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National panel questions reliability of Texas’ electric grid

By: Loren Steffy |

The agency that oversees reliability for the nation’s electric grid has questioned the adequacy of Texas’ deregulated system to meet growing demand for electricity. In a letter to the Electric Reliability Council of Texas, the state’s grid operator, the national group said that the lack of new generation being built in Texas “implies higher reliability risks” and that “ERCOT will need more resources as early as summer 2013 in order to maintain sufficient reserve margin.”

Reserve margin is essentially the cushion of generating capacity that the state has to meet emergency demand for electricity. Gerry Cauley, the president of the North American Electric Reliability Corp., which is certified by the federal government to assess and enforce reliability standards in the country’s power system, requested that the Texas grid operator respond by April 30 with a plan for how the state plans to address the shortfall of generating capacity.

So far, ERCOT and the Public Utility Commission have been unable to find a solution. The utility commission this summer doubled price limits in the wholesale market, and plans to do so again this year, but that hasn’t offered enough financial incentives for generators to build new plants.

Meanwhile, as I wrote in Sunday’s column, the state’s Sunset Advisory Commission in Austin, voted to strip consumer protections from a bill proposing changes to the PUC:

The decision overruled recommendations by the Sunset Commission staff that included granting the utility commission the ability to levy heftier fines for abusive practices in the state’s deregulated electricity market.

As our deregulated electricity market falters, as it fails to create incentives for desperately needed generating capacity, legislators, like regulators, have focused far more on helping big generating companies than protecting consumers.

“The Sunset Commission completely ignored their responsibility to protect consumers and the marketplace from abuse,” said Tom “Smitty” Smith, the state director for the consumer group Public Citizen.

The Sunset Commission’s staff recommended raising penalties that the utility commission can levy for companies caught manipulating electricity markets to $100,000 a day for each violation. Currently, the penalties are capped at $25,000 a day.

Sen. Brian Birdwell, R-Waco, pulled that provision before the discussion even started, and no one else on the 12-member panel bothered to address it. (Read more here.)

Neither development bodes well for ratepayers. The state is now under more pressure than ever to encourage generation, and that’s likely to mean higher prices at a time when the deregulated market was supposed to be delivering lower prices to consumers. At the same time, the regulatory protections to thwart market manipulation are flimsy at best when the market may be most vulnerable to abuse.

Here’s the letter from NERC: