Texas power grid reforms are moving in wrong direction

The Texas electricity grid is humming along beautifully. Cool temperatures, steady breezes and sunny skies have kept power demand low and renewable generation high. Texas was consuming about 45,000 megawatts one recent afternoon, while generators had 50,000 megawatts available.

This typical balance contrasts starkly with February’s collapse, when a polar vortex sent demand up to 70,000 megawatts, but the grid barely delivered 26,000 megawatts. Over five days, some 200 Texans died, thousands suffered and everyone wondered how that could happen.

Most days, Texas has plenty of power, reasonable demand and low prices on the grid operated by the Electric Reliability Council of Texas, better known as ERCOT. The quandary facing the Texas Public Utilities Commission is how to prepare for the extremes.

Some of the state’s biggest corporations stand to make billions of dollars in additional profits depending on what the politically-appointed commissioners decide. The PUC could announce its new plan any day now.

PUC Chairman Peter Lake’s comments at a meeting on Oct. 28 suggested Texas will take a massive leap backward. Instead of redesigning the wholesale power market to reward efficiency, conservation and backup supply, the PUC is poised to reward the fossil fuel generators that failed the state in February.

The ERCOT grid collapsed due to lax regulations of an energy market that pays only for electricity that customers consume. The Texas Legislature ordered the PUC to ensure generators better prepare their equipment for cold weather. But that’s a minor step the PUC was supposed to take following blackouts in 2011.

The PUC’s weatherization rules only count as progress by Texas standards. Most grids have enforced similar rules for decades. They are only admirable compared to the lousy regulations put forth by the Texas Railroad Commission, which oversees the natural gas supply. That agency is letting companies skip weatherization if they feel like it.

The PUC is not addressing the market’s inhumane legalized price-gouging. When we need electricity the most, under the current rules, prices go through the roof.

In written submissions, generators that burn natural gas and coal told the PUC that they support the current system that generates insanely high prices on the hottest and coldest days. A few hours of $9,000 a megawatt-hour prices can generate enough profit to make up for the typical $30 a megawatt-hour price paid the rest of the year, they said.

Every other U.S. grid has a so-called capacity market that pays generators to standby for an emergency. Those markets forbid wild swings in prices, and they don’t suffer energy shortfalls nearly as often as ERCOT.

Chairman Lake dutifully assured fossil fuel generators at the Oct. 28 PUC meeting that he would not tolerate a capacity market. He also promised the new rules would favor fossil fuels over renewable energy, even as most of the world is innovating to fight climate change.

Gov. Greg Abbott promised fossil fuel companies a windfall after the freeze, and his PUC appointees are delivering.

Boosting generation should only be half the solution. The PUC should also focus on reducing demand with greater efficiency, conservation and convincing customers to reduce demand when needed. Instead of punishing with high prices, why not reward people for adjusting their thermostats?

Weak building codes have left Texas homes and businesses horribly energy inefficient. Improving building insulation, upgrading air conditioners, and deploying smart thermostats could save 9 million home and business owners hundreds of dollars a year in energy bills, according to the American Council for an Energy-Efficient Economy.

The nonprofit’s report shows how $4.9 billion spent on efficiency and technology could reduce demand by 8,000 megawatts. The program would eliminate the need to build $8 billion worth of power plants. Reducing demand would also lower peak prices and save consumers billions of dollars.

The only problem? Fossil fuel generators only profit when demand is high and supply is low. They make money building more natural gas power plants. Electric companies want more demand, not efficiency.

Most of the time, Texas has far more power generation than it needs. But we must ensure Texans never again experience a four-day blackout during a winter storm or a summer heatwave.

We should pay natural gas plants to be ready when the sun doesn’t shine and the wind doesn’t blow. But we should rely on renewable power most of the time.

We need enough affordable electricity to keep the economy going and families safe. But we must also encourage conservation and efficiency.

Striking these balances is tough. When the PUC’s plan comes out, we’ll learn whether the new commissioners are more interested in pleasing their political patron or doing right by Texans.

Tomlinson writes commentary about business, economics and politics. twitter.com/cltomlinsonchris.tomlinson@chron.com