Should Texas Pay Power Companies Just For Having Power Plants?

An electric light bulb shines 31 May 200

Photo by JOEL SAGET/AFP/Getty Images

The Public Utility Commission of Texas is proposing a change to the way the state’s electricity market is run. And some lawmakers voiced concerns during a public hearing at the Capitol yesterday.

The Texas Senate Natural Resources Committee hosted a hearing to question the Public Utility Commission, or PUC, about the possible change to the market.

Right now, power companies get paid when they produce electricity. The change could end up paying those power companies twice: once for the power they produce, and a second time just for owning or building power plants. The proposal is aimed at encouraging power companies to build new plants – to help avoid power shortages that have led to rolling blackouts in the past.

“Yes we could force people to build thousands and thousands of more megawatts, but if we do that those costs would be passed on to consumers,” State Sen. Troy Fraser, R-Horseshoe Bay said. “So there’s a huge cost to consumers for reliability. So the question becomes reliability at what cost?”

Sen. Fraser is the most vocal critic of the proposal. He said it could cost up to $4 billion in extra payments to power generation companies. That could hike electricity costs, which, he adds, is also not businesses-friendly. Fraser argued his point Monday with Public Utility Commission Chair Donna Nelson, who supports the proposal.

“It’s nice for us to project the sky is falling but we have to look at the reality of what we have. The market, currently, it continues to work pretty well,” Fraser said.

Nelson said she’s not trying to project the sky is falling. “And if at the end of the day we decide we made the changes we need to for the market to work, then that would be a blessing.”

At the hearing, there were questions about whether the PUC even has the authority to make such a change. Nelson told lawmakers she believes the commission has the responsibility to ensure future reserves of energy in Texas, but that the Legislature’s opinion on the issue does matter.

“Nobody wants their electricity going off. And I think people look to the commission to make sure that doesn’t happen,” Nelson said. “The average Texan looks to the commission to make sure that doesn’t happen. The changes we’ve made to date resolve the issues then that’s great, we won’t have to move any further. We’re a growing state we need electricity.”

Tom “Smitty” Smith is the director of the Texas office of the consumer watchdog group Public Citizen. He says opposition to the proposal has come from across the political spectrum.

“The consumer groups, whether they be the right-wingers like the Texas Public Policy Foundation or those of us that are more liberal like Public Citizen, are uniformly in opposition to a capacity market,” Smith says. “It costs too much, does too little, takes too long and will lead to too much litigation.”

Reports detailing how much power Texas actually needs are expected early next year. Another legislative hearing on the matter could come in January.

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