Source: CLICK HERE
Pablo Vegas, president and CEO of ERCOT (center), and Rudy Garza, CPS Energy President and CEO (right), discuss the "State of Energy" at a forum hosted Wednesday by the North San Antonio Chamber and moderated by A.J. Rodriguez, Texas 2036’s executive vice president (left). Credit: Lindsey Carnett / San Antonio Report
Proposed changes to the Texas energy market in an effort to make the state’s grid more reliable could eventually cost CPS Energy customers more, but whether the plan will be approved by state lawmakers or how exactly it might work for the city-owned utility is still unknown.
Pablo Vegas, president and CEO of the Electric Reliability Council of Texas, which operates the state’s electrical grid, discussed the proposed Performance Credit Mechanism (PCM) with CPS Energy President and CEO Rudy Garza on Wednesday at a forum hosted by the North San Antonio Chamber and moderated by Texas 2036’s Executive Vice President A.J. Rodriguez.
A PCM would require electricity providers to pay additional money to generators, who would in turn promise to have enough power available when demand spikes — as it does every summer and did in February 2021, after a massive winter storm led to energy shortages, days-long blackouts and hundreds of deaths.
Critics of the PCM, which include the Texas Association of Manufacturers, many energy experts and environmentalists, have called it untested, expensive and convoluted. The Public Utility Commission, which oversees ERCOT, unanimously approved the idea in January, but it’s unclear whether lawmakers will approve or direct the agency to tweak it in some way.
Energy researchers from the University of Texas at Austin, led by Michael Webber, have argued there are far less costly ways to increase grid reliability, such as requiring natural gas producers to winterize, as the Texas Legislature now requires electricity generators like CPS Energy to do.
Additionally, investing in more energy efficiency and demand response programs, and connecting Texas’ grid to the other U.S. grids, would better serve the state and consumers, they say.
As conceived, the PCM could cost electricity providers — which would pass those costs on to consumers — an additional $5.7 billion annually.
Because CPS Energy is both an electricity provider and a power generator, it’s unclear how this potential market redesign would affect the utility and its customers, Garza said Wednesday.
“We will have to look at the equation from both sides,” Garza told the San Antonio Report after the forum. “[We’ve] got to weigh the cost with the benefit … and then decide what’s the best option.”
Vegas, who was named ERCOT’s CEO in August 2022, 16 months after the former CEO was fired after the deadly 2021 winter storm, talked up the proposal Wednesday.
“It’s a very simple solution that essentially incentivizes generators who can perform during the most critical times the grid needs them,” Vegas said. “By having that consistent revenue earning opportunity — it’s not a guarantee because you have to perform — but having that consistent opportunity to earn that revenue when the grid needs you, it sends that signal that to build on support.”
Proponents like Vegas, including power generators, say a PCM will encourage the construction of more natural gas plants in Texas, which they say are necessary to add “dispatchable” power — that is, power that can be quickly turned on when it’s needed — to the Texas grid.
Now is the time to implement such a tool, Vegas added, noting that the state’s exponential growth is not projected to slow anytime soon. Without new dispatchable generation, Texas’ grid could see more failures in the future, he said.
Between 2000 and 2008, more than 20,000 megawatts of net new dispatchable generation was added to the grid, he said. Between 2008 and 2022 only 1,500 megawatts of net new dispatchable generation was added; 20,925 megawatts were retired — mostly aging coal plants — while 22,485 megawatts were added.
In that same time frame, however, more than 48,000 megawatts of net new solar and wind power have been added — but that power isn’t dispatchable, he said, and so needs the backup of natural gas.
“The time to act is today,” he said. “It takes time to build resources, to build generating units, so we have to do something about it now.”
Garza agreed, and said that’s why the utility is always looking for ways to bring additional megawatts online.
CPS Energy’s new short-term power plan, which trustees approved in January, will add roughly 4,928 megawatts of generation capacity to the utility’s portfolio over the next seven years, including 1,380 megawatts from combined cycle natural gas and about 800 from reciprocating internal combustion engines that will run on natural gas or diesel.
The plan will also add another 500 megawatts from wind, 1,180 from solar and 1,060 from lithium battery storage.
Environmentalists criticized the utility’s plan for much the same reason they oppose the PCM, suggesting that CPS Energy and Texas as a whole aren’t transitioning to cleaner forms of energy quickly enough.
“I’m happy we’re closing a coal plant, but we still need a carbon-free future,” DeeDee Belmares, a climate justice organizer with Public Citizen’s Texas office and CPS Energy rate advisory committee member told the San Antonio Report at the time, referring to the utility’s plans to stop using coal by 2028.
Vegas praised CPS Energy’s new plan and its longstanding demand response program, which allows the utility to reduce the amount of electricity residential and commercial customers that have opted into the program are using when demand is highest.
Vegas said he also admires CPS Energy’s efforts to enhance communications with local officials and residents, which he said is something he’s trying to bring to ERCOT as well.
While the two presidents chatted candidly on stage, their respective organizations are locked in a legal battle over the cost of power during the winter storm.
CPS Energy has argued that ERCOT presided over “one of the largest illegal wealth transfers in the history of Texas” for keeping wholesale electricity prices at $9,000 per megawatt-hour — power that typically trades at under $50 per megawatt-hour — for almost 72 hours.
CPS Energy racked up over $1 billion in fuel charges during that timeframe, and customers are already locked in to pay roughly $418 million of that via a $1.26 fee customers will see on their monthly bills for the next 25 years — an amount that will likely go up as it settles the remaining $587 million in litigation.
Last week, Texas’ 3rd Court of Appeals ruled that the PUC overstepped its authority in setting the price at the maximum, which led to $16 billion in overcharges to utilities across the state.
It’s unclear how that ruling, which is likely to be appealed to the Texas Supreme Court, will factor into CPS Energy’s case against ERCOT.
“It is reassuring that the courts are considering all of the impacts to customers across the state, however we are not in a position to comment further at this time,” read a statement from CPS Energy to the San Antonio Report.