The Facts
* In 2013, competitive price offers were an average 21% lower than the 2001 regulated price. This means that Texas consumers paid less in real dollars under the energy-only market than they did before competition.
* Numerous studies predict that a capacity market will cost Texas consumers an additional $3 to $5 billion per year, not including the market’s design, implementation, and litigation expenses. The most recent Brattle report estimated that these hard costs would come to an annual $3.2 billion.
* The Brattle Report claims that, even assuming the optimal scenario, where a Texas capacity market delivers on its promises and offsets some of its hard costs, capacity payments would have an annual net cost of at least $400 million.
* PJM spent $50 billion in capacity payments between 2007 and 2011 and added 7,000 megawatts of new generation, about 4% of its total install capacity. During that same period, Texas’ energy-only market added 10,000 megawatts of new generation, about 12% of its installed capacity, with zero extra cost to consumers.
* In September 2013, PJM suffered a series of rolling blackouts due to unusually high temperatures in combination with mechanical issues and plants being taken offline for season maintenance. The blackouts occurred despite a fully mature capacity market and over $54 billion spent in capacity payments.
Recommendations
* Preserve Texas’ energy-only electricity market.
* Reject all proposals that implement a mandatory reserve margin or capacity market.
* Clarify that the PUC of Texas does not have the statutory authority to restructure and reregulate the electricity market under any form of capacity market.