase payouts for providing services key to keeping the grid running when power plants go offline or renewables don’t produce because the wind isn’t blowing or the sun isn’t shining.
“This ‘plan’ is basically a grab bag of good ideas, with specifics to be determined,” said Beth Garza, a former utility executive who is now a consultant for research group R Street Institute. “What seems to be missing is a detailed determination of the reliability risks to be addressed, or even a call to determine what standard is trying to be achieved.”
A second phase of the blueprint is controversial because Texas is considering a rule to require consumers to pay generators for being ready. An alternative is to award credits only to new generators that come online. Both are meant to be incentives to get developers to build new plants.
Separately, the PUC is considering payouts to plants to stay on standby for emergencies, which would take daily supply out of the market and raise costs. The commissioners asked Ercot to analyze what it would take to implement these options and determine the best path forward.
“These cost money, but nothing is more expensive than losing power,” Lake said.