The proposal has drawn opposition from groups all across the political spectrum — in great part because of its staggering price tag, according to reports.
Texas regulators have delayed consideration of a potentially expensive change to the state’s wholesale electricity market, although the issue likely will come up again before the year’s end.
That’s according to The Texas Tribune and the Houston Chronicle, which in recent editions described a generator-sponsored proposal that could cost consumers an estimated $4 billion annually. The Public Utility Commission was set to consider the change during a meeting last week, but then unexpectedly delayed action until later.
The Tribune reported that the proposal had drawn opposition from groups all across the political spectrum — in great part because of its staggering price tag — but that big generation companies wanted the change. “Such a tweak could cost some $4 billion a year, at least according to estimates from (the) Exelon (generation company),” The Tribune’s Kiah Collier reported. “That sum would almost certainly trickle down to Texas residents in the form of higher electric bills.”
The Houston Chronicle’s Chris Tomlinson wrote that electric companies, led by Exelon and Calpine, were arguing that power in Texas is too cheap. “This is the second time they have asked for a change that would put $4 billion more a year in their pockets,” Tomlinson wrote.
At issue is something called the Operating Reserve Demand Curve — ORDC for short — that functions within ERCOT’s computer systems. As part of its responsibilities, ERCOT (also known as the Electric Reliability Council of Texas) uses these computers to manage a portion of the state’s wholesale power market.
The ORDC is an algorithm in the software, and its function is to calculate quantities of additional revenue that go to generators as those generators sell power in real time. That is, ORDC revenues (also sometimes known as “adder” payments) add to the revenues that generators otherwise would receive for selling electricity. Under the ORDC, as overall electric operating reserves diminish on the ERCOT system, the payments to generators increase.
The ORDC mechanism has been producing these adder payments since 2013, but generators would like to adjust the mechanism so that it produces much greater payouts. The argument from generators is that with additional revenue they will have a greater incentive to invest in new power plants to keep up with future demand.
But other groups have begun sounding warnings, with some pushing for a go-slow approach and others expressing outright opposition. The Texas Chapter of the Sierra Club, for instance, said in written comments that “such an adjustment would be premature, especially given that ERCOT or PUC staff have not actually conducted an analysis of the likely impacts of such a change.”
The PUC also last week delayed consideration of two other potentially important changes to ERCOT’s system. One proposed change relates to the manner in which ERCOT’s computers account for transmission line losses. The other potential change relates to something called “real-time co-optimization,” which potentially could lead to consumer savings.
The Houston Chronicle, in a Dec. 6 report by L.M. Sixel, explored the transmission-line issue, and explained how it plays into the wider interplay between traditional fossil-fuel power plants and renewable energy. You can find that article here.
Separately, the Texas Coalition for Affordable Power, in a July 18 blog post, explained the real-time co-optimization proposal. You can find that post here.
The PUC may take up each of the issues again during its next open meeting, on Friday Dec. 20.
Is a policy analyst consultant for TCAP, a coalition of political subdivisions in Texas that purchase electricity in the deregulated market for their own governmental use. Because energy costs are typically a significant budget item to our members, TCAP is consistently looking for ways to save our members money, through cost-saving contracts, energy efficiency or demand response programs.