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By Cyrus Reed
Last year, Texas voters approved a number of state constitutional amendments, including Prop 7, which created the “Texas Energy Fund.” Sierra Club opposed that proposition because what the somewhat sneaky ballot language didn’t make clear is that the type of energy the $10 billion in taxpayer funds will go to is almost entirely fracked gas, with renewable energy sources explicitly excluded. Proposition 7 provides funding for four programs, the largest of which offers loans and completion bonuses (grants) for dispatchable power plants within Texas’s main grid – mainly gas. It also includes a grant program to build backup power packages for facilities like nursing homes and hospitals, as well as a program offering loans and grants for infrastructure for utilities outside of ERCOT.
On Thursday, March 21st, Public Utility Commission of Texas (PUCT) commissioners approved new rules for the loan program based largely on a staff proposal filed recently with a few minor amendments. In approving the new rules, those wanting to apply for state loan funding would need to submit a letter of intent between May 1st and May 31st, and then apply with a full application by July 27th for loans with a 3% payback. In approving the rules, the Commissioners largely followed the staff’s recommendations on how the applications will be considered by a third-party administrator. The rules do not appear to allow for much if any public input on what is ultimately taxpayer dollars. However, in response, the Sierra Club filed some additional comments asking them to prioritize making information transparent and allowing for public comments. The rules also make clear that private entities, municipally-owned utilities, electric cooperatives and river authorities can all apply for funding to build “dispatchable” power plants that are at least 100 MWs in size. In fact, even industrial consumers that want to power their own facilities can apply for funding, as long as at least 100 MWs of the facility would be used to provide power to the wholesale market itself.
A number of entities have already announced that they intend to apply for the funds, largely with the intent to build new gas plants. Entities including NRG, Calpine and Sandow Lakes Energy Company have all announced their intent to build new gas plants and indicated they plan to apply either for the loans or completion bonuses.
In addition to the loan rules, the PUCT is developing the rules surrounding the completion bonuses, a near final proposal of which can be found here. It’s expected the Commissioners will vote at their meeting on April 25th to adopt those rules. While Sierra Club and many other entities did file comments on a previous draft, it remains to be seen to what extent commissioners change the proposal. Currently, the rule would allow up to $120,000 per MW to be paid to the developer of a power plant that was completed and operational before June 1, 2026, or $80,000 per MW if completed and operational before June 1, 2029. The completion grants would be paid out over 10 years to encourage the plants to stay in operation, and would be based on performance – were they available to operate and provide electricity during the 100 hours when the grid is most stressed. In other words, unlike the loans, which could be provided before the plants are operational, the grants would only be made available on an annual basis after the plants were operational. Under the proposal, entities that build new dispatchable generation could apply for the grants beginning on January 1, 2025.
The other two programs authorized by Proposition 7 appear to be moving at a slightly slower pace. First, recently a new advisory committee was named to advise the PUCT on developing packages intended to help vulnerable populations or facilities housing vulnerable populations to have backup power that might consist of gas plus solar plus battery storage – or even potentially bus or fleet vehicle batteries that could be discharged to provide electricity. The Texas Backup Power Package Advisory Committee held an initial meeting in February, and recently completed another meeting March 11th. Meeting minutes can be found here for the latest meeting. Rules are expected to be developed soon for the program, which could provide up to $1.8 billion in grants and loans.
The PUCT has been working to develop rules on a number of other pieces of legislation that were passed with the intent of adding more resources to the electric grid. Look for an update on that rulemaking process and what it means for the grid soon.