ERCOT Won't Institute "Self-Serving" Changes to the Texas Electricity Market Yet

The summer of 2011 will go down as one of the hottest, driest years on record. Heat drove Texans to their thermostats and the electric grid to the brink of rolling blackouts. Tuesday, with those unbelievable temperatures in mind, grid managers convened to discuss whether they should raise the target for how much power-generating capacity the state should have, known as the reserve margin.

Not yet, they concluded. At least not until the Public Utility Commission gives them some guidance on the future of the Texas power grid.

As it stands, Texas has the lowest reserve margin in the country. Here, power generators recoup their investments only through the sale of electricity, which has fetched a much lower price since fracking flooded the market with cheap natural gas used to power generators. As a result, companies aren't building enough power plants to meet rising Texas demand. So, the Electric Reliability Council of Texas was considering increasing the reserve margin from 13.75 percent to 16.1 percent. But Senator Troy Fraser, in a letter to ERCOT, beseeches the grid manager not to give the power industry a no-strings handout.

"With the makeup of the ERCOT board weighted heavily in the electric industry's favor, any vote to drastically increase the reserve margin appears to be self-serving and could increase electric costs for all consumers," Fraser wrote in a letter Monday.

He worries it's a first step toward a statewide capacity market, in which consumers would subsidize the construction of new power plants and the operation of old ones to meet demand. It would mean power generators get consumers to cover their fixed costs while they reap all the upside when the summer heat is flogging demand and electricity prices. You couldn't rig a more perfect scam, and Fraser knows it.

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"The impact of your decision...will weigh heavily in the ongoing policy debate of ensuring our state's resource adequacy," he writes. "An increase in the target reserve margin of this scale could not help but serve the interests of those advocating for a capacity market, a system that would subsidize existing [power] generation."

That's why Fraser asked ERCOT not to consider that sweltering 2011 summer in its temperature calculations, calling it an anomaly. An ERCOT spokesperson tells Unfair Park that the board shared the same fear at the meeting -- particularly because the likelihood of another 2011 was pegged at a one-in-100-years chance of return. If you decide to play those odds, jacking the reserve margin over a once-in-a-century event doesn't make a lot of sense. Of course, Texas is seeing the incidence of extreme weather increasing every year. But Fraser -- a lonely voice in the Legislature ratepayers -- is pushing a discussion Texas needs to have.

If Tuesday was an indication, ERCOT heard him loud and clear.

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Brantley Hargrove