Texas regulators direct higher plant payments amid capacity crunch concerns
The PUCT’s decision to alter its pricing mechanisms is the latest in a series of regulatory responses to the retirement of large, aging coal and nuclear generators due to low natural gas and renewable energy prices.
Last week, ERCOT announced it had approved the indefinite mothballing of the 460 MW Gibbons Creek coal plant operated by the Texas Municipal Power Agency. That lowered the state’s reserve margin — the amount of capacity it has above expected peak demand — from 8.1% to 7.4%.
Texas survived the summer peak demand season in 2018 with an 11% reserve margin, but PUCT Chair DeAnn Walker called the 7.4% projection “very scary,” warning at the Thursday meeting that the state could experience power outages “if we have a large unit trip this summer on the hottest day of the year.”
ERCOT officials told the PUCT they predict “no indication of rotating outages,” but the slimmer margin “increases likelihood they could be needed.”
In response, the PUCT directed ERCOT to make two sets of changes to the ORDC, outlined in a memo Walker issued the same day.
The changes to the ORDC involve tweaking ERCOT’s Loss of Load Probability, an algorithm that predicts how likely power demand is to exceed generation reserves. The two shifts — one before this summer and one in 2020 — will cause prices to rise faster during times of generation shortages.
Walker hopes the opportunity for higher payments will incentivize generators to stay online and spur the deployment of new customer-sited resources.
