At this morning’s PUC Open Meeting, the commissioners will discuss the Performance Credit Mechanism, or PCM, which I have described as Pretty (much a) Capacity Market.

In a memo filed yesterday, Chairman Gleeson laid out three questions for the commissioners to discuss:

Are they ready to set dates for workshops? (The first is already set for March 26)

Should the cost cap set by the Legislature be annual or a yearly average? (The law unambiguously says “annually,” page 25, line 8)

Should the ERCOT filing from last week “be the ‘implementation plan’ required by the Commission’s Order and Modified Memorandum adopting the PCM?”

The Legislature put guardrails (including the annual cost cap) on the PCM but did not require it be implemented. A Commission order can be easily set aside by another Commission order; they are not obligated to proceed.

They need to consider at least a few extra questions…

Power grid operators need flexible and dispatchable resources, especially when grids are under extreme stress or emergency conditions. The worse the conditions, the greater the need for flexible resources. 

There’s no energy resource that’s more flexible or dispatchable than batteries. They can respond in sub-seconds and fulfill a variety of grid needs. 

So why on earth is ERCOT trying to slow down battery deployment?

Last month, the ERCOT Board unanimously approved a protocol revision request (ERCOT’s version of a rule change) requiring batteries to maintain a state of charge at all times. Batteries, of course, are meant to be depleted and recharged; ERCOT’s rule would force them to always have more juice, even in dangerous conditions — times when Texans desperately need it.

“ERCOT is trying to make batteries look like and act like coal plants,” Commissioner Glotfelty wrote in a memo that injected some common sense into the discussions of ERCOT’s protocol revision request (known as NPRR 1186). 

Commissioner Glotfelty suggested to ERCOT CEO Pablo Vegas back in August that the proposal would increase costs for consumers and create reliability problems; he suggested ERCOT to go “back to the drawing board” on the proposal and to “not pass it at the next Board meeting.” ERCOT ignored that advice — the politically appointed board unanimously passed a protocol revision that somewhat eased the heavy handed regulation of batteries but would still force batteries to hoard electricity when Texans need it. 

And so, three months later, the PUC was again left to express its displeasure with a regulation that would discourage investment in a dispatchable power source that Texas desperately needs…

The PUC held a workshop Friday, and while I've never watched a Politburo meeting, they likely have a similar feel. 

Electric companies lined up and, one after the other, said they're "ready for winter." When one company representative failed to say the scripted magic words, he was reminded by the PUC Chair of his omission, to which he replied, "We are preparing, and we will be ready."

Feel better? Me neither.

The Biggest Problems Weren’t Even Discussed

Beyond the sheer annoyance of repetitive, performative, perfunctory attestations, the meeting didn’t address some of the most important issues Texas faces this winter. There was not a single mention of the definitive post-Uri report or its 28 recommendations made two years ago by the North American Electric Reliability Corporation (NERC) and the Federal Energy Regulatory Commission, several of which have not been acted upon at all…

It’s the end of a tumultuous two years at the Public Utility Commission — and hopefully the beginning of a very different era. The Governor’s office announced last week the appointment of Commissioner Kathleen Jackson as interim Chair of the PUC; an announcement of a longer-term Chair will likely come later this year.

The new PUC leadership needs to quickly establish a more participatory and collaborative approach — for both stakeholders and the public at large. This means listening to the public, significantly improving opportunities for input, and convening stakeholders in ways that create compromise and lasting change.

Stakeholders are ready for change

For two years, stakeholders have been at each other’s throats — far more than is typical at the commission. First and foremost, a new Chair must openly acknowledge that no one solution will fix the problems with Texas’ grid. The PUCT and ERCOT will have to do dozens of things well; that demands active participation from a broad group of stakeholders. 

Finding the right mix of solutions requires more collaborative leadership. That’s not easy — it’s quite hard — but it’s been done. In the late ‘90s and early aughts, PUCT Chairs Pat Wood, Becky Klein, and Barry Smitherman all had tenures characterized by collaboration with the Legislature, stakeholders, and the public. People involved in energy policy back then admit that they never got everything they wanted, but they got a lot of it. The other side didn’t get everything either, and there were more resolutions where everyone won.

Wood, Klein, and Smitherman didn’t start with a solution, but rather with a problem statement. From there, they worked with the broadest cross section of interests and the public, distilling promising solutions into a system that worked. 

Since then, the agency has been run far less collaboratively… 

Throughout the legislative session, Chairman Todd Hunter has spoken up — and acted — on behalf of consumers. “I want to protect the consumer,”  he said on the House floor while successfully defending a cap on the cost of electricity capacity in the ERCOT market.

After a series of dangerous Senate votes, Hunter and other House members have one more opportunity to protect Texas consumers in the final days of the legislative session.  

For consumers, it feels like a last stand.

Over a whirlwind and confusing 45 minutes Wednesday evening, senators tacked 15 amendments onto House Bill 1500, a significant but somewhat routine bill designed to improve the efficiency and effectiveness of the Public Utility Commission and ERCOT. Senators sometimes seemed to be voting blind — in some cases, no printed amendments were distributed and Senators didn’t seem to know exactly what they were voting on…

As the Texas Legislature enters the final sprint, big power generators are putting pressure on policymakers to approve a massive increase in their revenues — with as few consumer protections as possible. Some legislators seem compelled to go along for the ride.

The cap the generators want is effectively no cap at all: $9 billion per year. If they get their way, the Governor can take his Site Selection Magazine Governor’s Cup, put it on a bus, and send it straight to, say, Florida. 

Manufacturers and large employers have warned state leaders that this massive giveaway to generators will dramatically hurt their bottom lines. Residential and small commercial consumers can expect 30-40% bill increases if a cost cap doesn’t make it into law. The number of Texans who see their power shut-off — because they’ll no longer be able to afford their electric bills — would skyrocket…

The sky is falling. And everything is great!

Such was the message at a bizarre PUC and ERCOT press conference Wednesday. Ostensibly, the purpose was to release two reports on grid reliability. Instead, it turned into a political exercise — another effort to spin Texas’ ongoing grid problems as something somehow caused by the state’s nation-leading clean energy resources.

“The grid is more reliable than ever,” said ERCOT CEO Pablo Vegas. Also Vegas: There is a “higher risk of emergency operations” this summer compared to last. So more reliable than ever… except for last summer?

Said PUC Chair Peter Lake: “The risk of brief periods of load shed has increased.”

Got it. More reliable than ever and more risk of rolling outages. Clear as mud!

So Are There Actually Problems?

Texans continue to list grid reliability as one of their top concerns. Given these mixed messages, that won’t change any time soon — nor should it, given the increasingly obvious political and anti-competitive tilt of the PUC and ERCOT…

With only six weeks left in the 88th Regular Session, the pressure is mounting. As the countdown to Sine Die (the final day) ticks away, I'll keep you in the loop with regular updates here on Substack and on Twitter.

Here's a sneak peek at what's happening this week.

A Senate Market Design Bill Heads to the House

After the House adjourns on Wednesday, the House State Affairs Committee will dive into one of the Senate's market design bills, SB 2012. The bill aims to control the costs of the Performance Credit Mechanism (PCM); the PCM is a favorite among ERCOT generators but not many others. The bill caps the cost of performance credits at $500 million and mandates real-time co-optimization (RTC) implementation (likely by 2026) before PCM takes effect.

However, the Senate's version includes provisions that would burden renewable energy with the costs of ancillary services and performance credits, ultimately raising consumer costs. It also prevents demand response and storage from earning performance credits, making PCM more expensive and increasing reliability risks, since the state already relies heavily on natural gas. To increase reliability, policymakers need to deal with “correlated risk;” diversifying dispatchable resources to include storage and demand side resources would help. SB 2012 cuts them out.

Senate Bill 6 would mean the end of electric market competition in Texas.

Last week, a Texas court ruled that the Public Utility Commission of Texas (PUC) set prices too high during Winter Storm Uri in 2021.

The Third Court of Appeals noted that the Texas Legislature enshrined competition as the cornerstone of the electric market. By fixing the price, the court ruled, the PUC overstepped its bounds and arbitrarily raised Texans’ energy bills.

There are a few reasons that energy bills are poised to climb even higher in Texas — it’s not just a bad PUC decision or two (though those have certainly made things worse). It’s also because state government — especially the Texas Senate — is moving rapidly away from the competitive principles that have been at the core of Texas’ electricity system since Dan Patrick was on AM radio…

Two years have passed since Winter Storm Uri plunged Texas into darkness — yet policymakers are still far from ensuring a reliable grid. There are a multitude of reasons for this. For instance, Texas hasn’t done nearly enough to winterize power plants, gas supply, or homes and buildings.

But the biggest problem may simply be one of vision: policymakers aren’t seeing — or, at least, aren’t acknowledging — that there are a multitude of grid challenges facing them, and, by necessity, they will require varied solutions. No single answer will solve them.

The ERCOT energy only market is—to borrow Churchill’s comment about democracy—the worst form of an energy market, except for all the others. Texans expect their leaders to make changes to protect them and their property from future extreme weather events. Unfortunately, too many state leaders have fallen under the spell of capacity market solutions — most peddled by large power generation companies — that would waste billions of consumers’ dollars for little or no reliability benefit.

The Public Utility Commission of Texas (PUCT) has already endorsed a version of a capacity market, albeit a wholly untried and unproven one with an eye-glazing name: Performance Credit Mechanism, or PCM. It sounds meritocratic, but it isn’t: the PCM’s distinguishing characteristic is that it would pay generators if they are available at certain times, not necessarily if they actually perform when needed.