Texas group backs less peak use of electricity

Posted Tuesday, Feb. 12, 2013  comments  Print Reprints

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The Austin office of Public Citizen said Tuesday that its new study shows that paying electricity generators to add capacity is not the solution to meeting the state's growing demand for power.

The consumer advocacy group instead proposes measures that reduce demand at peak times.

Texas' deregulated market is an "energy-only market," meaning that generators get paid only when they sell electricity. But low wholesale power prices in recent years have discouraged new capacity. And the state's biggest power grid, the Electric Reliability Council of Texas, has said its margin of supply over projected demand could run uncomfortably short as early as this summer.

One approach taken in other deregulated markets is a "capacity market," in which big users can contract for power three years in advance. That arrangement aims to encourage investment in generation.

The Public Utility Commission of Texas has already approved higher ceilings on wholesale power, a move also aimed at encouraging new capacity. PUC spokesman Terry Hadley said the agency meets Thursday but is expected to gather information on the issue rather than make any decisions.

Public Citizen's consultants studied an existing capacity market in the PJM regional transmission market, which serves 13 states from Ohio to North Carolina, as well as the District of Columbia, and has a design most like that being considered for ERCOT, they said. Those experts said replicating that capacity market would take until 2015 and cost $1.2 billion to $2.3 billion a year.

"We'd be better off developing a new market structure that creates incentives for people to use less electricity," said Tom "Smitty" Smith, director of Public Citizen's Texas office.

The independent study is the second in a week to criticize a capacity market in ERCOT. The other was issued Feb. 6 by the Texas Public Policy Foundation, an Austin-based free-market advocate.

One of that report's authors said "not only will a capacity market fail to address reliability concerns, its costs will almost surely exceed any benefits it might bring."

Capacity challenges are "a result of intervention such as renewable energy subsidies and price caps that has inhibited -- or prohibited -- innovation and kept the market from developing solutions to these highly complex issues," it added.

Jim Fuquay, 817-390-7552

Twitter: @jimfuquay

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