Texas regulators on Thursday tapped the brakes on an annual $1 billion performance credit mechanism, or PCM, for power generators, saying it must be implemented alongside efforts to operate the state’s electricity market more efficiently and that stakeholders must have a larger role in its development.
Texas lawmakers approved the PCM last year, envisioning incentives for power generators in the Electric Reliability Council of Texas market to be available during times of grid stress.
In a Feb. 29 memo setting out design parameters and a potential schedule, ERCOT staff called for a trio of PCM workshops with the first scheduled for March 26. The market operator worked with Energy and Environmental Economics on development of the PCM outline, and said the process is intended to “culminate in a consensus-based design strawman.”
The memo anticipated that the the Public Utility Commission of Texas would issue a ruling on the PCM design in either the third or fourth quarter of this year. In addition, it said that “in parallel with the Commission's rulemaking, ERCOT and the [independent market monitor] will analyze the cost and market effects of the PCM proposal and present an assessment to the Commission and Legislature.”
“I don't even think that's compliant with the law,” Commissioner Lori Cobos said Thursday at the PUCT open meeting. “What is the purpose of conducting an updated cost assessment if you’re codifying the design parameters at the same time?”
The indepedendent market monitor and ERCOT should also do separate studies on the PCM’s market impacts, said Commissioner Jimmy Glotfelty.
They “ought to be completely independent of each other,” he said. “We need to have two data points, two views of how the PCM is going to cost and affect the market.”
All three workshops included in ERCOT’s memo were going to be held at the market operator’s offices, but commissioners said stakeholders need more opportunities to provide input.
Cobos also questioned the speed of the PCM development, considering the commission has called for the performance credit to be implemented alongside a real-time co-optimization, or RTC, project that aims to make ERCOT energy procurement and dispatch more efficient. However the RTC is not expected to be implemented until Dec. 31, 2026, she said.
The schedule for the PCM “is very compressed, it's very rushed, and it completely leaves out the commission in terms of workshops and engagement and any kind of stakeholder feedback over here,” Cobos said.
“The market participants need to have a bigger role in this. Here's the place for that to happen,” Glotfelty said. At least one of the workshops needs to be held at PUCT offices, Chair Thomas Gleeson said.
Commissioners determined that PUCT staff will review ERCOT’s strawman proposal and present recommendations in a memo to be discussed at the commission’s March 21 open meeting. Commissioners will give feedback and staff will file another memo ahead of the April 11 open meeting, after which ERCOT can hold its first workshop.
Cobos said she anticipated the commission would take “a deeper look” at the straw proposal’s design parameters at the March 21 meeting. The memo filed by ERCOT included 37 parameters as part of the PCM design.
Texas energy analyst Doug Lewin said regulators ought to focus their efforts on energy efficiency instead of the PCM, and should not anticipate an easy road ahead. ERCOT called for development of a consensus-based proposal but “there is little that divides stakeholders more than the PCM; an expectation of any kind of consensus is almost certainly unrealistic,” he wrote Thursday in his power market newsletter.
