TPPF Supports New Power Plant Reliability Standards

TPPF Supports New Power Plant Reliability Standards but Warns Penalty Structure Won’t be Enough to Improve Grid Reliability

AUSTIN, Texas – The Texas Public Policy Foundation (TPPF) recently submitted comments on new reliability requirements for power plants starting in 2027. TPPF applauds the Public Utility Commission (PUC) for starting the rulemaking process early, allowing plenty of time for public input before the requirements take effect.

“We’re grateful the Commission began this process with over a year of lead time,” said Life:Powered Campaign Director, Carson Clayton. “This gives all stakeholders and the PUC ample opportunity to get the rules right and make sure that they will maximize the financial and reliability benefits for Texas consumers.”

In the comments, TPPF strongly supports the PUC’s approach to measuring reliability, which compares performance during high-risk hours to a benchmark based on performance across all hours. Generators that perform below their average during high-risk hours will be penalized, while generators that overperform during those hours will be rewarded.

“The PUC’s method for measuring reliability across all types of power plants is the only robust way to do it and must be maintained in the final rule,” noted Brent Bennett, Policy Director for Life:Powered.

However, TPPF identified a critical flaw in the penalty structure. Under the current proposal, power companies would only pay penalties during grid emergencies. The penalties would average around 5% of wind and solar revenue in an average year, which is not enough to induce generators to improve their reliability. If the goal of the program is to ensure all new power plants meet the reliability standard, then the penalty structure must be improved.

“The PUC must structure the penalties so that producers will have enough incentive to comply with the reliability standard across every season in every year,” Bennett explained. “If the penalties are far lower than the cost of unreliability, then that means consumers will still be stuck with some of those costs.”

TPPF recommends applying penalties on a consistent basis every year and season, not just during occasional emergencies. Furthermore, the value of the penalties should be based on the full cost of providing reliable backup power. This would create meaningful financial incentives for intermittent generators to build or purchase backup generation, rather than just paying a modest fee that results in no tangible changes.

“The Commission is on the right track with its proposed rule, as evidenced by the apoplectic reaction from unreliable generators that will no longer be able to foist their reliability costs onto consumers,” Bennett concluded. “Now the Commission needs to finish the job by ensuring the right incentives are in place to make the reliability standard effective in practice”