State Senator Troy Fraser had clearly been spoiling to tee off on Texas' electric regulators. At a committee hearing Monday, Fraser excoriated Texas Public Utility commissioners Donna Nelson and Brandy Marty for proposing changes to the state's electric marketplace that could cost Texans billions of dollars.
In a series of testy exchanges, Nelson in particular was chastised for failing to reach out to the Legislature before she and Marty signaled their approval for a "mandatory reserve margin," or the surplus amount of electricity available for shortages -- a vote that caught fellow commissioner Ken Anderson off-guard. It's widely believed that this is a step toward a capacity market, which would require retail electric providers -- and, ultimately, you and me -- to pay generators a subsidy to build new power plants or guarantee that they will have a set amount of electricity available. It would be a dramatic shift away from the current system, where profits come only from the sale of power.[jump]
Cost estimates to the end-users of electricity have ranged anywhere from $2 to $5 billion per year in what Anderson has called "corporate welfare." The industry finds itself in a climate where power prices have decreased dramatically from the days when it sang the praises of a free, unfettered electricity market. Now they say they need additional direct payments from consumers to keep the lights on. Fraser has spoken against such a move for months now, and Monday was his first chance to challenge its proponents on the PUC directly.
"Did you pick up the phone and ask me what my thoughts would be about a mandatory reserve margin?" State Senate Committee on Natural Resources chairman Fraser asked.
"No," Nelson replied.
"You don't think I or we in this committee might have a concern about the fact that you're doing a major market-design change that would almost for sure mandate a capacity market?"
"I have talked to you about this a lot. In the future I will call you."
The single largest point of contention is the assumption on which the argument for a capacity market is based: That keeping the lights on in Texas will be a problem going forward. Predictions from the Electric Reliability Council of Texas, the state's grid manager, have been reliably unreliable, overestimating demand and underestimating supply.
Fraser accused Nelson of pushing a sky-is-falling narrative that hasn't been borne out and, as ERCOT President Trip Doggett testified to earlier that morning, probably won't be. Referring to the 2011 heat wave that prompted somewhat panicked calls for conservation, Nelson re-imagined those days, "If we had an 8 percent reserve margin in 2011, we'd have had 40 hours of rolling outages."
"Commissioner, come on," Fraser responded. "We had a 14 percent margin in 2011. It's absurd to say, 'What if we had 8?' It's nice for us to project that the sky's falling but we have to look at the reality we have."
Fraser sparred with Nelson and Marty, Governor Rick Perry's former chief of staff, over whether the PUC even had the authority to implement such sweeping changes.
"I don't ever remember any discussion about the PUC being given unbridled authority under the pretext of resource adequacy where y'all could do a total market redesign," Fraser said.
"I believe provisions in the (Public Utility Regulatory Act) give us authority over reliability," Nelson replied.
"Does that give you the authority to create a new electricity tax?"
"To re-regulate the market?"
"How do you think that gives you the authority to change the free market, to socialize the market, without involving the Legislature?"
"It's not a total redesign. A capacity market is still a market. You're just buying installed capacity. That's still a market."
It's a market alright, only one that forces consumers, regardless of their consumption, to underwrite power generators' fixed costs, with no guarantee that any power plants will get built with that money.
Fraser accused Nelson of backing off on the capacity market in private discussions with him, then bringing it back up while the Legislature was out of session.
As I said in a post last week, if the power-generator lobby thinks getting Texans to prop it up during a down market is going to be a cakewalk, it's sorely mistaken.