What you Need to Know About ERCOTs New Proposal

ERCOT new proposed plan

Time to Read: 4 minutes

Date: March 2, 2023

Improving and maintaining the health of the Texas power grid is one of the biggest concerns for Texans. The Lone-Star State currently finds itself in a “double-edged sword” situation in which its power grid needs maintenance and overhaul, but puts the cost on residential customers. Many Texans have noticed significant increases in their electricity bills over the last few years. This is especially true around seasons with extreme seasonal temperatures. With power grid issues in mind, ERCOT (Electric Reliability Council of Texas) is now proposing a new plan that could possibly strengthen the power grid. ERCOT’s new proposal is to implement PCMs in order to address the problems with the Texas power grid. But how will this affect Texans? This article explores ERCOT’s new proposal to use PCMs and what that means for Texans.

What is a PCM?

PCM is short for “Performance Credit Mechanism”. In ERCOT’s new proposal, power companies would be paid to be available whenever the grid is short on power. These power credits are purchased by retail electricity providers. The idea behind this plan is that it will motivate power companies to build more power plants fueled by natural gas in Texas.

For context, ERCOT has four main responsibilities:

  • Maintain system reliability.
  • Facilitate a competitive wholesale market.
  • Facilitate a competitive retail market. 
  • Ensure open access to transmission.

To make things a bit easier, here is a short list of the acronyms in this article and what they stand for.

List of terms:

  • ERCOT: Electric Reliability Council of Texas
  • PCM: Performance Credit Mechanism
  • OPUC: Office of Public Utility Counsel
  • WFAA: An ABC news station in Dallas, Texas. Stands for “Working For All Alike”

What Would ERCOT’s New Proposal Mean for Texans?

The largest takeaway from ERCOT’s new proposal is that it means higher electricity bills. The costs for these credits would be placed on Texans who are customers of these retail electric companies. Officials with the Office of Public Utility Counsel (OPUC) say that the price for PCMs will be paid by the end-user, meaning you. As noted in an article by WFAA, the OPUC objected to the plan to use PCMs, saying that there aren’t any types of assurances that paying generators for performance credits would lead them to “building any new generation assets that may reduce overall energy prices and result in fewer scarcity pricing events lucrative to generators in the market”.

Over the past few years, the changes that ERCOT has made to try and avoid power outages like the ones that happened in 2021 have led to increases in electricity bills. This is due to a combination of things like the price of natural gas and the other costs associated with running extra generators. But now that ERCOT’s new proposal is in the works for PCMs, Texans are likely to see yet another increase in the price they pay for electricity.

Different Opinions on Success for PCMs and ERCOT’s New Proposal

Some are skeptical of ERCOTs new proposal. Experts point out that the plan doesn’t guarantee new power generation and that it will simply give already existing generators more revenue. In an article by WFAA, energy experts such as Doug Lewin point out that this plan tries to solve the wrong problem with the grid. The issue is that not enough of the Texas power grid’s capacity is available when it is needed the most.

Supporters of the plan believe that allowing PCMs to come into play would incentivize companies to build more power plants in Texas. Some think that aiming at a market-based solution to Texas’ power issues is the right direction to go in.

IES Texas Solar has the solution regardless of Texas Power Grid Plans

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