What Texas’ ERCOT reforms mean for you as a business energy consumer

The state of Texas experienced one of the worst power failures the United States had ever seen. The state’s power grid succumbed to extreme winter conditions and was left unable to provide power for over 4.8 million people and businesses. 

In response, Texas Governor Greg Abbott signed legislation that addresses areas of improvement to the state’s power grid. Power supply companies, under the care of ERCOT, will be pushed to “weatherize” power generators in preparation for future instances of extreme weather. 

Governor Abbott signed Senate Bills 2 and 3 into law on 8 June. The reform also requires power generators to provide aid to consumers impacted by storms and extreme weather. Failure to meet the requirements of the new legislation will result in penalties of up to $1 million for ERCOT and the public utility commission. A “Power Outage Alert” emergency system is put into effect when power supply is inadequate for consumer demands.  

What does this mean for you as a business energy consumer?

The February cold snap left many energy suppliers scrambling to not only provide power for their customers but also foot the bill as result of loss revenue. Twelve firms, including one of the state’s oldest, shut down following the weather-induced outages. Their inability to access power from the grid forced these suppliers to close up shop. Those who could afford the limited energy supply turned around and hiked prices up for their consumers. This resulted in skyrocketing energy bills for small businesses across Texas. 

Here are the implications of the reforms that we can anticipate:

-This new legislation should ensure that Texas’ power grid is up and running even during the most extreme of conditions, be they frigid winters or scorching summers. Of course this means that you as a consumer will have power no matter how harsh the weather is. 

-The legislation protects consumers on flexible contract plans thanks to the establishment of an emergency pricing plan for the wholesale electricity market. However, there will be rate increases to look out for across the market over a period of several years. This is due to House Bill 4492 allowing retail electric providers and other companies to access low-interest loans to cover costs from the unrealistically high charges procured over the month of February. 

-Keep in mind, though, that prices will not escalate over the pricing cap established by the market. Senate Bill 3 (Section 39.160) outlines this. It adds: “The emergency pricing program may not allow an emergency pricing program cap to exceed any nonemergency high system-wide offer cap.”

-The “Power Outage Alert” system notifies you of potential power outages and emergencies, enabling you to act accordingly in regards to your business energy management practices. 

One important thing to know is that the weatherization of Texas’ energy supply will be costly. The cost of these enhancements may be up to $39 million. We must also consider the maintenance costs of the new infrastructure. Will this see further rises in distribution costs and delivery charges? We should know as 2022 comes around, the time by which these reforms ought to be implemented. 

Switch to a new energy contract with confidence

Governor Abbott’s signing of the ERCOT reforms should ensure that Texas’ energy suppliers, and importantly its business energy consumers like yourself, are protected from potential power outage disasters like the state saw in February 2021. 

NGP Americas can help you procure a competitive business energy contract for your business. Our network with Texas’ energy suppliers allows you to switch suppliers with confidence. 

Contact us today to get started. 

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