87th LegislatureEnergyState HouseState SenateElectricity Omnibus Bill, PUC and ERCOT Overhaul One Step Closer to Governor’s Desk

Legislation aimed at remedying the underlying causes of the February blackouts has been approved by both legislative chambers.
May 24, 2021
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A sort of catch-all piece of legislation passed first muster in the Texas House on Sunday, setting the table for the legislature’s response to the February winter storm and electricity blackouts.

Senate Bill (SB) 3, authored by Sen. Charles Schwertner (R-Georgetown) and sponsored by Rep. Chris Paddie (R-Marshall), will likely serve as the legislature’s chief response to the Electric Reliability Council of Texas’ (ERCOT) winter storm fallout. The omnibus bill is lengthy and addresses a number of different areas.

The upshot includes an overhaul of ERCOT’s directives from the state, a mandate that the power industry weatherizes its infrastructure against severe cold temperatures, a more rigorous mapping of critical infrastructure, creation of a statewide alert system, and reinforcement of dispatchable backup power available during tight grid conditions.

Most of the bill’s provisions were included in the House’s piecemeal electricity priority list — of which most have already made it through both chambers — but being all-encompassing, it is likely SB 3 will be signed by Governor Greg Abbott in lieu of the rest.

Passed on the same day but in a separate bill, the House approved ERCOT board overhaul which includes an in-state residency requirement, a lobbying prohibition for former board members within two years of leaving ERCOT, and a provision giving the governor, lt. governor, and speaker of the house say over the appointments of the five unaffiliated board members.

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An unaffiliated member is a generic position, not specifically representing one sector of the power industry. The legislation also creates one board position explicitly tasked with representing ratepayers’ interests.

And another priority bill approved expands the Public Utility Commission board to five members and prohibits registered lobbyists from being appointed to the commission.

Another feature is a restriction on the use of wholesale indexed electricity plans. Those plans, of Griddy notoriety, resulted in utility bills in the thousands of dollars because they are based on the fluctuating cost of electricity on the wholesale ERCOT market — which ballooned to the $9,000 per megawatt-hour scarcity cap.

A straight-up ban on those plans for residential customers was suggested initially, but it has since tempered into a cap on what a customer can be charged — up to 200 percent more than the average monthly price of electricity during the same month in the previous year.

The bill faced a litany of proposed amendments. One, by Rep. Craig Goldman (R-Fort Worth), ensures that grocery stores can stay on the grid during a time of stressed demand so their products do not spoil.

Three amendments, two by Rep. Tony Tinderholt (R-Arlington) and one by Rep. Jared Patterson (R-Frisco) were aimed at renewable energy and the patronage on which those companies rely, but none were adopted.

Patterson’s amendment, similar to legislation he introduced shortly after the blackouts, would have required ERCOT to adjust electricity pricing to compensate for the “market distortion” caused by tax credits given to the renewable industry.

Tinderholt’s first amendment would have set a limit on the cost of transmission shouldered by the state. After a certain point, the generator would be responsible for financing the interconnection. Because of its nature, windmill and solar panel generation is often based far away from the population centers possessing most of the demand for electricity.

It costs money to transmit the energy from the point of generation to the point of use — that goes for thermal energy as well as renewables, but the latter benefits more from it — and the state provides an allowance for capital costs incurred.

Tinderholt sees that as an unfair advantage to renewables and an unnecessary cost shouldered by taxpayers. Supporters of the current policy decried his amendment as a slight to renewables.

His other amendment would require generators to produce a given facility’s average capacity during peak demand times. Generators, both thermal and renewable, can use what are known as “peaker plants” to backup generation in times of stressed demand.

The language is aimed specifically at renewable generators who produced vastly lower amounts of electricity during the February winter storm than, not only their capacity, but their average production as well.

Neither Tinderholt amendment was adopted.

Language proposed by Rep. Justin Holland (R-Rockwall) allowing generators to contract for energy storage services up to 100 megawatts (MW) was tacked onto the bill. That proposal is a response to Tesla’s development of a 100 MW-capacity battery that company founder and CEO Elon Musk touts as reinforcement for Texas’ grid. On a local level, 100 MW is a large capacity that could power 65,000 homes at any given moment. But the capacity pales in comparison to the state’s general consumption 500-times that.

With one week left, the legislature is nearing the close of the 87th Legislative Session. Ever since the temperatures dropped and the lights went out in February, Texans have clamored for resolution from its state government.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.