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Dive Brief:

  • The Texas Senate on Wednesday approved a package of energy reforms including a $10 billion “Energy Insurance Program” that aims to boost grid reliability by developing a fleet of new gas-fired power plants capable of delivering 10,000 megawatts.
  • SB 6 passed 22-9, but faces broad opposition from the energy sector and conservationists from changes to the state’s electricity market and environmental impacts. Uncertainty about the plan’s cost could threaten the measure’s chances in the Texas House of Representatives.
  • Berkshire Hathaway Energy is backing the legislation, and experts say the company is a leading contender for contracts to build backup generation. But for smaller generators, the SB 6 could make a less attractive investment than a Texan.

dive insight:

Gas-fired generator WattBridge is spending billions to build power plants in Texas, but officials say that when this round of investment ends, the company may end up with the state.

“Once we complete our facilities that are currently under construction… we don’t expect further investment” in the Electrical Reliability Board for the Texas market, Mike Alvarado, president of WattBridge, told Texas Senators at a March 23 hearing at SB 6.

“Current market conditions simply do not allow it. The legislation proposed by the Senate makes the current market more challenging for our business and provides additional conviction in our decision to discontinue our current investment program in ERCOT and begin looking into other markets,” Alvarado said.

SB 6 would establish Texas Energy Insurance outside the competitive market, while another bill passed by the Senate, SB 7, would create a new add-on service for dispatchable generators while also charging new fees.

“The Senate’s grid reform package evens out the playing field between distributable and renewable energy sources by raising distributable energy sources to put ratio payers first,” Texas Gov. Dan Patrick said in a statement. He added that SB 6 is also creating a low-interest loan program to maintain old distributable generating plants.

The bill’s sponsor is Senator Charles swordsmanR, says the new capacity will not cause problems for the state’s power market only because 10,000 megawatts will not operate until grid conditions require it.

Factories can earn a regulated rate of return of up to 10%, Bloomberg reports.

Michelle Richmond, executive director of Texas Competitive Power Advocates, said the bill represents a “fundamental shift away from a competitive electricity market.”

“It represents a costly tax on consumers that does not improve reliability or make the market economical for distributable resources – new or existing,” she said.

Julia Rathgeber, who represents Berkshire Hathaway Energy in support of the bill, called the legislation “an opportunity to invest in Texas.”

Parts of SB 6 are similar to the Berkshire Hathaway energy scale that was supported in the last legislative session for emergency generation construction, Rathberger said, but the newer iteration is “broader in scope” and includes maintenance of the older generation.

“The sixth body could also work with other market reforms, such as the performance credit mechanism,” Rathberger said.

In January, the Texas Public Utilities Commission approved a new performance credit mechanism as part of the state’s energy market reform. Lawmakers have yet to implement it, and critics say it could cost consumers up to $5.7 billion annually with uncertain reliability improvements.

Rising energy costs in Texas is a major concern. The Lower Colorado River Authority’s slip surface obtained by Austin NPR KUT 90.5 estimates the cost of SB 6 to be as high as $18 billion.

“These laws are part of a package of legislation that could stop the development of renewable energy in Texas,” Luke Metzger, executive director of the Texas Environment Department, said in a statement. This means more air pollution that threatens our health and higher electricity costs. Any one of these laws alone will harm renewables, but together they can hold back the entire industry. We are counting on the State Council to reject these.”

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