Texas grid regulators spent $600k on a market redesign study that doesn’t consider extreme weather

When someone offers up a solution, they should—at the very least—know what problem they’re trying to solve. 

You might assume that, in “solving” the issue of Texas’ ERCOT electricity market, the Public Utility Commission of Texas is focused on solving the reliability problems that led to days of blackouts and hundreds of deaths during Winter Storm Uri.  

If you did, you’d be wrong.

The PUCT just spent 600,000 taxpayer dollars on a consultant’s report to recommend a new market design. Surely the consultant—California-based E3—modeled the kinds of conditions that devastated Texas less than two years ago, right?

Nope. The study “does not include the extreme cold weather event caused by Winter Storm Uri… Such analysis is beyond the scope of this study,” it says on page 35. 

It gets worse.

The study also did not look at the availability of fuel. “The availability of fuel for thermal resources is not considered in this analysis; all thermal resources are assumed to have unlimited access to fuel when needed. The potential for fuel limitations is beyond the scope of this analysis” (page 56).

The Federal Energy Regulatory Commission and North American Electric Reliability Corporation cited lack of fuel as a major cause of the blackouts. Less than a month ago, FERC released its Winter Assessment for this year and this remains a problem. 

But neither E3 in its report, nor the PUCT in its market design solution, seem to even acknowledge the problem. 

The report essentially tells the PUCT how to redesign the market so that the grid is reliable in an average year. Average years aren’t the problem. Unfortunately, after winter 2021 and summer 2022, Texans don’t seem to be experiencing many average years anymore. Climate change is driving higher frequency and intensity of extreme weather. 

These are massive flaws in the E3 study. Unsurprisingly, they led to a flawed product.

A capacity market by another acronym

The PUC’s consultants ended up proposing a straight-up capacity market, in which Texans would spend far more money on excess electricity that they would not use. It’s a model that the Texas Legislature has consistently opposed. Perhaps recognizing the political opposition to a capacity market, PUCT Chairman Peter Lake introduced a new concept: the Performance Credit Mechanism, or PCM.

But don’t let the new acronym fool you: it’s still a capacity market…