Senator Hughes Press Release

State Sen. Hughes urges commission to intervene in Pirkey Power Plant closure

AUSTIN, Texas (KLTV) - An East Texas lawmaker is fighting to keep a Harrison County power plant from closing.

On Thursday, Republican State Sen. Bryan Hughes of Mineola testified before the Public Utility Commission of Texas in Austin and urged them to intervene in the planned closure of the Pirkey Power Plant. In 2020, AEP SWEPCO announced the plant would close in 2023.

How Texas’ Electricity Plan Could Change the Grid

Transmission towers in Houston are shown. Brandon Bell/Getty Images

After a boom in wind and solar generation, regulators in the nation’s top energy-producing state are pushing ahead with a plan that would incentivize more natural gas plants on the power grid.

The new framework could remake Texas’ electricity mix for years to come, clouding the outlook for renewable energy even as federal incentives are pushing those sources onto the grid.

The plan won approval from the state Public Utility Commission last week, setting terms for how the electricity market may change. The structure — which passed the PUC unanimously almost two years after winter blackouts crippled the state — is designed to aid reliability while retaining some of Texas’ unusual electricity system.

Critics, however, warn that the PUC is pushing the state toward a market design rooted in the past instead of embracing renewable energy and accelerating efforts to cut electricity use when demand is highest. Some also say the proposal would raise power costs for customers. And powerful legislators question whether the PUC’s plan will offer the reliability its supporters promise.

State Sen. Charles Schwertner, a Republican who leads the influential state Senate Business and Commerce Committee, labeled the PUC plan “unacceptable” in a Thursday Twitter post.

In a letter to regulators last week, Schwertner said the PUC’s design represented a “substantial departure” from what legislators previously directed the commission to consider.

Texas’ main power market has relied for years on a competitive design that allows generators to reap high prices when conditions are tight, potentially creating an incentive for companies to build more power plants. However, as renewable energy production becomes cheaper and a growing population pushes up demand, that structure is colliding with efforts to make sure there’s enough electricity during periods of extreme heat and cold.

State lawmakers, Schwertner said, “did not direct the PUC to replace the state’s energy-only market with an unnecessarily complex, capacity-style design that puts the competitive market at risk without guaranteeing the delivery of new dispatchable generation.”

With the PUC’s approval of a new outlook, legislators and officials from the Electric Reliability Council of Texas (ERCOT) — the state’s main grid operator — will now debate next steps for the plan. Texas is seeking to try an unproven method to fix reliability problems plaguing numerous U.S. grid regions.

Here are answers to five key questions about Texas’ new plan for electricity.

Why is the Texas market being altered?

The market redesign has its roots in 2021’s Winter Storm Uri, where freezing temperatures led to widespread blackouts and the deaths of more than 200 people in Texas. As part of sweeping legislation after the storm, the Texas Legislature instructed ERCOT to commission a report on ways to restructure the market to avoid shortages.

Although legislation led to changes, including more oversight and weatherization of natural gas infrastructure, a winter storm near the end of 2022 highlighted the grid’s continued challenges. Below-freezing temperatures pushed ERCOT’s electricity demand to more than 73,000 megawatts — some 12,000 MW higher than ERCOT had forecast the day before and a wintertime demand total only topped by the 2021 storm.

ERCOT’s grid stayed intact in what Dan Woodfin, vice president of system operations, later called a “nonevent.” But there were dangers.

According to a report from the Federal Reserve Bank of Dallas, 10,000 MW of thermal power plant capacity — a segment that can include sources such as natural gas, coal and nuclear — and 6,000 MW of renewable generating capacity went offline during the storm in Texas’ main grid region. On top of that, production of natural gas from the ground was curtailed because of frozen equipment and at least one provider — Atmos Energy Corp. — had to cut some gas service.

“There have been significant improvements to the Texas electrical grid over the past two years,” wrote Garrett Golding, senior business economist at the Dallas Fed. However, he added, the fact that there haven’t been major blackouts since February 2021 “is a low bar to meet.”

Electricity demand across the state is rising, Golding wrote, and the grid’s power sources are not keeping up.

Grid reliability “increasingly hinges on an aging collection of coal and gas plants,” Golding wrote. Those sources, he added, “are proving less reliable at offsetting expected drops in intermittent power sources in both extreme cold and heat.”

How Texas’ Power Grid Works

Who are the major players and how do they manage the power grid in Texas?

Who is in charge of the state power grid? And who's responsible when the lights go out? Illustration by Emily Albracht.

The deregulated power grid in Texas means no one company owns all the power plants, transmission lines and distribution networks, and about 60% of Texas customers choose between dozens of power retailers on an open market. Electricity generators, such as NRG and Vistra, produce power, while retail electric providers, such as Tara Energy and Griddy, sell it to residents and businesses. Transmission companies, such as Oncor, transport the power and are compensated by a fee on customer’s bills from their electric provider. But who is responsible when the power goes out?

The Electric Reliability Council of Texas, an independent nonprofit, manages the price of power and also balances supply and demand in the grid, which ERCOT said was "seconds and minutes" away from catastrophic monthslong blackouts during the mid-February winter storm that caused dayslong power outages for millions of Texans. ERCOT is regulated by the state government.

ERCOT and electric utilities answer to the state Public Utility Commission, whose board is appointed by Gov. Greg Abbott. And everyone answers to the Texas Legislature, which can write laws to regulate any part of the system. A Texas Tribune and ProPublica investigation found that Texas regulators and lawmakers knew about the grid’s vulnerabilities for years, but repeatedly prioritized the interests of large electricity providers rather than force expensive changes.

Note: About 60% of the state gets electricity through this deregulated power market. In other areas, a municipal utility generates, transmits and sells electricity. Some counties are on one of two national grids instead of the Texas grid, and those are regulated by PUC and the federal government but not ERCOT.

Sources: Public Utility Commission, PowerOutage.us, ERCOT

Credit: Darla Cameron and Emily Albracht

Public Utility Commission Releases Reliability Reform Study

Public Utility Commission Releases Reliability Reform Study on Texas Electric Market Design

Austin, Texas – The Public Utility Commission of Texas (PUCT) today released an independent study commissioned to analyze and recommend design updates to the Texas wholesale electricity market that will strengthen current and long-term reliability reforms to the state’s electric grid. The study was done in alignment with the economic and operational reliability principles outlined in the PUCT’s Blueprint for Wholesale Market Design, which was unanimously adopted by Commissioners in December 2021.

“This study confirms that we can achieve even more dramatic improvements in reliability with minimal cost impact to consumers,” said PUCT Chairman Peter Lake. “By combining the best elements of each design model into the Performance Credit Mechanism (PCM), we create a system that ensures enough electricity when we need it most while incentivizing construction of new plants to deliver reliable power to Texas homes and businesses.”

In comments made from the dais during the Commissioners’ Nov. 10, 2022, open meeting, Chairman Lake stressed the PCM is the preferred option for market design because it best satisfies the priorities laid out by the Commission for market design and meets the requirements passed by the Legislature and Governor Abbott in the last legislative session. The study, by Energy+Environmental Economics (E3) is available on the PUCT’s website for review, along with a corresponding staff memo.

PUBLIC COMMENT

The PUCT is asking the public, members of industry, stakeholder groups and anyone interested in the market design reliability reforms to provide feedback on the PCM option as it’s laid out in the E3 study. Key questions of interest to the PUCT for public feedback can be found in the PUCT’s request for comment, at the link above.

The PUCT is adding five days to the normal 30-day public comment period to accommodate for the Thanksgiving holiday. Comments are due by noon, Thursday, December 15, 2022, and should include a clearly marked Executive Summary, up to one page, labeled with the commenter’s name as the last page of the filing. Please limit responses to 25 pages, excluding the Executive Summary.

“This affects every Texan served by the ERCOT grid, so we need to hear from you,” said Chairman Lake. “Your feedback helps ensure that we are delivering the reforms and reliability needed to keep Texas strong.”

BACKGROUND

Beginning in July 2021, PUCT Commissioners held a series of public workshops and meetings and accepted public comment to collect information from the public, industry, stakeholder groups and others about market design preferences to meet reliability directives in Senate Bill 3, passed by the 87th Texas Legislature and signed into law by Gov. Abbott. The bills required increasing grid reliability through operational and economic improvements.

Information gathered during these meetings and submitted to the PUCT formed the foundation of the Blueprint for Wholesale Electric Market Design, Phases I and II.

E3 was hired in May 2022 by the PUCT through an open, public, competitive bid process to analyze and recommend market design options following the priorities outlined in the Blueprint.

Texas PUC Nears Market Redesign Decision

Texas PUC nears market redesign decision amid criticism performance credit will not spur new generation

Retrieved from Public Utilities Commission of Texas.

Dive Brief:

• Texas utility regulators plan to vote next week on whether to recommend the state adopt a controversial Performance Credit Mechanism designed to ensure grid reliability during periods of low non-dispatchable power.

• “I still believe PCM is the best mechanism,” Chairman Peter Lake said at Thursday’s open meeting, adding that criticisms of the proposal “offer opportunities to improve” the credit. Ultimately, the commission will send its recommendation of how to reform the Texas energy market to the state legislature.

• The PCM has been criticized for its complexity, among other factors, and observers say it could take years to implement. The PUCT will also be considering a “bridge mechanism between now and any implementation of any long-term solution,” Lake said.

Dive Insight:

Along with Lake, Commissioner Kathleen Jackson was explicit in her support of the PCM. 

The performance mechanism “preserves the energy-only market and will allow Texas to continue to garner the benefits of competition and innovation,” Jackson said.

The credit would be earned by generators in the Electric Reliability Council of Texas footprint, based on their availability during hours of greatest risk to the system and with an aim to incentivize more generation to be available during times of high demand.

ERCOT CEO Pablo Vegas also supported the PCM, saying it “seems to offer the best combination of incentives that move our grid from a system characterized by extreme pricing, physical scarcity, and conservation notices ... [to] a place of stable investment.”

Vegas offered one “important modification” to the PCM, which was modeled by consulting firm E3. Instead of basing credit requirements on the top 30 hours of the system’s highest reliability risk per year, “the PCM should use a modified peak net load type of concept distributed across the year for the retroactively-settled requirement period,” Vegas said. 

There have been criticisms that the PCM mechanism will not sufficiently incentivize new generation but rather focuses on keeping older plants from closing down.

“What the PCM does ... is mitigate the quantity of exit from the market or retirements,” E3 Director Zack Ming told the commission. “It’s primarily an incentive to retain existing dispatchable generation.”

Commissioner Will McAdams appeared to question the focus on retaining generation. “You’ve got to hit that high-risk hour ... less efficient, older, vintage stuff isn’t going to have the ramping capability to hit it,” he responded to Ming.

That prompted Lake to jump in, “even if initially it’s retaining old units, everything is going to reach the end of useful life. So that dynamic, is it fair to say that dynamic would probably change?”

“Yes,” said Ming.

“A decade later?” Lake continued.

“Yes,” said Ming.

Stoic Energy President Doug Lewin, an energy analyst who closely watches the Texas market, tweeted that the PCM is “convoluted & extremely complicated.”

“Few investors, if any, will put money into long-term assets based on this. But existing generators will get a windfall for old power plants,” Lewin said.

“I’m not really sure what problem it truly solves,” Ascend Analytics Director of Market Intelligence Brent Nelson said in a separate discussion of the ERCOT market Thursday.

“You still have a scenario where you have a boom-bust potential,” Nelson said. “When there’s a lot of resources available or mild weather you’re going to have a very low value of this incentive. When you have extreme weather or tight conditions you’re going to have a higher value. It sounds to me a lot like scarcity, just under a different name.”

Whatever the PUCT decides will be “purely a recommendation” to state lawmakers, Lake said. He wants the commission to make a decision at the Jan. 19 open meeting.

In December, lawmakers raised concerns about the commission’s market redesign including that proposals being considered “will not guarantee new dispatchable generation in a timely and cost-effective manner.”

State Agency Proposes Changes to Power Market Aimed at Averting Mass Blackouts

The proposal is aimed at making sure power providers and electricity generators have enough power on hand in case of increased demand. But it’s not clear how it would hold up in unexpected weather, an expert said.

Vistra Corp.’s Midlothian power plant. The Public Utility Commission of Texas is recommending changes to the state’s electricity market that aim to ensure a more reliable power supply during extreme weather events like the February 2021 winter storm that caused widespread power outages in Texas. Credit: Shelby Tauber for The Texas Tribune

After several months of hammering out how to make the Texas power market more reliable in the wake of the deadly 2021 winter storm, state officials have landed on what they say is a solution.

Under a new proposal unveiled Thursday, power providers would be required to buy “performance credits” from power generators — which are intended to guarantee that both have enough electricity to meet increased demand when power demand is high enough to stress the electrical grid. If providers don’t buy the credits or generators don’t meet their end of the bargain, both could face financial penalties.

If the idea is implemented, “this will be the first time … that the companies that sell power to households — who you send your check to when you pay your bill each month — this will be the first time they’re actually responsible for ensuring they can deliver that power,” said Peter Lake, chair of the Texas Public Utility Commission, the board that regulates the state’s power grid operators.

The public will have roughly a month to comment on the plan before the PUC’s final vote on Dec. 15.

But it’s unclear how the grid would function under this framework in periods of unexpected heat or cold, said Alison Silverstein, a former senior adviser at the Public Utility Commission of Texas, which regulates ERCOT.

A consultant hired by the Public Utility Commission, which oversees the largely deregulated Texas power market, to analyze different proposals for overhauling the power market did not factor in how extreme weather events such as the 2021 winter storm would stress the grid operating under the credit system — writing in the report that “such analysis is beyond the scope of this study.”

Silverstein pointed to this year’s unseasonal heat wave in May, which forced six power plants offline.

“That was not on anybody’s bingo card for ‘this is when we’re going to have a reliability problem,’” Silverstein said.

The early heat in May didn’t trigger widespread power outages. But just over a year earlier, a February winter storm sent the state power grid close to collapse when demand suddenly spiked, triggering power outages that left millions of Texans without power or heat for days in subfreezing weather. Hundreds of people died and the fallout from the storm caused a wave of reforms by state lawmakers, the PUC and the grid operator — including the current push to overhaul the state energy market.

State lawmakers last year ordered the Public Utility Commission to look at ways to overhaul the market — which is largely unregulated and functions primarily off of supply and demand. That system led to disastrous consequences during the winter storm when power suppliers were allowed to charge exorbitant prices as demand for electricity skyrocketed — but frozen equipment meant that they still couldn’t meet that demand.

State officials have worked to find a fix that would make the grid more reliable without further driving up consumers’ electricity bills. Out of several options analyzed by E3, a California consulting firm, the “performance credit mechanism” fix seemed to gain favor among a majority of members on the five-member commission Thursday.

Theoretically, it would insulate consumers from sudden spikes in their electric bills because providers — including publicly-owned power providers like Austin Energy and retail providers like TXU Energy or Reliant Energy — and generators, which operate the state’s power plants, agree ahead of time to have enough reserve power on hand during peak demand periods, Lake said.

The consultant’s analysis said using performance credits would cost an estimated $460 million more per year. But Lake said competition among generators would theoretically drive down prices of the credits. By avoiding massive energy price spikes like those seen during the 2021 winter storm, Lake said power customers “shouldn’t, according to this analysis, experience any significant impact on their bill.”

Eco Regulations Force Coal Plant to Shut Down

Texas coal plant shutdown will 'devastate' the local community, locals tell FOX Business

Fox News: A coal-fired power plant is pictured near Page, Arizona. (Plus49/Construction Photography/Avalon/Getty Images)(Getty Images)

A plan to prematurely cease operations at a coal-fired power plant in eastern Texas early next year has sparked angst among members of the local community who fear severe economic consequences.

In 2020, Southwestern Electric Power Company (SWEPCO), a subsidiary of the Ohio-based American Electric Power (AEP), announced it would close H.W. Pirkey Power Plant, a large 721-megawatt coal plant located in Hallsville, Texas, in March 2023. SWEPCO told FOX Business that it elected to shutter the plant "after an economic analysis weighing the cost of environmental compliance and needed maintenance."

The company — which operates 11 power plants, including Pirkey, and serves nearly 550,000 customers across Texas, Arkansas and Louisiana — also said it had ultimately factored customer costs into its decision.

"One of the factors considered was impact on customer rates for the cost of completing this work. Customers will benefit from this decision," Scott Blake, a spokesperson for AEP, told FOX Business in an email. "When the announcement was made, we immediately began working with the community to do everything possible to lessen the impacts of the plant’s closure."

Among the many state and federal regulations coal-fired power plants are faced with is the Environmental Protection Agency’s (EPA) coal combustion residuals (CCR) rule, which is designed to protect the environment from excess coal ash contamination. The costs associated with complying with the CCR rule was a main driver leading to the Pirkey plant's planned shutdown.

In addition, two environmental groups, the Environmental Integrity Project and Sierra Club, filed a lawsuit against the EPA last month, accusing the agency of failing to enforce federal emissions standards at the Pirkey Power Plant and seven other Texas facilities.

However, the decision to close the Hallsville plant has sent reverberations through the tiny town, which relies upon the plant for direct and indirect economic support as well as reliable energy, according to several members of the community.