Following Winter Storm Uri, incumbent generators have increasingly sought government-mandated, fixed payments from customers to compensate them for simply owning existing generation facilities. These proposals have caused substantial cost increases in electricity while failing to improve reliability across the country. Under Senate Bill 7, which deregulated the ERCOT market, a key goal was to move away from a regulated model where captive ratepayers fund generation development directly, and to shift the financial risk of generation investments from customers to private investors. Government capacity mandates would undermine the benefits of deregulation and competition for Texans.

ERCOT was designed strictly as a “pay-for-performance” market, where generators are only paid for selling energy, ancillary services, or real-time reserves. Texas has wisely chosen not to adopt a costly, bureaucratic capacity mandate like other areas of the country, and as a result, ERCOT has had better reliability in general at a lower cost to customers. Texas’s fundamental market design remains effective, but the increase in zero-cost generation from renewable resources has put retirement pressure on the thermal (coal & gas) generation fleet. To address this issue, TAM supports policies that will directly compensate dispatchable resources—including both generators and demand response providers—for supplying energy, ancillary services, or reserves when the system needs them. A costly, bureaucratic capacity mandate will increase payments to incumbent generators for “just existing,” shift risk to consumers, increase prices, and reduce performance incentives without increasing reliability for Texas consumers.