May 10, 2021

Texas lawmakers consider bailing out state’s battered electricity market

Texas lawmakers consider bailing out state’s battered electricity market

KILLEEN, Texas (KWTX) – Late last week, state lawmakers in the House approved a roughly $2.5 billion plan to bail out Texas’ electricity market nearly three months after Winter Storm Uri.

During the winter storm, many electricity providers had to purchase power at the maximum rate allowed by Texas law.

They also had to pay various related fees, and now many providers cannot pay what they owe to the Electric Reliability Council of Texas (ERCOT), which then funnels the money to electricity generators.

“Basically the whole system is really clogged up,” Bernadette Johnson, a senior vice president of power and renewables at the oil and gas software company Enverus, told KWTX.

The bailout plan outlined in House Bill 4492 would establish a nonprofit special purpose public corporation called the Texas Electric Securitization Corporation, which would issue bonds to be used toward offsetting some of these electric providers’ debts.

Providers would only be able to use the aid in the bill for debt that would have otherwise been defaulted.

Consumers would then shoulder some of the responsibility of paying back the bondholders.

“Over the period of the bonds — you know 15, 20, 30 years, whatever that ends up being — there would be this small charge on each customer invoice,” Catherine Webking, the general counsel of the Texas Association of Energy Marketers, told KWTX.

She estimated that the average consumer would end up paying 77 cents more per month over the duration of the bonds, which could be a decade or more.

“So what this basically does is it creates this mechanism or system where you can finance that big expense, kind of peanut butter spread it across all the various rate payers in Texas,” Johnson said.

“You could pay it back in 10 years, instead of having to pay it back right now,” she added.

Some think that lawmakers should focus their attention on the natural gas market as well.

“Why are we only looking at the electric system,” said Michael Webber, an energy resources professor at the University of Texas at Austin.

“The gas system also failed in a really spectacular fashion, and so we need to winterize and weatherize the gas system because gas barriers also cause a lot of power system failures,” he said.

Supporters of the bill argue that not passing it could have dire consequences.

“If we’re not able to do this, I think we’re going to see a big disruption in the competitiveness of the market,” Webking said.

“Several of the providers will be forced to exit; customer choices will be reduced; and ultimately, we won’t have the same level of competition today, which provides a lot of downward pressure on prices,” she said.

The bill cleared the House with bipartisan support, 129-15.

It remains unclear if the Senate will advance it with about three weeks to go in the legislative session.

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