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…

Late Sunday — after the Texas Legislature, at the 11th hour, passed monumental electricity grid bills that stitched together a range of energy proposals that many had assumed to be dead — a friend asked on Twitter, “Does this mean the grid is fixed?” 

No. Not even close.

Over the past 20 weeks, state leaders have, with frightening consistency, focused on the wrong energy-related issues. They wasted time and energy attacking Texas’ nation-leading clean energy sector — something most states and countries pine for — while ignoring consumer-centric solutions that would reduce bills and increase reliability.

The only good news as the 88th legislative session came to a close was the surprising lack of bad news. 

Bad bills that died (or got better)

A remarkable coalition of environmentalists, industry organizations and business groups — including more than 50 chambers of commerce, manufacturers, generators, oil & gas advocates, and others — stopped very real efforts to shut down the renewable energy industry in Texas. 

As attack after attack rolled out of the Texas Senate, the state House of Representatives consistently raised red flags about the effects of such legislation on consumers. House State Affairs Committee Chairman Todd Hunter — a pro-business, anti-nonsense Republican from Corpus Christi — often led the questioning on behalf of consumers. And most anti-renewable bills could not stand up to that scrutiny…

By this time next week, the 88th Texas Regular Legislative Session will be over.

Make no mistake: none of the grid bills under consideration today and throughout the week do much to improve grid reliability. The most impactful bills — including proposals to increase energy efficiency and create opportunities for consumers to get paid to reduce demand at times of scarcity — are all but dead.

The bills that are likely to pass are primarily about redesigning the ERCOT market to pay incumbent generators more money (SB 7 and SB 2012) or giving subsidies to new gas plants (SB 2627 and SJR 93). The February 2021 blackouts, which supposedly prompted this legislation, were due to lack of winterization of gas supply, power plants, and homes and buildings. ERCOT had plenty of capacity, but half of it didn’t work in the extreme cold, ice, and snow.

So these bills do not address the root causes of those outages. Instead, the biggest debates today will likely be over whether to raise consumer costs by only a few billion dollars, or by tens of billions of dollars.

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…

Last winter, heading into the 88th Texas Legislative Session, there was one marquee bad idea to reshape the state’s electricity market.

The Performance Credit Mechanism, or PCM, was dreamed up by a mix of energy companies, Public Utility Commission Chairman Peter Lake, and a consultant that worked for both. It proposed steering billions of Texans’ dollars to thermal generators — in many cases simply to do what they already were doing. It would have dramatically increased power bills with no promise of additional reliability.

Legislators, especially in the Senate, made it clear they hated the idea. The PUC recommended it anyway, just days before the legislative session convened — essentially daring the legislature to create a different system.

In the months since, bad ideas have multiplied like rats. The state Senate has passed at least six bills that would raise consumer costs to previously unimaginable levels. Fortunately, many don’t seem to have gained traction in the House of Representatives, which has taken a far more consumer-centric approach to Texas’ energy challenges.

Make no mistake — those ideas are far from dead. There is more than enough time for Lt. Gov. Dan Patrick to, say, resurrect his proposal for the state to spend $18 billion on gas plants and, in the process, blow up the state’s competitive energy market. We’ll all keep a close eye on those zombie bills over the next month.

But today, let’s focus on the PCM (aka Pretty much a Capacity Market). Because, unlike the Senate’s bad ideas (which you can read more about in this great piece from Lynne Kiesling over at the Knowledge Problem), this one actually seems to have support in the House and from the Governor right now. The next four weeks will determine whether it’s catastrophically terrible, or merely not great, for Texas consumers…