The Texas Senate Committee on Business and Commerce heard testimony on Feb. 16 about potential changes to the state's energy grid.
Multiple outside experts gave testimony on what the best path forward is for the grid. Witness comments and questions from the senators dug into the cost of improving grid reliability and who or what should be liable for carrying that cost. In his testimony, Brent Bennett, the policy director of the Texas Public Policy Foundation's Life:Powered project, suggested a method of allocating the cost of reliability to electricity generators based on their ability to perform.
According to Texas.gov, following the severe winter storm of 2021, Gov. Greg Abbott (R-TX) directed the Public Utility Commission (PUC), a group that regulates the state's electric grid, to "take immediate action" in order to improve grid reliability across the state of Texas. The Texas Legislature also passed a slate of laws addressing the shortcomings of the grid.
Abbott's directive specifically instructed the PUC to incentivize reliable sources of generation and make unreliable generators pay for their shortcomings. Legislative actions required generators to provide ancillary services on a competitive basis during times of low production.
In January, the PUC formally adopted a plan to overhaul the grid focused on a novel idea called the Performance Credit Mechanism, or PCM, according to the Austin Journal.
According to the Austin Journal, following the release of the PUC's plan, the Texas Senate Committee on Business and Commerce believed the plan did not meet the directives of the Legislature. In a letter signed by all of the committee members, the committee stated that the PUC did "not include any evaluation of the dispatchable ancillary or reliability service directed by Senate Bill 3."
State Sen. Donna Campbell (R-New Braunfels) and Sen. Lois Kolkhorst (R-Brenham) both made public comments indicating their disapproval of the PUC plan and reiterating their concerns over the unreliable and costly nature of the current grid conditions.
In his testimony before the Texas Senate, Bennett pointed out the need for Texas to bring a balance to its energy market due to "overinvestment" in renewable sources of generation. Bennett advocated for an alteration to the PUC's plan by changing where the money comes from in order to pay for the cost of improved reliability. He suggested that the costs be allocated to electricity generators on a "cost causation basis," meaning generators whose unreliable nature results in volatile electricity prices would be responsible for the cost they impose on the market.
"Market design should be done for the benefit of ratepayers," Bennett said during his testimony.
Texas Sen. Charles Schwertner (R-Georgetown) agreed with Bennett's suggestion, saying that it “sounds logical. If you have a problem that is caused by 'X,' then 'X' should pay for the problem.”
Bennett summarized his suggestion by saying that Texas should try "to get increased reliability at the lowest cost possible” and that it is a fair method of cost allocation for generators, not targeting one source over another, but also that it is fair to paying customers.
