Texas operates the most competitive wholesale electricity generation market in the United States. Every day, hundreds of power generators compete in ERCOT-run auctions to deliver the cheapest power to homes and businesses. The retail electric market is equally robust, with retail electric providers (REPs) vigorously competing for customers based on price, service, and preferences. The PUCT’s www.powertochoose.org website makes it easy for Texans to shop among hundreds of REPs.
Thanks to customer choice and competition, electricity consumers in the ERCOT region of Texas have saved millions of dollars over the past 25 years. Yet one critical segment of the Texas electric market remains untouched by competition: the local transmission and distribution utilities (TDUs). These incumbents operate as a “Soviet-like” monopoly. When new transmission lines are needed, incumbent TDUs are automatically awarded the projects in their service territories with no competitive bidding. They recover all costs plus a healthy return on invested capital. A 2019 law reinforced this monopoly by restricting new transmission ownership and construction to companies that already own and operate transmission lines in Texas.
The 5th Circuit Court of Appeals struck down this law, noting the absurdity with a pointed analogy: “Imagine if Texas—a state that prides itself on promoting free enterprise—passed a law saying that only those with existing oil wells in the state could drill new wells. It would be hard to believe.” The U.S. Department of Justice under President Trump’s first term supported the court’s ruling. Nevertheless, the status quo persists: only existing transmission owners get to build new lines.
Enough is enough. Over the next five to ten years, Texas electricity demand is projected to double. To keep pace, ERCOT is planning massive new transmission projects. The “Permian Basin Reliability Project” and the “STEP Eastern backbone,” for example, are expected to cost $33 billion—the largest and most expensive transmission initiatives in Texas history. Under the current system, these projects will simply be handed to the incumbent TDUs on a “cost-plus” basis.
It’s time to introduce competition into the awarding of transmission projects. Competitive transmission is not theoretical; it is already delivering major benefits elsewhere in the U.S. The PJM Interconnection, serving 65 million people across 13 states from Illinois to Maryland, has long used competitive solicitations for transmission projects. These processes have consistently delivered savings of 20-30% compared to incumbent utility cost estimates. Similarly, the Midcontinent Independent System Operator (MISO), which serves 45 million customers across 15 states (including parts of Southeast Texas), has seen winning bids come in 38-45% below the highest bids. Given the enormous capital expenditures planned for ERCOT, even a modest 5 or 10% cost reduction through competition would save Texas ratepayers billions of dollars.
Competition delivers benefits beyond lower costs. It drives faster project delivery and innovation. Non-incumbent developers, currently locked out of Texas, have strong incentives to finish projects on time and on budget—any overruns fall on them, not ratepayers. New entrants also bring fresh ideas, such as creative ways to minimize the need for new rights-of-way. Equally important, competition opens the door to vast new sources of capital. Infrastructure funds, pension funds, and private investors—totaling trillions of dollars nationally—could compete for Texas projects.
Many energy companies from other states have far greater financial strength than our incumbent TDUs, enabling faster and more robust grid expansion to meet surging demand. Incumbent Texas TDUs have nothing to fear. They would continue to own and operate their existing transmission assets. They would also be free to compete head-to-head with new entrants for future projects. With decades of Texas-specific experience, strong reliability records, and proven ability to deliver on time and on budget, incumbent utilities are well positioned to succeed in a competitive environment.
In 1999, Texas leaders made a bold move by deregulating most of the state’s electric market. Critics predicted chaos and incumbent utilities strongly opposed the change. Instead, the result was a dramatic expansion of generation capacity, fueled by private capital rather than ratepayers. Electricity prices in Texas have remained among the lowest in the nation, and most Texans now enjoy the freedom to choose—and fire—their retail electric provider.
A former PUCT chair captured the Texas ethos perfectly: “Competition on its worst day is better than regulation on its best day.” That spirit defines our state. Texans embrace competition on the football field, in business, and in politics. We distrust heavy-handed government regulation. It’s time to extend that same competitive spirit to transmission development. When it comes to delivering reliable, affordable electricity, Texas should once again lead the nation.
Barry Smitherman is the Chairman of Texans for Affordable Transmission, a non-profit education and advocacy group working to advance competitive transmission policies in Texas. He is a former Chairman of the Public Utility Commission of Texas and is an Adjunct Professor of Energy Law at the University of Texas Law School.
This article was originally published by RealClearEnergy and made available via RealClearWire.
Especially good are the sixty or so electric cooperatives here in Texas. They are highly attuned to their customers, provide excellent service and low rates.
A ‘sunk cost’, if local gen ever occurs … as will any investment in big generation plants. These are just ‘givens’ … Of course, not seeing (not being able to see) the future, who can tell what will be what?
Oops – did just say that out loud?
This gave me a good laugh!
In Australia a while back, we had an atrocious duo of very socialist leaders one of whom was an unmarried woman living is sin with a partner and the other a foul mouthed self-proclaimed expert on China who was our ambassador to the US until quite recently.
Electricity prices were rising (due to the insane attempts to achieve Net Zero) but she blamed the cost of the distribution network – calling them “gold plated poles and wires” Much of the network is government funded and a significant portion is in private hands, some overseas corporates.
Australia is the size of the USA with the population of just one of its large cities so electrifying the continent involves very long above ground electric cables in all directions out of a small number of central generation hubs.
Just imagine how many more thousands of kilometres of them needed to connect the distributed sources collecting power from solar panel fields and clusters of windmills.
and then there’s the plan for an undersea cable to send solar generated power from Western Australia to Singapore.
The rationale for this must be that Singapore doesn’t have much spare land, but WA does.
I can’t think of any other motive.
(unless it’s a way to soak taxpayers for lotsa $$$$s.
But I’m sure that would never be contemplated for one minute 🤫🤩🤑 ).
Regarding the wholesale/retail electric rates, I have to wonder how much of a sweet deal so-called “renewables” get, at the expense of ratepayers and taxpayers. Scamsters gonna scam.
Yeah, where is the competition when windmills and solar are involved? They are not viable without taxpayer subsidies and special favors like being put at the front of the line all the time. That’s not competition.
Those sweet deals are renewable.
The problem with transmission lines is the person who owns them controls the rules and can pick and chose allowing connections. So now you can legally build new transmission lines but the existing owners can simply refuse to connect another companies network because they can’t agree on cost and say you run your own wires to the customers you want to connect.
That is why at some point you have to create an authority with rules and sort out how the existing network costs are fairly paid for.
Or everybody goes off-grid, and does their own generating at home.
And you kiss off any industry and jobs.
Geez, so many things not covered here.
There is a difference between transmission lines and distribution lines. There is a difference between builders and operators. There is a difference between low cost builders having an incentive to use substandard components and higher cost builders using components designed to last 20 to 30 years with minimal maintenance.
Operationally, who decides whom and when switches are thrown, maintenance is done, etc. Who does the maintenance? Does each owner have to hire and train their own maintenance crews?
Lots of planning and details missing in this plan.
Is an article from a lobbyist who wants to blanket the state of Texas with a bunch of wires, partially driven by unrealistic ERCOT projections of high demand growth, and presuming that a large part of that will be met with unreliable, intermittent wind and solar.
Even if the projections are correct that the demand will quadruple in the next six years, this is predominantly driven by AI and other data center developments. However, it is much more likely that these large demands will be met with behind the meter dispatchable on site power generation, not so grossly affecting the overall transmission system.
The author of this article does not at all make a logical case for what transmission is needed, and why.
This piece ignores the fiasco of Winter Storm Uri Feb 2021 in which Texas was literally within minutes of a blackout due to a week long deep freeze for which its system operator ERCOT was unprepared. Over 200 Texans died from this disaster.
So lets not go overboard with the superlatives:
“They are highly attuned to their customers, provide excellent service and low rates.”