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On Feb. 7, the Texas Senate Committee on Business and Commerce held a hearing on the Public Utility Commission's (PUC) plan to overhaul the Texas energy grid. PUC Chairman Peter Lake answered questions from the committee. Several senators displayed their skepticism over whether the plan would work, pointing out their concerns with the plan's novel nature. Specific issues raised by senators include questions over the price tag for the plan and its ability to attract new generators to the market.
In January, the PUC formally adopted its plan to overhaul the grid in order to ensure reliability. Austin Journal reported that the plan centered on the introduction of a Performance Credit Mechanism, known as the PCM. The plan was met with immediate skepticism by members of the Senate Committee on Business and Commerce, who sent a letter to the PUC saying the plan failed to meet the directives given by the legislature.
According to ReformAustin, the PCM would require utility companies and electric providers to purchase the "performance credits" from generators. The credits are used to pay for power that is supplied during peak hours of demand, often due to extreme weather and a lack of solar and wind generation.
Industry groups have joined the senators in expressing their doubts about whether the PCM would work, Houston Daily reported. Both the Texas Association of Manufacturers and the Texas Oil and Gas Association (TXOGA) released statements expressing concern about instituting a novel approach to the grid that had not been tested before. The associations also pointed to the potential price tag attached to the plan, which TXOGA said could amount to $5.7 billion annually.
"I think a big question that I keep hearing around the table, is 'Is the $5.5 billion real or is the $460 million because of the efficiencies you pick up real? Which is the real number?' I think there’s a lot of uncomfort (sic) level here, and I would encourage y’all to go back, if you want to refute it and do a one-pager or a two-pager if possible to make members more comfortable with why you don’t think it’s a $5.5 billion cost on an annual basis," Sen. Robert Nichols said in a committee hearing.
Lake disputed the $5-plus billion figure to the Committee, suggesting the real cost would be $400-500 million. Lake explained the discrepancy in cost estimates by saying the PCM would reduce the instances of high stress on the grid. These peak periods result in a surge in prices for electricity. Lake said fewer occasions of surge pricing would reduce the average electric bill for consumers over time.
Sen. Mayes Middleton also touched on how much the plan will ultimately cost, asking Lake if the reason the PCM will decrease the instances of surge pricing is due to an increase in baseload thermal generation. Lake replied, "It’s all of the above. Given the variability that wind and solar bring to the system."
Brent Bennett, policy director for Life: Powered of the Texas Public Policy Foundation, spoke with the Austin Journal about PCM costs related to wind and solar generators. He asserted that there are positive elements to the PCM, but "more is needed because the PUC has determined that they do not have the authority to allocate at least part of the cost of the PCM to wind and solar generators."