88th LegislatureEnergyStatewide NewsGov. Abbott Backs Proposed ERCOT Market Redesign, Suggests Not Waiting for Legislature’s Input

The governor's letter seemed unwilling to wait for the Legislature to deliberate a redesign plan during its next five months in session.
January 10, 2023
Gov. Greg Abbott planted his flag on the coming redesign of the Electric Reliability Council of Texas (ERCOT) market, backing a plan identified by the state’s third-party contracted consultant — but not the one it recommended.

Back in November, Energy and Environmental Economics, Inc. presented the results of a long-running analysis to the Public Utility Commission (PUC), gauging options for more significant changes to the ERCOT market. The firm officially recommended the establishment of a Forward Reliability Market (FRM), but also said a Performance Credit Mechanism (PCM) would suffice to some degree. Abbott has chosen the latter as his preference.

The differences between the two are not vast; both award credits for reliability to generators that generate at times of need. But whereas the FRM allots those credits based on forecasts, the PCM awards them after the fact, based on actual generation during those qualifying windows.

In 2021, after passing its own physical reforms to the state’s main power grid, the Texas Legislature tasked the PUC with the market redesign; the chief task was to create an environment more amenable to growing the portfolio of dispatchable generation in the state.

But after it was unveiled, legislators expressed their disapproval, at least insofar as to demand a say in the plan’s final approval. That has placed the ERCOT power grid back on the legislative agenda after passing the broad-ranging physical reforms in 2021, and the PUC agreed to wait for the Legislature’s input.

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In a letter to the PUC, Abbott backed the PCM, stating, “As the Legislature has noted, a reliability standard must be the foundation of any reliability design.”

The PCM best meets this call because it is based on a reliability standard, incentivizes new dispatchable generation, and maintains Texas’ energy-only market. The fact that generators have already publicly committed to build thousands of new megawatts of dispatchable generation resources if the PCM is adopted and implemented by the PUC further supports this point.”

Abbott has seldom weighed in on this topic with any specificity since his July 2021 letter to the PUC directing it to restructure market incentives and stick renewable generators with reliability costs, among other things.

Time is of the essence,” Abbott’s letter adds. “Texas is adding new residents and businesses every year, and the demands on the power grid will continue to grow.”

“I have full confidence that you will be able to meet this new demand by adopting and implementing a new market design that prioritizes reliability and meets the directives passed during the last legislative session.”

That last clause does not seem to jive with the Legislature demanding its own say on the matter over the course of this 140-day session.

The PCM doesn’t appear to explicitly lay out penalties for generators who fail to show up when promised, but it does reward those who do.

With the Texas Legislature’s desire to weigh in, it’s unclear what the PUC will do. PUC Chair Peter Lake committed to waiting for their input, but now the governor appears to see no reason to delay the plan even more than it already has been.


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Brad Johnson

Brad Johnson is a senior reporter for The Texan and 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.