Last week, a Texas court ruled that the Public Utility Commission of Texas (PUC) set prices too high during Winter Storm Uri in 2021.
The Third Court of Appeals noted that the Texas Legislature enshrined competition as the cornerstone of the electric market. By fixing the price, the court ruled, the PUC overstepped its bounds and arbitrarily raised Texans’ energy bills.
There are a few reasons that energy bills are poised to climb even higher in Texas — it’s not just a bad PUC decision or two (though those have certainly made things worse). It’s also because state government — especially the Texas Senate — is moving rapidly away from the competitive principles that have been at the core of Texas’ electricity system since Dan Patrick was on AM radio.
In his ruling last week, Third Court Judge Edward Smith invoked the opening lines of the chapter of the Utilities Code focused on competitive markets: The legislature finds — or it did 24 years ago, when lawmakers created Texas’ revolutionary energy-only market — that “the production and sale of electricity is not a monopoly warranting regulation of rates, operations, and services … electric services and their prices should be determined by customer choices and the normal forces of competition” (emphasis added).
How quaint.
A Win-Win That Texans Lose
This Thursday at 8:00 a.m., the Senate Business & Commerce Committee will hear a slate of energy bills that Lt. Gov. Patrick and his committee members unveiled less than two weeks ago. The $12 billion centerpiece is Senate Bill 6.
SB 6 would put 10,000 new megawatts of gas generation — around a dozen new gas power plants — onto every Texan’s electricity or tax bill. It’s a great deal for folks who would build these gas plants. SB6 provides a guaranteed rate of return and requires Texans to pay the full cost of the plants — plus profits for generators — even if the plants become “stranded costs.”
In other words, some big generators will win, even if you lose. If the plants are a bad idea, or they’re a bad investment, or they become obsolete because technology and markets pass them by, you’ll still pay for them — AND you’ll guarantee a 10% profit for the corporations that build them.
Further, the generators will be allowed to “test” the plants for 336 hours per year at ERCOT’s direction. A small provision slipped in toward the end of the bill says “any net revenue earned during testing or operating would be for the benefit of the ERCOT power region.”
Yes, a a state-contracted monopoly utility is poised to compete against other generators. Not quite how generations of Texas’ leaders drew it up.
If SB 6 passes, we’ll likely never see another dispatchable plant built beyond these that Texans will directly pay for. We’d almost certainly see an accelerated wave of power plants retirements, leaving the system less reliable — and more expensive — than before the bill was passed.
Hopefully, at least out of honesty if not decency, the Senate will also delete the statutory language that Judge Smith quoted — under SB 6, “customer choices” and “normal forces of competition” will be things of the past. The government will become the single payer for power plants: a centrally planned, government-owned power system designed not by a big-government bureaucrat, but by Dan Patrick.
More Legislation, Less Competition
SB 6 isn’t the only anti-competition bill from Patrick and the Senate. SB 2015 would mandate that 50% of all Texas electricity generation must be “dispatchable.” Quick reminder: Texas’ energy-only market is delivering a world-leading amount of low cost solar power to Texans. But solar development, which 64% of Texans support, would slow significantly under this bill.
Losing this source of zero fuel-cost power, Texans’ electric bills, already historically high, would go even higher. And it would be even harder to keep air conditioners humming in the summer.
Then there’s SB 1287, which would force clean energy developers to pay extra — more than any other generator — to move their electricity to Texans who need it. Want to guess what those extra costs would do to your power bills?
Make no mistake: Patrick intends to hurt Texas’ homegrown clean energy industry, and his bills certainly would succeed at that. But they also would hurt his own constituents — we’ll all pay more for electricity, and for no good reason. Patrick’s bills will raise yours.
Worst of all, not one of these bills directly and affordably addresses the problems that caused the 2021 blackouts or repeated electricity scares since. There are many, many solutions available at a fraction of the cost.
Flexing Ratepayers’ Credit Card
The Senate appears to at least partially understand that energy costs are mounting for consumers. Unfortunately, their proposals would put us all into more debt.
Last session, the legislature authorized $11 billion in bonds to help pay for the staggering costs of 2021’s Winter Storm Uri. This year, SB 30 would pay down nearly $4 billion in 2021 costs. (Had they just paid the cost last session, they would have saved several hundred million dollars in bond fees and interest.)
But only gas customers — about one-in-three Texas families — would benefit from this year’s giveaway. The other two-thirds of Texans are on their own.
SB 6 would spread the pain around: everyone would get to pay off the roughly $12 billion that the new gas plants would add to energy bills. That eats up the savings for gas customers, and it piles yet more costs onto 6 million Texas households and small businesses with all-electric heat.
Focus on What’s Important
The worst part of all these bills: they’re partial solutions at best.
The main source of power outages is still the distribution part of the grid that delivers electricity to individual homes and businesses. Thousands of entrepreneurs are working across the state to bring real resiliency solutions to Texans — distributed energy resources such as rooftop solar and batteries (whether in a car or on a wall), widespread weatherization and energy efficiency, and technologies that optimize energy use to increase reliability and reduce costs.
The Senate will not take up any bills this week to support those solutions, even though they increase reliability when there’s not enough supply to meet demand and when local power lines go down.
It’s frustrating to watch state government flail about, grasp at false solutions, and throw bad ideas at the wall — and then stick consumers with the bill for it all.
These are complicated issues. They’re not easily solved, even when policymakers are focused on the right things.
But right now, policymakers are not focused on the right things. In Dan Patrick’s Senate, they’re focused on a very expensive state takeover of Texas’ energy market.
They need to get back to basics. Texas’ competitive market didn’t cause the Uri blackouts; inadequate winterization of gas supply, power plants, and homes and buildings did. And as the Third Court of Appeals pointed out last week, suspending market competition made the costs of the disaster much, much worse for Texas consumers.
Now Patrick’s bills would finish the job, effectively ending competition in Texas.
That will take a heavy toll on this state — and you’ll pay for it.