Too much panic in the power market

Posted Saturday, Mar. 08, 2014  comments  Print Reprints
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The recent panic over adequate and reliable electrical power supply in Texas should officially be ruled dead.

Driven by electricity generating companies and abetted by the three-member Public Utility Commission and the Electric Reliability Council of Texas, which manages the power grid covering most of the state, two years of hand-wringing already has led to a significantly higher wholesale price cap during periods of peak demand.

It was well on its way to causing a market overhaul, including a consumer-paid subsidy for generators.

Behind the panic was a fear that some day soon, weather conditions and other factors could push demand straight through available power supply reserves and cause rolling blackouts across much of the state. That’s certainly something to worry about, an inconvenience to residential customers and a serious threat to businesses and manufacturers.

What has killed the panic? For one thing, the deregulated energy market in Texas, which was opened to retail competition in 2002, has worked the way free markets are supposed to work.

New suppliers are joining the grid to take advantage of the growing demand. At the same time, consumers on average are decreasing energy use with more efficient light bulbs and appliances.

And for another thing, blame faulty forecasts that have been corrected with new methodology and now show a brighter picture.

ERCOT targets a “reserve margin” calling for available supplies to exceed anticipated demand by 13.75 percent. In its official Capacity, Demand and Reserves report released Feb. 28, the grid operator forecasts reserves at 13 percent as of June 1, climbing to 16 percent by Aug. 1 as new generating plants come on line.

The new plants are expected to add more than 2,100 megawatts of generating capacity, ERCOT said. One megawatt is enough to power about 200 homes during peak demand.

The Texas Association of Manufacturers opposed the panic-driven market overhaul. Its leaders jumped on the new ERCOT report, saying it “reinforces that reserves in Texas are in good shape.”

Tony Bennett, the association’s president, said in a news release that ERCOT’s numbers still don’t take into account “a number of generation resources and plants that have been announced and financed,” which he said will put reserves above the target level through 2019.

ERCOT said its numbers were boosted by new methods of forecasting consumer behavior and weather patterns, as well as a new approach to analyzing the potential supply contribution from wind-powered generators in coastal areas.

The Public Utility Commission had been moving toward fundamental changes in the power market. The most striking change would be a switch to a “capacity market,” under which power customers would pay more to generators to finance additional reserves.

Since the 2002 deregulation, Texans have paid only for the electricity they use, not a subsidy for power they might never need.

Even before ERCOT released its new numbers, those market changes encountered powerful resistance.

State Sen. Troy Fraser, R-Horseshoe Bay, the chairman of the Senate Natural Resources Committee, said the commission did not have “unbridled authority to do an entire redesign” of the electricity market and insisted that the matter be submitted to legislative debate.

Now it looks like there will be no need, at least for several years.

In an interview Thursday with Star-Telegram writer Jim Fuquay, Fraser said the power grid doesn’t face a potential shortage “until 2020, and even then that doesn’t count new power plants.”

In other words, maybe the deregulated market will continue to work.

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