by Robert J. Michaels
Texas Public Policy Foundation
January 22, 2014
There is a conflict between two visions of power markets administered by the Electricity Reliability Council of Texas. One side advocates continuation of existing markets on the basis of observed performance. The other side believes that today’s markets do not produce revenue sufficient to encourage investments in new generation that will be necessary to maintain reliability over the future. The critics of today’s market have made a number of proposals, two of which are analyzed here, to supplement the revenue obtained from energy market transactions. This paper finds that Texas’ competitive market is already functioning as a capacity market without the $4 billion electricity tax and excessive regulation proposed by advocates of a centralized capacity market. Adding capacity payments for generators is not necessary and would introduce complex and uncompetitive elements that would adversely impact Texas’ competitive market.

Heritage FoundationInsiderOnline is a product of The Heritage Foundation.
214 Massachusetts Avenue NE | Washington DC 20002-4999
ph 202.546.4400 | fax 202.546.8328
© 1995 - 2015 The Heritage Foundation