Texas Governor Greg Abbott is backing a controversial proposal that would offer payouts to electricity suppliers to make sure they are online during critical times in an effort to avoid deadly blackouts.
(Bloomberg) — Texas Governor Greg Abbott is backing a controversial proposal that would offer payouts to electricity suppliers to make sure they are online during critical times in an effort to avoid deadly blackouts.
The so-called Performance Credit Mechanism, aimed to aid nuclear and fossil fuel plants, would cost households and business about $460 million a year, according to a report by an independent consultant hired by the state.
The payouts are an incentive for developers to spend billions building new natural gas-fired power plants. Last month, generators committed to building 4.5 gigawatts of capacity if the rule is adopted, according to Texas Competitive Power Advocates, an industry group. Its members include some of the state’s biggest generators and traders, such as Vistra Corp., Calpine Corp., NRG Energy Inc. and Constellation Energy Corp.
One gigawatt is enough to power about 200,000 Texas homes on a typical day.
The grid reform “must be given strong consideration” by the Public Utility Commission of Texas after an 18-month process to develop and review power market changes, Abbott said in a letter to the commission on Tuesday. “The fact that generators have already publicly committed to build thousands of new megawatts of dispatchable generation resources if the PCM is adopted and implemented by the PUC further supports this point.”
The move to create a capacity-like market would be a sharp pivot for the state grid that operates uniquely as an energy-only market where traders make money off of the price of volatile electricity prices and grid services.
Critics of the program argue it would increase consumers’ bills without guaranteeing greater reliability because it doesn’t require developers to build new plants, despite their pledges.
The Texas PUC is poised to vote on the capacity payouts as soon as Thursday.
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