DALLAS — As 2025 nears, concerns are being raised about the second phase of a state government program designed to bolster the Texas power grid.
The Texas Energy Fund, a $5 billion program created by the Legislature in 2023, is set to move forward with a grant program to create backup power generators, creating a failsafe energy supply for critical infrastructure such as hospitals, first responder facilities and water treatment plants.
Though the Public Utility Commission has not yet set rules and regulations, some possible participants have expressed fears the program could lead to a fleet of greenhouse gas-emitting diesel generators and encourage participants to sell their stored electricity instead of reserving it as a backstop.
The Texas Energy Fund has faced scrutiny after its first phase – a government loan program to build natural gas power plants – gave initial approval to a proposal from a company led by a woman convicted of a federal crime. Lawmakers have since pressured the accounting firm overseeing the program to refund millions of state funds for failing to eliminate the project.
During a tense Senate hearing, lawmakers repeatedly said Deloitte, the firm contracted to vet proposals, could have found the criminal history of the project’s head had they performed a Google search.
Though the backup power program and the power plant loan program are part of the same effort, scrutiny on the backup power aspect of the Texas Energy Fund is more muted and happening largely behind the scenes. But an advisory group has already called attention to an initial engineering report that failed to account for how large some critical facilities are – think Parkland Hospital’s Dallas campus – when compared to a rural emergency care facility or nursing home.
Stakeholders also raised have eyebrows at some companies’ desire to use taxpayer-funded backup power systems to profit from the Texas electricity market.
During a recent meeting facilitated by state electricity regulators, Zachary Stephenson with Texas Electric Cooperatives Inc. said allowing participants to sell power back to the market “defeats the original purpose of the program.”
Allowing taxpayer-funded backup systems to sell electricity on the ERCOT grid would create a government-subsidized electricity service, Stephenson said, instead of buttressing critical infrastructure during a power emergency.
Monica Batra-Shrader, a policy analyst with the backup power company Enchanted Rock, said monetizing backup generators would be important for the program’s success. Jamie Charles, a policy and regulatory analyst with the rooftop solar and battery backup company Sunnova Energy, said allowing participants to sell energy in a limited sense would lower overall equipment costs over time.
The program originated in a bill by Sen. Nathan Johnson, D-Dallas, that he called the Texas Power Promise. The bill didn’t get a final vote but ended up as an amendment to a larger GOP-led bill by Georgetown Republican Sen. Charles Schwertner.
Schwertner, working with Lt. Gov. Dan Patrick, designed a bill that would meet their goal of creating government subsidies to build enough natural gas-fueled plants to power 2.5 million homes. Since the near collapse of the ERCOT grid in 2021, Republicans at the Capitol have placed a premium on building more power plants that are not reliant on the weather. In Texas, that means natural gas power plants.
The bipartisan bill had a $10 billion price tag, though lawmakers appropriated only $5 billion. Most of the money was set aside for the natural gas loan program and a government subsidy that would rebate up to 10% of the construction cost of a natural gas power plant if completed before certain deadlines.
The backup power program got $1.8 billion.
Voters approved the whole package in an amendment to the Texas Constitution.
Regulators at the Public Utility Commission moved forward first with the loan program providing 3% interest loans for qualifying projects. The accounting agency Deloitte is reviewing applications from several power generation companies. The PUC is expected to pick winners in about eight months.
A preliminary report on the backup power program, released by Patrick Engineering in September, found nearly 31,000 facilities in Texas could be eligible for the program. The law defines critical facilities as those for community “health, safety, and well-being,” including hospitals, first responders, water treatment plants, storm shelters, grocery stores, public schools, municipal buildings that provide critical services and gas stations on hurricane evacuation routes.
Facilities with a power usage greater than 2.5 megawatts, commercial energy systems and private schools are ineligible.
The grant program would help counties, cities and eligible businesses purchase backup power systems to power critical facilities for at least 48 hours during a blackout.
An advisory committee that included Johnson, Sen. Mayes Middleton, R-Galveston, Rep. Jay Dean, R-Longview, and Rep. Ana Hernandez, D-Houston, suggested Texas power grid operator ERCOT could order participants in the program to turn generators on to help stave off a blackout in a power emergency.
But their report said that should be left to regulators to decide.
The law was written to prohibit participating companies or facilities from making money by selling energy back to the power grid in a similar way homeowners with rooftop solar or home-scale batteries can mitigate their electric bills.
Johnson said that doesn’t make sense.
“I’m not against backup power participating in the market, I am against state-funded backup power participating in the market at this point,” Johnson said in an interview. “It’s not someone taking a risk with their small business or home, this is water towers, police stations and water treatment facilities, nursing homes, warming centers.”
The Houston area’s large-scale power outages this year from two major storms, including Hurricane Beryl, underline the need to move quickly on the backup power program, Johnson said.
Additional funding from the Legislature may be required. The Public Utility Commission earmarked all of the $5 billion it received after the 2023 legislative session for natural gas power plants. Patrick and Gov. Greg Abbott vowed to add $5 billion this session, but their focus has remained on building carbon-emitting fossil fuel plants.
Johnson said he has little worry about the funding for backup power. He doubted the first round of $5 billion will be fully spent and predicted many of the natural gas power plant projects that got through the first round of PUC approval won’t survive the vetting process. The leftover cash could go to the Texas Power Promise.
Moving backup power ahead of natural gas plants was not a “politically viable option,” Johnson said. “The spotlight was always on the Texas Energy Fund. But it is getting done.”