The recent decision by the Public Utility Commission of Texas to approve a $16 billion price tag for the state’s catastrophic February 2021 power outage has sparked outrage and confusion among Texans. While some believe that these costs must be covered to prevent future disasters, others argue that it unfairly punishes consumers who had no control over the situation. So why is the Texas regulator pushing back against this controversial ruling? In this blog post, we’ll explore the key factors behind this decision and examine what it means for Texans going forward.
Background on the Cost Decision
The Texas regulator is pushing back against the “Blackout Cost Decision,” a proposed rule that would require state utilities to price electricity based on its true costs. The proposal, drafted by the Texas Public Utilities Commission (PUC), was published in May and was met with widespread criticism from energy companies and their lobbyists.
The proponents of the Blackout Cost Decision argue that the current electrical market is not functioning as it should because prices are not reflecting the true cost of electricity. These costs, they say, include environmental damages from emitting carbon dioxide and other pollutants, as well as lost jobs and economic growth due to increased reliance on alternative energy sources such as solar and wind.
Utilities argue that the Blackout Cost Decision would be too costly for them to implement and would lead to higher rates for consumers. They also argue that pricing electricity based on its true costs would not necessarily result in lower rates for consumers, since alternative energy sources might still be more expensive than traditional fossil fuel-generated electricity.
Texas Regulator Responds to Public Comments
Since the public comment period for the “Blackout Cost Decision” ended in late March, the Texas Utility Commission (TUC) has been reviewing and weighing feedback from stakeholders.
The TUC held a public meeting on April 12 to discuss the proposed decision and answer questions from the public. In a release following the meeting, Commissioner Michael Phillips said that “the TUC will continue to take all comments into account before issuing its final decision.”
According to Phillips, several key points that have emerged from stakeholder feedback include:
-The proposed decision would significantly increase electricity prices for consumers;
-It would constrain future investments in energy infrastructure;
-It would result in job losses and other economic impacts.
The TUC has also received letters of support from major industry groups like The Electric Reliability Council of Texas (ERCOT) and The American Council on Renewable Energy (ACORE). However, many consumer advocacy organizations—including Texans for Natural Gas—have voiced concerns about the proposed decision.
Many commenters asked why the TUC didn’t consider lower blackout costs when making its original cost determination in January. Phillips explained that while lower blackout costs may have resulted in a different cost determination, they would not have resulted in lower electricity prices for consumers. He added that lower blackout costs are not an achievable or sustainable objective.
The Texas ’21 Blackout Cost Decision
On May 17, 2017 the Texas Commission on Energy (TCE) released a report highlighting the potential cost of implementing the proposed nationwide “Blackout Cost Decision” proposed by the Federal Energy Regulatory Commission (FERC). The TCE report found that implementation of the blackout cost decision could result in an additional $3.8 billion in costs for Texas over 10 years, and would impact electricity prices statewide. The TCE also highlighted that these costs would be passed along to consumers through higher electricity rates. The blackout cost decision is a proposal from FERC to require utilities across the country to identify and plan for potential blackouts caused by extreme weather events. If implemented, this proposal would require all utilities to develop plans for ensuring that their systems can operate during extreme weather events, including those caused by natural disasters like hurricanes or heat waves. In order to provide input on this proposal, FERC held public hearings across the country over the past several months. One of these hearings was held in Austin on March 23rd, 2017. At this hearing, TCE submitted testimony opposing the blackout cost decision. In its testimony, TCE argued that there is no evidence that blackouts caused by extreme weather events are becoming more common or severe. Furthermore, TCE argued that implementing this proposal would have negative impacts on Texas’ economy and energy security. Recently, FERC has been receiving feedback from stakeholders urging it to delay or withdraw its blackout cost decision proposal. These stakeholders include industry groups like Edison Electric
What Lies Ahead for Energy Suppliers in Texas
Since the Texas regulator made its “blackout cost decision” in December, energy suppliers have been scrambling to comply. Earlier this month, the Public Utility Commission of Texas (PUCT) held an open meeting to discuss how utilities are complying with the new rules. The PUCT is also accepting comments on the decision until March 26th.
Some energy suppliers believe that they will be able to fully comply with the blackout cost decision while others feel that they may have to make significant changes.
One supplier who feels that they will be able to fully comply is TXU Energy. TXU has already developed a plan for upgrading their transmission infrastructure and has begun installing equipment needed to comply with the new rules.
However, other energy suppliers believe that they will need to make more drastic changes in order to meet the PUCT’s requirements. For example, Sunflower Electric Association believes that it will need to reduce its residential customer base by 50 percent and increase its commercial customer base by 200 percent in order to comply with the blackout cost decision.
Energy suppliers are anxiously waiting for the PUCT’s final ruling on the blackout cost decision so that they can start implementing plans for compliance.
Conclusion
As the regulator for the Texas electricity market, the Public Utility Commission (PUC) is entrusted with ensuring that consumers have access to affordable and reliable energy. However, as we’ve seen in recent months, this responsibility sometimes comes at a cost – such as when it pushes back against an Energy Reliability Council of Texas report that estimated 21 blackouts costing Texans $11 billion between 2020 and 2035. Although billed as an effort to prevent these disastrous blackouts, PUC’s decision could actually lead to more outages and higher prices for Texas consumers. We hope that policymakers will continue to look at ways to keep rates low and avoid future blackout costs for Texans.
