The Texas State Senate will take up an energy package today that sponsors claim will strengthen the state’s electricity system, but that threatens to undermine Texas’ first-in-the-nation competitive market and burden Texans with higher energy bills.
The legislative package, unveiled earlier this month, comes two years after a deadly winter storm paralyzed the state, sparking a public debate about the power system’s resiliency.
The Senate Business and Commerce Committee is holding a hearing on the package at 8 a.m. central time Thursday, March 23.
The centerpiece of the package, Senate Bill 6, would require the Electric Reliability Council of Texas (ERCOT) to add 10,000 megawatts of natural gas-fired “back-up” generation. That’s roughly a dozen new gas powerplants at a cost that Stoic Energy President Doug Lewin of the Texas Energy and Power Newsletter estimates at $11 billion.
But far from being based on the free-market principles at the foundation of ERCOT’s energy market, SB 6 would rate-base those new fossil fuel powerplants, requiring them to be paid for by every electricity user and taxpayer in a state where nearly 45 percent of residents already say they’ve had to forgo spending on necessities to pay their energy bills.
While Texas consumers will bear the cost burden imposed by SB 6, the big utilities building the new plants will come out on top since the legislation provides a guaranteed rate of return that requires Texans to pay the full cost of the plants – even if they end up being obsolete because of technology advances by the time they are completed.
Last week, a court in Texas ruled that the Public Utility Commission of Texas (PUC) overstepped its authority by setting prices at the maximum rate for several days during Winter Storm Uri. The storm, which brought freezing temperatures and rain, nearly collapsed the state’s electric grid, leaving millions of Texans in the cold and dark for days.
During the crisis, the PUC ordered the price of electricity pinned to a $9,000 per megawatt-hour cap for four days – more than 300 times the price per megawatt-hour on an average day. The state’s electricity market monitor said in the aftermath of the storm that Texas overcharged retail electricity providers by $16 billion.
The ruling by the state Third Court of Appeals in Austin found that the PUC exceeded its authority and violated Texas law by fixing the price of electricity during the 2021 storm.
As Doug Lewin noted in his Texas Energy and Power Newsletter, Judge Edward Smith’s ruling quoted the state’s Utilities Code on the primacy of competition in Texas’ electricity market: “The legislature finds — or it did 24 years ago when lawmakers created Texas’ revolutionary energy-only market — that ‘the production and sale of electricity is not a monopoly warranting regulation of rates, operations, and services … electric services and their prices should be determined by customer choices and the normal forces of competition.’”
“They need to get back to basics. Texas’ competitive market didn’t cause the Uri blackouts; inadequate winterization of gas supply, power plants, and homes and buildings did. And as the Third Court of Appeals pointed out last week, suspending market competition made the costs of the disaster much, much worse for Texas consumers. Whatever it is, the way you tell your story online can make all the difference.”
If SB 6 and its companion proposals are adopted the government will become the single-payer for power plants, and full competition in the Lone Star State will become a thing of the past.
In a recent post on the energy package, Lewin wrote, "if SB 6 passes, we’ll likely never see another dispatchable plant built beyond these that Texans will directly pay for. We’d almost certainly see an accelerated wave of power plant retirements, leaving the system less reliable — and more expensive — than before the bill was passed.”
SB 6 isn’t the only anti-competition bill in the package. There’s SB 2015 which would require half of Texas electricity demand be met by gas-fired generation, significantly hindering solar power deployment; and SB 1287 would charge clean energy developers more than other generators to connect to the state’s transmission system and deliver clean energy to consumers.
Texas’ competitive market is unique as the nation’s lone truly energy-only market delivering a world-leading amount of low-cost solar power. But this slate of bills would bring that glorious experiment to an end, replacing the free market with command-and-control Big Government. The result will be less clean energy, less energy choice, and higher utility bills.
These bills sound more like something California Governor Gavin Newsom would promote than freedom-loving Texas.
The Texas Senate Business and Commerce Committee hearing on the energy package begins today at 8 a.m. CT. Follow the legislation at the Texas Legislature’s website.