The Texas House of Representatives and Senate are considering
three similar, but not identical, legislative drafts that could
impose substantial grid charges directly on renewable generation
businesses.
House Bill 4466,
which is scheduled for hearing on April 8, would require the Public
Utility Commission of Texas (PUCT) to require the Electric
Reliability Council of Texas (ERCOT), the state's internal
market operator, to directly assign to the renewable projects
themselves the costs of ancillary services that ERCOT incurs
(including standby backup, and reactive power) to address renewable
energy-related reliability issues. Senate Bill 1278,
which was favorably voted out of the Senate Business & Commerce
Committee on April 7, would command the PUCT to require
intermittent resources to purchase ancillary services and
replacement power to manage net load variability.
Companion legislation (Senate Bill 3) that
passed the Senate and was referred to a House committee on April 7
contains language that is similar to Senate Bill 1278 and would
also impose other changes on the ERCOT market.
Important terminology used in and the application of both the House
and Senate bills are unclear, although either bill would be highly
unfavorable to renewable generation generally. With respect to the
House bill, there is no mechanism specified for the PUCT to
determine what, if any, "reliability issues" arise out of
the operation of renewable generation. With respect to the Senate
bill, the concept of "net load variability" is not
defined. Neither bill would be self-implementing: each would
require the PUCT to conduct rulemaking or similar proceedings,
which the PUCT would be required to conclude with the issuance of
orders by January 1, 2022. ERCOT would then be required to develop
implementing tariff provisions.
If the legislation were retroactive, it would effectively shift
costs of Winter Storm Uri to wind and solar (rather than creating a
capacity market, dealing with the inability to deliver natural gas
and therefore operate gas-fired projects; addressing weatherization
issues; etc.). However, it is far from clear that Texas
constitutional law permits the adoption of a retroactive ratemaking
regime of this nature.
Renewable trade groups have widely spoken out against all three
bills. The U.S. Partnership for Renewable Energy Finance, whose
members are affiliated with the American Council on Renewable
Energy, have asked the
governor and lieutenant governor of Texas and the speaker of the
Texas House to reject all three, declaring that they undercut
previous investment decisions and erode investor confidence and
neither enhance electric reliability nor lower consumer costs.
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