Texas Commission to Mandate Electricity Reserves to Avoid Power Shortages

Oct. 28, 2013
A bitterly split Texas Public Utility Commission decided Friday to begin mandating the reserve levels for the state’s electricity supplies.

The Texas Public Utility Commission decided last week to begin mandating the reserve levels for the state’s electricity supplies to ensure reliability. But, according to Statesman.com, it is also the first step toward redesigning the state’s wholesale electricity market.

Two commissioners supported a mandatory reserve margin, with at least one other commissioner opposing on the basis of economics. The commission did not set a reserve margin level at the meeting, but will take the issue back up after an economic study is issued by consulting firm The Brattle Group at the end of January.

Currently, state authorities determine a “target” for electricity reserves, relying on the private sector to build the necessary power plants. But the owners of power plants, including Austin Energy, argue that wholesale prices are too low to encourage new investments in power plants. The state’s independent market monitor agrees with that view. The owners of power plants have argued that the utility commission should mandate what electricity reserves are necessary, then pay additional “capacity” payments to ensure supply. Critics, including some of the state’s largest industrial customers, argue that capacity payments unnecessarily enrich generators at the expense of consumers.

The disagreement is whether the current wholesale market, which only pays generators when they sell electricity, will address the forecast of electricity shortages several years out...(American Statesman)

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