Texas may put restraints on new big businesses hoping to tap into the energy grid

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ODESSA — Texas will need a lot more energy in the future.

Driven largely by demand from businesses such as data centers and the oil and gas industry, the Electric Reliability Council of Texas, the state’s grid operator, predicts the state’s energy needs will nearly double in six years.

State Sen. Phil King, R-Weatherford, worries ERCOT is not working with a full picture.

He told a legislative panel as much in February.

“We do not have accurate load forecasting. No one knows if the forecast is real,” he said. Large companies, he added, are requiring ERCOT to plan “for load growth at dramatically higher levels than experienced ever in the history of Texas, and frankly, ever in the history of the United States.”

And “without credible data, we run the risk of overbuilding, with high costs being passed on to consumers, or underbuilding, further exacerbating scarcity,” he said.

He believes his legislation, Senate Bill 6, will put restraints on the state’s open-energy market, and help the grid plan for the future to save rate payers money and avoid another catastrophe when extreme weather strikes again.

The bill, which has already won Senate approval and is expected to start its journey in the Texas House Wednesday with a committee hearing, would place more requirements on businesses meant to help ERCOT better forecast the electricity needs. Businesses would also have to pay more in advance of operating.

While business groups have said they agree the grid needs more security, they believe King’s bill is too heavy-handed. They said some of his proposals won’t help ERCOT’s planning and put their operations at risk.

They want changes to the bill, such as removing language that would grant ERCOT the ability to disconnect power to major energy users during an emergency, and new rules on arrangements between power generators and companies.

Michael Jewell, an attorney who has represented large industrial companies on energy issues and policy, said King’s legislation will need to strike a balance between addressing the growth without scaring companies away.

“This legislation is important to finding that balance, that we can bring these large loads into the ERCOT region, grow the Texas economy, and support the development of this technology,” he said. “But we also want to be sure that we, as Texans, will continue to have reliable electricity.”

King’s bill only applies to industrial-sized facilities, or those needing more than 75 Megawatts.

Under the bill, businesses wanting to plug into the grid must disclose whether they have similar requests elsewhere in Texas or out of state. Companies must tell ERCOT if their backup generators can meet at least 50% of their power. During an emergency, ERCOT could instruct facilities to use that power, instead of the grid. Another provision allows ERCOT to shut off a facility’s power in an emergency. ERCOT must give the facilities a day’s notice.

Facilities sometimes negotiate directly with power generators, like gas-fired plants, to satisfy their electricity needs without connecting to the grid. The bill gives the Public Utility Commission, which regulates electricity and some water and wastewater, authority over such arrangements, allowing it to approve or reject them, in addition to 180 days of review.

Companies would also have to pay an electric, municipal utility or a cooperative at least $100,000 to study the transmission work necessary to transport electricity to their facilities. Companies must also demonstrate that they can afford to contribute to the construction of transmission lines and purchase any equipment or services.

The bill also directs the utility commission to determine how to better allocate transmission costs, including looking at peak demand, the point at which supply meets demand.

King acknowledged the strain on the state’s power grid means more businesses are moving to Texas, something he supports.

“I want to make it very clear that while this load growth is a strain on the ERCOT grid, it is also an excellent opportunity for the state of Texas,” King said in February. “So long as we manage it properly (and) not create reliability risks or pricing issues for everyday Texans.”

Groups consisting of the facilities King is targeting said parts of his proposals won’t benefit ERCOT’s efforts to make the grid reliable or lower prices.

Dan Diorio, a government affairs expert for the Data Center Coalition, a national group, said it is supportive of the goals the bill is trying to reach. But in its current form, the group said it has lingering concerns as the bill moves through the House, including a provision requiring companies to disclose information that he said is unnecessary for the grid, such as out-of-state requests for electricity. He said ERCOT can separate serious requests within Texas.

“This is a highly competitive industry,” he said. “So not only do we have competitive concerns about that, because this is proprietary information, but how is that going to inform the forecast correctly?”

He said diesel makes up most backup power generation, and is a fuel overseen by the federal government and the Texas Commission on Environmental Quality. Forcing companies to run emergency generators could lead to air emissions violations and air pollution, Diorio said.

Diorio added that the information data centers collect and maintain — including from local and state authorities — could be put at risk when the system shuts down. Proposing to shut off power, even with a notice, could risk public safety, adding that the bill does not offer enough specificity regarding how the shut-off would be implemented.

Walt Baum, president of Powering Texans, a group representing natural gas power generators, said the bill imposes administrative requirements on agreements between power companies and facilities.

In this case, the company would pay the power generator directly for the needed electricity. Baum said a company could otherwise go directly to the grid, drawing out the same amount of electricity it would have gotten from the generator directly. The amount of energy used would not change.

“And the impact on the grid is the same,” he said.

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