Concerns about potential capacity market becoming a bi-partisan affair – Wendy Davis and Leticia Van De Putte enter the discussion

The ongoing discussion at the Public Utility Commission about whether Texas needs to add a “capacity market” to its “energy market” to ensure there will be enough power to keep the lights on during cold summer mornings or hot summer afternoons is raising concerns among a variety of stakeholders.

 At a recent interim committee hearing of the Senate Committee on Natural Resources held November 25th, Chairman Troy Fraser was unabated in his criticism of the decisions by the Utility Commission to consider such a market, arguing it would be equivalent to “an energy tax.” The conservative chairman argued that such a capacity market went against Texas tradition since 1999 of an energy-only market, and more importantly, was a decision the legislature – not the commission should make.

Others raising concerns have included the Sierra Club, Public Citizen, the Cities served by Oncor, the Texas Manufacturing Association, the conservative think-tank Texas Public Policy Foundation, the AARP and some retail electric providers like Direct Energy. Others – like generators Luminant, NRG and Calpine – have been bullish in their support for the need for a capacity market.

The latest to voice their concerns are the two senators now vying for the State’s top political positions, Governor and Lieutenant Governor. Wendy Davis, State Senator from Fort Worth, wants to be the next Governor. Leticia Van De Putte, State Senator from San Antonio, wants to beat David Dewhurst and become the head of the senate as Lt. Governor. Both raised concerns in letters sent to the Public Utility Commission this week.

 

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Photo of Van De Putte and Davis campaigning in San Antonio — photo from San Antonio Express News 

In her comments, Senator Van De Putte wrote: 

“At the November 25, 2013 Senate Committee on Natural Resources hearing on resource adequacy you stated that the Public Utility Commission would only make changes if it made sense from a cost benefit standpoint. I was pleased to hear that but remain concerned that the cost benefit analysis may not contain a breakdown of costs for the different types of consumers including residential, commercial, and large industry.

I strongly urge you to include a cost analysis for the different types of customers and I would appreciate a response on the methodology of the cost benefit analysis. I also appreciate your willingness to have a complete cost benefit analysis before any decisions are made. I stand ready to work with you and the members of the Public Utility Commission to ensure reliable, efficient, and affordable electricity for our state.”

For her part, Senator Davis from Fort Worth, running to be the state’s governor, asked the Commission to conduct the analysis and answer three basic questions:

In the Senate Committee on Natural Resources hearing on November 25, 2013, you stated that you were “absolutely in favor of doing a cost/benefit analysis” relative to a potential change to

a capacity market. I am writing this letter to urge you to proceed with such an analysis and to consider the following as you engage in that analysis:

  • “What would the impact be on the costs of electricity to the average residential ratepayer, the average commercial ratepayer, and the average industrial ratepayer?
  •  What guarantee can be provided that switching to a capacity market will result in the construction of new generation, eliminating the specter of future capacity shortfalls?
  •  What might the impact to our state’s economy be were such a shift to occur, measured particularly by potential impact to the costs of doing business in the state and the subsequent impact that might occur to our state’s continued ability to attract and grow business? In this regard, I am particularly interested in determining the potential impact  that added costs might have to the energy production sector of our state’s economy? “

 And also filing comments were PUC Commissioner Ken Anderson, who is opposed to the capacity market, even as his two other commissioners express at least partial support for the concept. For his part, he had his staff conduct an analysis of a report filed by the  Charles Rivers Associates, on behalf of energy giant NRG, which found a capacity market would cost money — some $4 billion per year – but over several years would lead to more stable energy prices and ultimately cost a small fraction of that amount in return for reliable electricity service and little cost because of brown-outs or black-outs. The analysis by Anderson’s staff criticized the methodology used by the River Associates outfit, stating that they overestimated the cost of any brown-outs or lost opportunity for energy. The report concludes: “Based only on errors …., the CRA Study is 23.2 times too high in its value of dollar per un-served kWh.” A copy of the memo/study by Anderson can be found here

Comments from other stakeholders — including the Sierra Club — are due on December 16th. Stay tuned for more info!

 

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