Post: Texas regulator votes for power market overhaul

Texas regulator votes for power market overhaul

The regulator for Texas has adopted a new market design for the state’s electric grid that will see power plants getting paid to be on standby, aimed at securing new generation capacity and increasing grid reliability.

On January 19, the Public Utility Commission of Texas (PUCT) voted to adopt the Performance Credit Mechanism (PCM) electric market design option and a set of guiding principles for implementation to strengthen reliability, accountability, and affordability of the ERCOT electric grid.

Currently, ERCOT operates an energy-only market, under which generators get paid only for power that’s delivered. Price spikes during periods of high demand are expected to provide sufficient incentive for companies to build enough power plants to meet that demand.

Under the PCM, power providers would be required to buy “performance credits” from power generators, which are intended to guarantee that both have enough electricity to meet increased demand when power demand is high enough to stress the electrical grid. Performance-based credits would be earned after the fact based on a generator’s availability to provide power during periods of high demand, rather than in advance. If providers don’t buy the credits or generators don’t meet their commitments, both could face financial penalties.

Another element of the redesign proposal is a requirement for ERCOT, the state’s grid operator, to “develop bridging options to retain existing power plants and build new generation resources until the PCM can be fully implemented.”

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