Bill to give companies low-interest loans to build more gas-fired power plants is approved by House committee

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A Texas House committee has approved two major bills aimed at building up the state’s electricity grid. One would offer companies low-interest loans to upgrade or construct natural gas-fueled power plants, and the other would limit how much extra revenue gas-powered electricity generators could make through a proposed financial tool that would pay them in exchange for promises to be available to produce power in tight times.

Both bills mark the Legislature’s turn toward supporting natural gas-fueled electricity after a boom in renewable energy across the state. Politicians have criticized wind and solar energy, which is cheap and doesn’t burn fossil fuels, as less reliable than “on-demand” power sources like natural gas because it’s produced only when the wind blows and the sun shines.

Renewables came under attack by Texas leaders after a powerful winter storm hit the state in 2021, electricity demand skyrocketed and the Texas grid came close to collapse. But the extreme cold hampered all types of power, including gas-fired plants and wind and solar generators. Millions of Texans lost power and heat for days. Hundreds died.

Efforts to correct for the deadly failure led the House State Affairs Committee on Wednesday to pass Senate Bill 2627, which would use state money to provide low-interest loans and pay companies a bonus for connecting a new plant to the grid by 2029. Although the bill is technically meant for building any type of on-demand power, it excludes batteries that are typically used to store wind or solar power.

The committee reapproved a slightly changed version of the bill on Thursday. Rep. Rafael Anchía, D-Dallas, argued that paying only bonuses might be more effective to get facilities built quickly rather than making companies wait for the state to set up a new loan program. He also expressed concern that offering loans would expose the state to the risk of companies defaulting.

“I’m not sure that that’s the business we should be in as a state government,” Anchía said.

Sen. Charles Schwertner, R-Georgetown, introduced the bill late in the legislative session, which ends May 29, and proposed giving companies zero-interest, state-funded loans. Companies that build gas-fueled power plants said in committee hearings that they preferred Schwertner’s new proposal to an older one — Senate Bill 6 — which would have potentially billed Texas power customers billions of dollars to build gas-fueled power plants to use in emergencies only.

Still, the reaction from industry to SB 2627 was tepid.

Representatives for gas-fueled power companies warned lawmakers that the loan and bonus program could cause companies to retire their older facilities because they would be economically disadvantaged. Several testified that they didn’t believe the bill was necessary.

“This is a fine program on the cost side,” said Sam Siegel, vice president of wholesale strategy for Irving-based power company Vistra. But Siegel said the real issue that needed to be addressed was finding a way for gas-fueled power generators to make more money in the state’s electricity market.

Representatives of gas-powered generation companies stressed that they could live with the loans and bonuses if they also got a functional financial tool to give them more revenue after the plants were built. The tool to do that, known as performance credits, was proposed by Texas electricity regulators earlier this year.

The House committee voted Thursday to approve Senate Bill 7, which would create guardrails for those credits. Generators would sell the credits to companies that sell power to customers; those companies would be required to buy the credits and would likely pass the cost on to consumers.

Regulators predicted the credits would add 2% to customers’ monthly electricity bills — or $2 extra on a $100 bill.

Companies that build and operate gas-powered plants said the credits would incentivize them to keep older gas plants online and build new ones. Others refute the idea that more incentives are needed for on-demand power in the electricity market and doubt whether the credits would bring more online or just drive up electricity costs without providing a benefit.

With a previous bill, Senate Bill 2012, legislators had been battling over whether they should limit how much consumers would potentially pay under the plan by capping the total amount that electricity providers would spend on credits.

Supporters of a cap say it would rein in what consumers have to pay for what they consider a bad idea. Opponents of a cap say it would basically kill the concept, leaving consumers at risk of paying for another grid disaster. That bill is awaiting a vote on the House floor.

SB 7 included a net cost cap of $1 billion per year, a difficult calculation to make because it would require electricity grid operators to determine how much the credits lower overall energy prices.

Rep. Chris Turner, a Democrat from Grand Prairie, questioned whether that was the right amount to get enough generation on the grid. Turner asked if continuing to develop a “workable cap” was something legislators could do.

“Absolutely yes,” said committee Chair Todd Hunter, R-Corpus Christi. “This is an evolving process.”

Zach Despart contributed reporting.

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