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Texas Utility Regulators Adopt Performance Credit Mechanism Electric Market Design

The Public Utility Commission of Texas on Jan. 19 voted to adopt a performance credit mechanism electric market design option and a set of guiding principles for implementation to “strengthen reliability, accountability, and affordability of the Electric Reliability Council of Texas electric grid.”

The Commission said it will defer implementation of all elements of the PCM until Texas lawmakers
have an opportunity to review the PCM and its guiding principles and provide guidance or direction based upon the market design option’s merits.

A Jan. 19 memo from PUCT Chairman Peter Lake to his fellow commissioners said that the Commission would recommend the creation of a new reliability service to ensure enough dispatchable generation is available during periods of low renewable energy output. This new service would be based on the PCM concept detailed in a report from Energy and Environmental Economics, a consulting firm, which includes principles detailed in the memo.

The Commission said that adoption of the PCM market design meets the requirements of Senate Bill 3, as passed by the 87th Texas Legislature and signed into law by Governor Greg Abbott, which directed the PUCT to create grid reliability standards that ensure on-demand generation is available “during times of low non-dispatchable power production.”

In addition to adoption of the PCM, the Commission directed ERCOT to develop bridging options
to retain existing power plants and build new generation resources until the PCM can be fully
implemented and opened a project to evaluate and establish an appropriate reliability standard
for ERCOT.

The action is the culmination of 18 months of public and stakeholder engagement, analysis, and deliberation, the Commission noted.

The PUCT in November 2022 said it was seeking comments on the Energy and Environmental Economics . report on reforms aimed at bolstering the reliability of the state’s wholesale electric market.

The report, Assessment of Market Reform Options to Enhance Reliability of the ERCOT System, includes “novel hybrid designs that maintain the unique” energy-only wholesale power market of ERCOT.