The Texas Senate Committee on Business and Commerce met on February 16th to discuss various mechanisms for ensuring reliable and affordable power supply, including the Texas PUC’s recommended approach, the Performance Credit Mechanism or PCM. There was very healthy discussion on this matter amongst the Senators and the various expert witnesses offering testimony.
Witnesses called before the Committee included former Texas PUC Commissioner Rebecca Klein representing C3 Solutions, Katie Coleman and Charles Griffey both of whom representing the Texas Association of Manufacturers (TAM) and the Texas Oil & Gas Association (TOGA), Michelle Richmond representing Texas Competitive Power Advocates, Dr. Brent Bennett representing the Texas Public Policy Foundation, and Alicia Knapp representing Berkshire Hathaway Energy Renewables.
Several approaches were discussed beyond the PCM, including an approach suggested by Dr. Bennett that would require Firming Support from intermittent resources; a proposal from TAM and TOGA that would provide compensation for dispatchable generation units to be on-call with 2 hours’ notice and 4-hour minimum runtime and coupled with a state-supported loan backing to encourage investment; and a Public-Private partnership for emergency generation investment suggested by Berkshire Hathaway.
Klein stated in her testimony that the PCM required more study and benchmarking. As she concluded her comments Senator Schwertner asked her if the PCM represents a “U-Turn” from a free and competitive retail market. She replied that she could not comment without more analysis.
Richmond stated that her clients and member companies, who represent substantial power generation capacity in the state, support the PCM as it requires no upfront payment from the market, represents a future payment stream to support investment, and contains a performance mechanism in order for payment to be realized.
Coleman and Griffey, both of whom were articulate and impressive with their knowledge and testimony, described the PCM as a backward-looking capacity market, and in their view an “out of the market” mechanism.
Knapp spoke about Berkshire Hathaway’s 2021 proposal for investment in emergency generation capacity of 10,000 megawatts to be distributed around the state as recommended by the PUC. Berkshire Hathaway currently owns roughly 2,000 megawatts of renewable generation in ERCOT. However, several Senators seemed concerned that market distortions would arise from such emergency generation serving as a resource backstop.
The Committee, comprised mostly of Republican Senators, demonstrated their commitment to free and open market mechanisms, expressing their desire to avoid deviating from the path that had been set with retail competition (SB7).
There will be much more to come on the PCM and other market mechanism options being discussed in future Committee sessions.
