“Two years ago, not long after the Texas electricity system snapped following a winter storm, Warren Buffett’s Berkshire Hathaway pitched an idea to Texas lawmakers: Let us build some backup power plants in exchange for steady, guaranteed payment. Now the state is one step closer to making that concept a reality.
“The state Senate earlier this month passed a bundle of bills aimed at reforming the state’s energy system, the most substantial of which proposes a so-called Texas Energy Insurance Program. Under that system, the state would run a competitive process to select power plants that would serve as backups in case of emergencies. Only natural-gas-fueled power plants with on-site fuel storage would qualify. It is an attractive proposition for any power plant that could attain the designation: Such plants would earn a regulated rate of return on equity—with a ceiling of 10% a year—whether they end up being used or not. …
“The bill states that such backup power plants could be used to “resolve an actual or anticipated violation of transmission security criteria.” That is a phrase that could be interpreted as regular transmission congestion, something that happens “every few minutes,” according to Beth Garza, senior fellow at think tank R Street and a former director of the independent market monitor for the Electric Reliability Council of Texas, or Ercot, which is the electricity system operator for Texas.
“Critics, which include the Texas Competitive Power Advocates, an industry group that represents power plant owners in Texas, have said such power plants could undermine their own purpose by discouraging new generators from entering the competitive market.”
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