Texas Public Policy Foundation Releases Brief on Debate to Replace "World Class" Texas Electric Market with Subsidies for Special Interests (i.e. Capacity Market)

The Texas Public Policy Foundation released a Q&A on the Texas electricity market, providing an overview of the Texas electricity market and the current debate over, "whether Texas should abandon its world-class competitive market and move to a capacity market that would provide subsidies for electricity generators."

"The subsidies in a capacity market could cost Texas consumers $4 billion a year through higher electricity prices," said Vice President of Research and Director of the Center for Economic Freedom Bill Peacock, "That's a high price to pay in a market that has provided a reliable supply of electricity to consumers for over a decade."

Peacock adds, "Concerns about reliability are overstated. For instance, recent projections of future shortages have overestimated demand and underestimated supply. To the extent the Texas market is experiencing challenges, it is largely because of increased intervention in the market pushed by regulators and special interests -- who now seem bent on creating more problems with a capacity market. While Texas does need to act to improve the market, we should do so by moving away from, not toward, more regulation and intervention."

TPPF's Q&A (click here) observes that as Texas' successful competitive energy market has driven prices down, it has, "also be[en] hard on corporate profits."

"So there has been a push to abandon competition for a couple of years now, since lower natural gas prices and a more efficient market started eating into electricity generator profits," TPPF notes.

"In a capacity market, however, generators receive capacity payments regardless of whether their capacity is needed, and consumers pay for capacity on top of their electricity costs, whether or not they need the capacity. The role of competition in setting prices is significantly diminished, and a lot of the risk of new investment is shifted from generators to consumers," TPPF noted

Link to TPPF's Q&A (click here)