Oil & Gas News

ERCOT’s plan to keep power in reserve could cost Texans $1.5 billion

Texas, freeze, natural gas, gas

By: Shelby Webb – Houston Chronicle – Texas’ efforts to have more electricity in reserve on the power grid could cost ratepayers about $1.5 billion this year, an independent market monitor told a Texas House panel Wednesday.

Carrie Bivens, a third-party consultant hired by the Public Utility Commission to study the Electric Reliability Council of Texas said the grid manager’s increased reliance on buying reserve power and operating more conservatively has skewed price signals and fundamentally changed how the state’s wholesale power market functions.

Bivens was speaking before the Texas House State Affairs Committee on Wednesday to update lawmakers on the power market’s redesign as well as changes made since the deadly February 2021 freeze.

As of May 31, Bivens estimated that ERCOT spent $685 million to $860 million buying more electricity before it’s needed and changing elements of the wholesale power market. That’s far more than the roughly $400 million the state spent on those conservative operating measures from June 2021 through the end of that year, Bivens said.

Texas Public Utility Commission Chair Peter Lake and ERCOT interim CEO Brad Jones have said the more conservative operations are temporary measures to ensure reliability until the PUC finalizes changes to the wholesale power market, which officials hope to finish by the 2023 Legislative session.

Lake said the new posturing has already shown positive results.

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“We’re no longer waiting until the grid gets on the brink before we bring more reserves and more resources to bear to ensure it’s reliable,” said ERCOT’s Brad Jones. “We’ve seen the results. In the last 12 months, we’ve had at least six days where the grid reserves were so low that if we had not built in that margin of safety and those extra reserves, we would have been on the brink of rolling blackouts.”

Among the new operating procedures, generators are paid to sit on the sidelines and to be ready if they’re needed when grid conditions tighten. That stands in contrast to how the power market has operated since it was deregulated in 2000: Power generators in the past were only paid when they were producing power, said Michele Richmond, executive director of the Texas Competitive Power Advocates, a trade group for power generators and other market participants.

Many of the units that have been called to sit on the sidelines are older natural gas and coal-powered plants that have been in operation for as many 50 years, according to testimony in March before the Texas Senate Committee on Business and Commerce. Richmond said having those units humming on the sidelines puts more wear and tear on them and could make them less reliable in the future.

“Those units are designed to run a couple of weeks of the year, not all the time,” she said. “It makes the maintenance needs more frequent and potentially more comprehensive, also going to be costly.”

Lake said the PUC’s priority is reliability, but that comes at a cost both with the temporary measures and in the redesigned power market.

“There will be some costs increases. We had a low-performing product, and we need to enhance it, we need to improve it,” Lake said. “That’s the cost-benefit trade off, it’s our job to make sure it’s worth the trade off.”

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