The Texas Chamber of Commerce Energy Association Releases Report on Challenges Facing the Texas Electricity Grid

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The Texas grid is operated by the Electric Reliability Council of Texas (ERCOT) and is separate from the other North American power grids. ERCOT is battling on multiple fronts to maintain enough power to meet demand as weather extremes, economic pressures and environmental regulations conspire to tip the often delicate balance between the demand for electricity and the available supply.

These issues have a direct impact on Texas consumers both in terms of the reliability of the grid and the rates they pay for electricity.

The Texas Chamber of Commerce Energy Association has issued a report outlining the challenges facing the Texas electricity marketplace. The Texas electricity grid is under pressure from multiple fronts. Grid operators are struggling to mitigate the impact of increasingly volatile weather, new EPA rules, and capacity concerns brought on by drought and lack of investment in new power plants due to low natural gas prices.

“These issues have a direct impact on Texas consumers both in terms of the reliability of the grid and the rates they pay for electricity”, says Devon Bass Managing Partner of Vault Energy Solutions.

The natural gas boom which has driven down electricity rates in Texas for the past few years has led to longer-term capacity concerns as cheaper wholesale electricity prices have discouraged capital investment in new power facilities. To encourage power producers to invest in new capacity the Texas Public utility commission is forming a plan to increase the cap on wholesale electricity rates.

Such a move would inevitably result in higher retail electricity rates as retail electric providers in Texas are squeezed in the middle between higher wholesale prices on one side and fixed-rate electricity plans for consumers on the other side. Houston electricity rates, in particular, are at multi-year lows but will likely trend upward as retail electric providers begin to price in the expected rise in wholesale electric rates.

As reported by the Houston Chronicle, the state of Texas is battling in federal court to slow down the implementation of aggressive new EPA rules. According to the newspaper, Texas officials fear the rules will cause some power plants to close down for good and others to be temporarily brought offline to be retrofitted with new equipment needed to comply with the new rules.

This comes at a time when ERCOT is already warning of potential electricity shortages this summer based on the prediction of the National Weather Service of a hotter than normal summer in Texas in 2012.

2011 showed the impact increasingly volatile weather is having on the reliability of the Texas electricity grid. February ice storms resulted in rolling blackouts as the cold weather simultaneously caused a surge in demand while causing mechanical failure at certain power nodes. Record summer heat later in the year again brought the grid to the edge of capacity. More rolling blackouts were narrowly avoided by voluntary conservation measures from the public.

The full report is available on the Texas Chamber of Commerce Energy Association website.

About TCCEA:

The Texas Chamber of Commerce Energy Association was created to give Texas businesses negotiating leverage in reducing energy costs. Member chambers represent thousands of Texas businesses throughout the state.

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