Texas has the most competitive electricity market in the country. Nevertheless, there has been an ongoing debate at the Public Utility Commission of Texas on whether Texas’ current energy-only market should be changed to make it operate more like a centralized capacity market, such as those that operate in the East and Midwest. Making such a change would re-regulate the market unnecessarily and shift the costs (and risks) of new investments to consumers.
A capacity market operates by giving electricity generators yearly subsidies in exchange for a promise that they will use the guaranteed revenue to invest in new capacity. These payments are not for the electricity that generators produce, but for the amount of electricity that they could theoretically produce if their operations were running at peak efficiency and, most important, were that energy needed.