Update: Texas PCM Guardrails Bill Passes House With $1 Billion Cap, Retail Market Protections (Differs From Senate)

The Texas House passed SB 7, a bill, which among other things, places certain guardrails on the performance credit mechanism (PCM)

The bill's language was not changed compared to the version which yesterday passed to third reading in the House. Discussion of the bill's language and retail market provisions as passed by the House can be found in our story from yesterday (click here)

The versions of the bill passed by the Senate and House do differ; however, and for final passage the Senate will need to either accept the House version, or the bill will need to go through the conference process

Some notable differences concerning the versions include:

• whereas the engrossed (Senate) required that under the program all generators who receive credits be prohibited from self-arranging credit exchanges with any affiliated competitive retail electric providers, the substitute (House) does not

• whereas the engrossed required the PUC to ensure that the cost to the ERCOT market of the program credits does not exceed $500 million annually, the substitute requires the PUC and ERCOT to ensure that the net cost imposed on the ERCOT market for the program credits does not exceed $1 billion annually, less the cost of any interim or bridge solutions that are lawfully implemented, and also authorizes the PUC to make certain adjustments to that limit

• the substitute includes the following requirements for the program absent from the engrossed:

• a requirement that the program require ERCOT to procure the credits centrally in a manner designed to prevent market manipulation by affiliated generation and retail companies;

• a requirement for a single ERCOT-wide clearing price to be established for the program and for the program to not differentiate payments or credit values based on locational constraints; and

• The engrossed included among the required program criteria that the terms of the program and any associated market rules do not assign costs, credit, or collateral for the program in a manner that provides a cost advantage to load serving entities who own, or whose affiliates own, generation facilities. The substitute omits the reference to market rules in that provision and includes a separate provision prohibiting the PUC and ERCOT from adopting a market rule for the ERCOT power region associated with the implementation of a reliability program that provides such a cost advantage