Texas Policymakers Have Another Chance To Fix The State’s Power Grid

On March 23, the Texas Senate Business and Finance Committee held hearings related to a set of bills that would enact more reforms to the state’s electricity grid managed by the Electric Reliability Council of Texas (ERCOT). Two of the bills, SB 6 and SB 7, are a part of the list of legislative priorities laid out in February by Republican Lt. Governor Dan Patrick, who serves as the Senate’s presiding officer.

While SB 7, which would set out revised rules under which power suppliers would bid into the system, is important, SB 6 is of particular interest for those who want their electricity service in Texas to be restored to the level of reliability the state enjoyed for decades prior to the turn of the century. That was before state officials adopted the state’s current deregulated market and enacted a renewable portfolio standard (RPS) in 1999. Since that time, Texas has become able to boast that it is the nation’s leader in wind power generating capacity, but the system has failed in recent years to generate the market signals needed to encourage the building and maintenance of adequate dispatchable thermal capacity. The end result has been a significant loss of stability and reliability.

In laying out his priority legislation on March 9, the Lt. Governor said “Since Winter Storm Uri, I have been abundantly clear that we need to bring new dispatchable (primarily new natural gas plants) generation online as soon as possible to make sure that Texans have reliable power under any circumstance… SB 6 will put steel in the ground to serve as the state’s energy insurance policy and provide low-interest loans for existing dispatchable generators so they can improve the resources we already have. SB 7 addresses market uncertainty and levels the playing field between renewables (windmills and solar) and dispatchable energy by targeting money at the dispatchable assets that we need.”

Indeed, SB 6 would target a great deal of money towards putting “steel in the ground” to create a fleet of natural gas-fired dispatchable reserve capacity – as much as $10 billion. Patrick and his fellow legislators enjoy an unprecedented situation with the state’s budget this year, with a surplus estimated in January by Texas Comptroller Glenn Hegar to exceed $32 billion. While another of Patrick’s priority bills involves plans to allocate half that amount to fund a cut in the state’s property tax collections, the remaining $16 billion would still represent a larger surplus than has ever been available to any session of the Texas legislature.

Some current power generation companies and anti-fossil fuel advocates expressed concern and opposition to SB 6 during the hearing, but the bill likely has more than enough support to be voted out of the Senate. The question would then become whether the plan would be able to make it through the process in the House of Representatives.

It is key to note that it has been well understood that the Texas grid suffers from a dearth of dispatchable thermal reserve capacity for more than a decade now, since a major winter storm that passed through the state in February, 2011 highlighted the weakness. Despite being in session at that time, the legislature and Public Utilities Commission both acceded to pressure from the generators and renewables activists and failed to deal with the issue then. An identical scenario took place in 2021 following the disastrous grid failure during Winter Storm Uri, during which more than 200 Texans lost their lives.

While the 2021 legislative session did enact a series of needed grid reforms, language similar to that contained in this year’s SB 6 was stripped out of that year’s major bill passed by the Senate by members of the House State Affairs Committee (HSAC), causing the system weakness to linger unaddressed for another two years. This year, the HSAC has a new chairman, veteran Rep. Todd Hunter of Corpus Christi, along with a somewhat revamped committee membership. Whether or not this term’s membership will be more able to resist pressure from the big interests opposed to establishing what Patrick calls an “energy insurance policy” for Texas’s energy situation remains to be seen.

Bottom line: There has never been a time in the state’s history when Texas officials have been more adequately armed with the financial resources needed to finally fix this lingering elephant in the grid’s living room. This rare convergence of necessary factors will not likely align again anytime soon. If lawmakers fail to get the fix done right this time, it seems increasingly doubtful they ever will. Texas consumers would be well-advised to urge their state representatives to stand with the Senate and do the right thing for the state’s energy future.