This policy note includes the following highlights:
- Following Storm Uri in May 2021, the 87th 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 88th 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 29th, 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.
For more information and access to the full report, please get in touch with Francisco Ortega.
Download the policy note below: