Davis Expresses Concerns on Energy Market Proposal

Writing that Texans “demand and deserve real answers,” state Sen. Wendy Davis of Fort Worth has joined a chorus of lawmakers who are urging the Public Utility Commission of Texas to put the brakes on efforts to transform the state’s wholesale electricity market, expressing concerns that the move would unnecessarily cost ratepayers billions of extra dollars.

The Democratic gubernatorial candidate sent a letter to PUC Chairwoman Donna Nelson on Thursday calling for a comprehensive cost-benefit analysis before the commission makes a decision on whether Texas will shift its “energy only” market to a "capacity” market, which would pay electricity providers billions of dollars to maintain excess generating capacity.

“The PUC must not make any changes that would burden hardworking Texas families and the businesses that employ them with billions of dollars in additional costs,” Davis wrote.

The proposal to overhaul the market has surfaced amid concerns that Texas will not have enough electricity to meet its future energy needs, as the state gets hotter and its population surges. It has touched off a debate that has largely pitted electric utilities and advocates against industrial energy users.

Under current market conditions, electricity generators say, the status quo provides little incentive to invest in capacity that would probably sit unused and be turned on only during peak-demand days — usually during summer’s most blistering days. 

Consumers would ultimately bear the costs of a market shift, which some analyses have pegged at $4 billion per year. Capacity market proponents, however, say the switch would drive down prices in the long run. They say it would boost reliability, lower the costs of outages and stabilize the market, lowering the costs of capital.

In her letter, Davis called for a breakdown of cost impacts on commercial and industrial electricity consumers and Texas’ economy at large. She also seeks a guarantee that a market change would lead to more generation that would eliminate concerns about future electricity shortfalls.

“We cannot risk a negative impact to Texas’ thriving economy that a rushed decision on this very important issue might bring,” Davis wrote.

The capacity market question has not surfaced as a major issue in the 2014 campaign for governor. A spokesman for Attorney General Greg Abbott, the leading Republican candidate, did not immediately return a request for comment.

In October, the PUC signaled that it would move toward a capacity market when commissioners, in a nonbinding 2-1 vote, supported mandating a “reserve margin” — the gap between supply and peak energy demand. Adopting a capacity market would be one way for the PUC to enforce the reserve margin.

The vote has spurred some state lawmakers to accuse the agency of moving too fast on the issue, with some questioning whether the commissioners even hold the authority to transform the market. With her letter, which also questioned that authority, Davis joined the ranks of those skeptical lawmakers, who are led by Sen. Troy Fraser, R-Horseshoe Bay, the chairman of the Senate Natural Resources Committee.

Last month, during a contentious hearing, lawmakers grilled the commissioners on the issue and called for more in-depth analysis of the potential market shift.  

At that hearing, Nelson, one of the two commissioners who has expressed support for a capacity market, said the agency would do more analysis.