Analysis of Measures Under Consideration in the 88th Texas Legislature

This policy note includes the following highlights:

Following Storm Uri in May 2021, the 87^th Legislature passed Senate Bill 3 (SB 3) directing the Public Utilities Commission of Texas (PUCT) to increase reliability in ERCOT
In addition to implementing a range of incremental “Phase I” policy changes, the PUCT has engaged in over a year of debate on more fundamental “Phase II” market redesign proposals:
- - The PUCT contracted a third-party consulting firm, Energy and Environmental Economics (E3), to analyze market redesign options
  - The report was released in November 2022 and included six options, including a novel design involving retroactive payments to generators based on availability, the Performance Credit Mechanism (PCM)
  - The PUCT formally recommended the PCM in ERCOT in a unanimous vote on January 23, 2023
On January 10, 2023, the 88^th Texas Legislative Session convened in Austin. Focus has again been on reliability in ERCOT, with several bills aimed at increasing dispatchable capacity in ERCOT and putting guardrails on the PCM:
- - Senate Bill 6: Procures an out-of-market backstop fleet comprised of 10 GW of dispatchable generation
  - Senate Bill 7: Creates a new ancillary service called Dispatchable Reliability Reserve Service (DRRS)
  - Senate Bill 2012: Places guardrails on the PCM, including capping total system cost and participating technologies
  - Senate Bill 2627: Create a zero or low-percent interest loan program for dispatchable assets
  - It is still highly uncertain which (if any) of the bills will advance. The session will finish on May 29^th, but a special session could be called by Governor Abbott
This policy note analyzes the potential impact of SB 6, SB 7, SB 2012, and SB 2627 on ERCOT market outcomes.