ERCOT focuses on reliability over affordability

AUSTIN, Texas – No Texan will ever forget the February 2021 winter storm that killed nearly 250 people. After that storm, the Electric Reliability Council of Texas (ERCOT) moved to a “reliability model,” creating a power reserve to prevent future tragedies. But this comes at a cost.

“Prices are going up for Texans primarily because gas prices have gone up. And that’s typically what dictates the market for our electricity in this state. That’s the biggest amount of cost,” Richmond said. “The other aspect is that they’re bringing the units online earlier. So we’re running resources that maybe we don’t necessarily need to maintain reliability, but it’s to give that comfort level of reserve margin that the Texans seem to want.”

Texans want convenience, but not everyone can afford the price hike. Houston resident Mal Moses owes Frontier Utilities more than $3,400.

“I’m going to pay it because I can’t afford to be without air conditioning because I have a breathing problem,” Moses said. “So I’m in this heat. If I get too hot, I can’t breathe.”

Moses, who lives alone in his Houston home, said his wife died after contracting pneumonia during the February 2021 winter storm. He said they were without power for two weeks.

Moses said her utility bill has tripled since the storm, and she now owes $400 this month. He will use his $400 Social Security check to pay for it. Trim in other areas to keep your AC running.

“I had multiple court notices,” Moses said. “It’s hard for me to think about paying that bill. And then I still have to try to eat. I still have to go back and forth to different places that I have to go. I still have to think about paying my water bill.”

The state is increasing its power reserve with Reliability Unit Commitment (RUC) orders.

“The RUCs are a Texas effort to have more power ready to go very quickly, if needed,” said John Hanger, president of Hanger Consulting. “They’ve gone up exponentially. So that’s a strategy or procedure that Texas is using to try to make sure the lights stay on. [But] I think it’s the second or third best approach and with a lot of downsides.”

One such disadvantage is overworking the generators.

“These RUC orders are running, forcing plants to operate in ways they weren’t really designed to operate and forcing them to defer maintenance,” Hanger said. “At least don’t schedule it, the maintenance, or do the maintenance when it’s scheduled. In some cases, none of that is good. And all of that creates a different set of risks. So you have a RUC order that aims to reduce the risk of a blackout. But that order may be forcing plants to operate in a way that actually increases the risk of a blackout.”

Hanger said connecting Texas to the national grid, in addition to creating a capacity obligation, would help the state’s electric reliability.

“Apparently these two things become highly political issues within Texas. And that’s unfortunate,” Hanger said. “Texas starts with this huge self-inflicted wound that it chose to isolate itself. All the other states are pretty well interconnected with their neighbors, and in fact, states can be three or four apart. And that interconnectedness gives the other states in the union important reliability benefits. It’s also an economic benefit, not only is it a more reliable way to operate any power grid, it’s a more efficient and lower cost way to operate any power grid.”

Richmond said Texas is now sacrificing affordability for reliability.

“Reliability is more expensive,” he said. “We’ve had a market for the last 20 years that’s been built on putting affordability as the No. 1 priority, and reliability after that…I think after Winter Storm Uri, the sentiment among Texans has changed considerably. They want affordable energy, but first they want reliable power. And so we’re going to have to change our model to emphasize reliability first and affordability second. And I think that’s what the Public Utility Commission is really trying to get at in our design to market is what level of reliability do Texans want to pay for? Because it’s not free.”

Richmond said the Public Utility Commission of Texas is due to take action on the market redesign this fall.

“The problems we’re seeing this summer will also be the problems we’re seeing next summer,” he said. “We can see these older 67-year-old plants that need to be retired at some point. But they need to be retired when we have new resources that are going to come online to fill that gap that they’re going to leave. So that’s our biggest concern and making sure that the Texans understand that costing more in the short term will actually bring in new power plants. And ultimately that will lower the cost because you’ll have more reliable power and more in the future.”

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ERCOT focuses on reliability over affordability

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