Just as temperatures began to dip this month, the state’s Sunset Advisory Commission released a report that calls into question whether the Public Utilities Commission of Texas will be able to keep our lights on.
The analysis, which is a bit like a progress report for the agency, took a hard look at the changes made after 2021’s blackout during Winter Storm Uri. It found, in short, that those changes aren’t enough to ensure that the PUC is prepared to improve grid reliability. It also isn’t accurately analyzing data to inform decisions about the state’s utility markets.
“PUC is woefully under-resourced given its critical responsibilities and work that still lies ahead,” the report says. While explaining how 1999’s deregulation worked until it didn’t, the report pointed out that despite blackouts during an “unusually strong” winter storm in 2011, “state electric policy remained largely unchanged and business as usual continued.”
Then came Uri, which left 11 million homes in Texas without power and water for days during one of the coldest winter storms on record. The state legislature put the PUC under a mandate to more actively oversee the Electric Reliability Council of Texas and the market, but the “PUC was ill-prepared for the task,” the report said.
Part of that is because of budget cuts. At the time of the legislative mandate, the agency employed 166 people. That total raised concerns with the Sunset commission staff, who said the agency lacked the bodies to adequately oversee the industries it is tasked with regulating. For instance, the PUC relied heavily on the participants of markets it was regulating for the analysis it needed to make recommendations and decisions.
“The market participants have private interests to protect, which may be at odds with the broader public interest in providing reliable electricity to all Texans,” the report said. Having independent analysis, the Sunset staff said, would be key as the agency begins to implement market reforms while addressing grid reliability. The PUC should have more funding to hire its own analysts, they said.
The hefty document also recommended defining better the term “reliability,” as well as making sure that the PUC and ERCOT are actually communicating with each other.
Lawmakers will take a look at the report during next year’s legislative session, and a public hearing will also be held. But the agency already got an earful from some legislators last week when the state Senate Business and Commerce Committee held a hearing to discuss the PUC’s proposed plan to improve reliability by redesigning the utility market in Texas.
The plan, which was offered to the committee by PUC chair Peter Lake, would pay power generating companies to maintain a reserve of electricity for the grid during times of high demand—such as this summer, or during a storm like Uri. After forecasting and then proving that they can reliably provide electricity during peak demand, the state would pay companies a “performance credit mechanism.”
Lake testified that the idea would incentivize power generators to be reliable in a way that just supply and demand would not.
The cost and the timeline concerned several of the senators, as did the fact that the consulting firm hired to review potential plans didn’t participate in the hearing, and reportedly didn’t factor in the massive grid failure during Uri into its analysis into what plan would really improve reliability, choosing to run its analysis on weather from 1980 to 2019.
“What we have in front of us is a market-based solution the analysis says would give us 10 times the reliability for less money customers would pay in the absence of action,” Lake said.
However, several senators called the plan “convoluted” and questioned whether the state’s power consumers should pay for an untested idea when they already had billions from the 2021 storm passed on to them.
“We have to have the power and the heat and the A/C on in the summer, but it has to come in a package that people can afford their monthly utilities,” said state Sen. Jose Menendez (D-San Antonio).
“We’ve got to be good stewards with the dollars the ratepayers pay,” state Sen. Donna Campbell (R-New Braunfels) agreed.
The idea, which hasn’t been done anywhere else in the country, would cost consumers another $460 million a year, the PUC told the committee. It could also take more than four years to fully implement. In the meantime, should bad weather hit this winter, consumers could be left out in the cold, again. National Oceanic and Atmospheric Administration disaster and risk mapping shows that between 1980 and 2022, there were nine winter storms, and almost half of the state’s residents are not ready to respond to another.