Written on: March 1, 2013
Grocers make money selling groceries. Bakers make money selling bread. But big electric companies want to make money simply for existing. And if they get their way, electricity costs in Texas would go up. Maybe by a lot.
In a proposal that has been roundly rejected by organizations across the political spectrum, the owners of Texas power plants want to receive extra subsidies based on the number and size of plants they own. The more they own, they more they get. The subsidies would be added to wholesale power costs, but they’d trickle down into home energy bills.
According to UBS Securities, the generator proposal (it’s known as a “capacity market”) would cost Texans between $1.2 billion and $2.3 billion a year. Capacity markets in other states also have been very costly, including in New Jersey where one has added $1 billion to annual electricity charges.
What’s the argument for these subsidies? Generators say they need the extra cash as an incentive to build more power plants. Texas potentially faces a power shortfall after 2018, and because of the state’s deregulated electricity system there’s no easy way to confront the problem.
But generators offer no guarantees that they’ll use the money to build more power plants, and such subsidies in other states have not worked as intended. Part of the problem is that almost all the extra money ends up supporting companies with existing generation — whether those companies build new power plants or not. There’s also a question of basic fairness. For years, when energy prices in Texas were high, generators argued against any market intervention. Now that prices have come down, they’re clamoring for subsidies.
Creating a capacity market in Texas has been roundly rejected by conservation groups, free market groups, customer coalitions, manufacturers, elderly advocates and environmentalists. The Public Utility Commission also has taken aggressive steps to address the state’s reliability concerns, including significantly increasing caps on wholesale power costs. This likely will increase energy costs during the summer months and during other high-demand periods. The new subsidies, if also adopted by the PUC, would only add to the costs.
The Texas Coalition for Affordable Power is on record in opposition to a capacity market. The municipal energy consumer coalition has proposed technical fixes that will help address reliability concerns, but not at the expense of affordability.