Texas Public Utility Commission defends competitive markets, customer interests

The Texas Public Utility Commission (PUC) might not be a household name, but electricity customers across Texas have plenty of reason to be thankful for its latest actions.

Over the past month, the PUC has made some key decisions to protect Texas’ competitive electricity markets and make sure all Texans have access to affordable and clean electric energy.

As we move toward the hot summer months and ERCOT projects record demand and potential grid alerts, these policy moves will hopefully be paired with further support of tools like distributed energy resources to ensure a reliable and resilient grid.

Protecting customers and rejecting corporate handouts

The PUC took a stand for Texas consumers, economic growth and the competitive energy market’s integrity by rejecting a self-serving proposal from two of the state’s largest natural gas electricity generators.

Last fall, Calpine Corporation and NRG Energy pressed the PUC to add “marginal losses” (a way of accounting for electricity lost on transmission lines as it makes its way from power plants to consumers) in calculating the price power plants are paid for electricity sold to retailers.

These proposed changes would’ve served as a penalty system to benefit a few electricity generators at the expense of the rest of the state, and would have:

• Stymied the growth of wind and solar projects across Texas, costing the state valuable jobs, clean power and local tax revenue for programs like education.
• Caused Texas to forgo nearly $5 billion in energy cost savings projected to result from the growth of wind and solar power.
• Incentivized construction of more power plants in areas that already struggle with unhealthy air pollution and are already or are dangerously close to reaching “nonattainment” status under federal clean air rules.

Thankfully, the PUC rejected this ill-conceived proposal and protected a market that is already getting wholesale electricity prices right.

Keeping the lights on and the market working

As more uneconomic coal plants exit Texas’ grid and ERCOT projects a tight reserve margin this summer, the PUC also took sensible steps to ensure the lights stay on and Texans continue to receive reliable, affordable electricity.

Based on its review of how the wholesale electricity market performed last summer, the Commission approved an adjustment to the operating reserve demand curve (ORDC) – a wholesale pricing component that incentivizes power generators to provide more electricity when demand increases. While it was a much smaller adjustment than requested by generators, the Commission’s action focuses on allowing the competitive market to continue to drive new power generation, rather than other more regulation-intensive and costly alternatives.

Texas is a national leader in providing reliable, low-cost electricity, and this market design change will continue that legacy with the same principles that made it so successful in the first place and enabled it to become perhaps the most competitive electricity market in the country.

Unleashing the potential of distributed energy resources

In a memo on the ORDC change, Chairman DeAnn Walker noted her hope that the adjustment would also lead to growth in solutions like demand response and distributed energy resources (DERs). Both of these are cost-effective tools for balancing the grid and tapping into Texas’ broader generating potential, which will be especially important this coming summer amid lower reserve margins.

Demand response, which entails energy customers adjusting usage during periods of peak demand, can provide fast acting and non-polluting ways to ensure a balanced and reliable grid.

DERs, which use small-scale tech like rooftop solar or micro wind turbines to produce power, can also play a critical role in making Texas’ electric system more stable and resilient. The PUC should support continued growth of DERs and prohibit utilities from discouraging customers from investing in these resources on their own property and at their own expense, especially when such private investment benefits the grid as a whole.

Allowing Texas’ low-cost clean energy resources to thrive and Texans to reap the benefits of a cleaner electric grid and low wholesale prices will require that state leaders not undermine the progress of the competitive market and the potential of solutions like DERs. The PUC’s recent leadership is an encouraging sign that it recognizes this fact and affirms that the Commission intends to play a constructive role to ensure Texans enjoy healthy, affordable and abundant energy.