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The Case for a Texas Capacity Market Consider the following excerpts from an op-ed in favor of a Texas capacity market:
"Here in Texas it is easy to assume the lights will always come on, our computers and cellphones will have power and business will continue as normal -- until they don't.
"The challenges we face on energy issues over the next couple of decades exceed all those of the past 150 years. Over the next year Texas policymakers will be making key decisions which will determine how successful we are in meeting those challenges.
"At the end of the day, Texas needs an energy policy that recognizes the long-term nature of the electric industry and creates a regulatory framework that enables price stability, provides reliability and ensures capital investments to build new generation.
"The energy-only market does not account for the unique characteristics of electricity and the electric utility sector. Electricity is not becoming less relevant, but has become the essential service and its complexity far exceeds the nature and scope of any other industry in which we have attempted deregulation. More than affordability, these unique characteristics require a predictable regulatory environment that promotes certainty, long-term infrastructure investment, and price stability."
Reasonable enough, right? Hits all the arguments we've been hearing? One problem. This isn't an op-ed for a Texas capacity market. It's an excerpt from an op-ed appearing in the Lansing State Journal for regulation of the Michigan electric market, and in opposition to any full re-introduction of electric choice. The op-ed was authored by Steven Transeth, who is director of energy policy for the Michigan Jobs and Energy Coalition
Under the fair use exception granted for commentary, Matters simply replaced the word "Michigan" with "Texas," and "deregulation" with "energy-only." Otherwise, the op-ed excerpts are verbatim, including the key arguments of why regulation is needed.
The seamless manner in which an op-ed opposing retail choice can be read as advocating a "capacity market" by simply changing the state referenced in the op-ed should be disturbing to any proponent of retail electric choice.
Matters has previously noted the dangers of following the arguments in favor of capacity markets to their logical conclusion, but the Michigan op-ed hits the nail on the head.
In short, the Michigan op-ed says regulation is needed:
• To make sure the lights come on
• To meet new and future challenges in the electric industry
• To recognize the "long-term" nature of electric industry investments
• To recognize electricity's unique characteristics, such as the inability to store electricity
• To promote certainty and predictability
• To ensure price stability, reliability and capital investments to build new generation
Without any hyperbole, it is fair to say that these are exactly the same arguments being advanced in Texas in favor of a centralized capacity market. In other words, the energy-only market does not assure any of these provisions, capacity market supporters say.
Once you start conceding that electricity is "unique" and needs "some" government intervention to support long-term investment, maintain reliability, and achieve price stability, don't expect the policy to be quarantined and stop at a capacity market. Contagion is simple and inevitable; the same reasons Texas needs a capacity market is why more controls on the electric market are needed -- such as a default rate (or more likely initially, a "standard" retail product with identical terms and conditions required to be offered by all REPs as sought by consumer advocates), disconnection-for-nonpayment moratoriums (especially with the coming end of the SBF payment), and more and more policies to ensure price stability, certainty, and predictability.
Link: Lansing State Journal: Steven Transeth: Regulation key to affordable electric service
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July 15, 2013
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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