Transmission towers near the CenterPoint Energy facility on December 22, 2022 in Houston, Texas when subfreezing temperatures and a cold front loomed over the state of Texas.
Brandon Bell/Getty Images

Texas regulators approved a proposed overhaul to the state's power grid, which will likely increase consumers' electricity bills when changes begin.

The Texas Public Utility Commission said in January the new plan is to help make the grid more reliable by producing enough power when there’s a shortage of available electricity due to equipment breakdowns, severe weather, etc.

Using a tactic called “performance credit mechanism,” power companies, like NRG, would be on standby to generate more energy during an electricity shortage. The power companies would then sell power credits to retail electric companies that sell power to homes and businesses, like TXU, Cirro and Reliant, in order to avoid volatile price spikes when demand is high. Retail companies that buy the credits would eventually pass the cost on to the consumer.

The plan would take about three years to implement and cost about $460 million annually, commission documents said. That's about $2 a month on a $100 electricity bill.

“What we have in front of us is a market-based solution that thorough analysis says would deliver a 10 times improvement in reliability for less money than our customers would pay in the absence of action,” PUC Chairman Peter Lake said to Texas Senate’s Business and Commerce committee in November.

Many of the power companies in the state support the plan because they say the credits will help them build new power generation facilities to meet demand in a growing state. Gov. Greg Abbott also endorsed this plan.

But critics doubt the plan could work, saying it's too risky and doesn't have unilateral support from energy experts, advocates and industry leaders.

"To be clear, [we] did not direct the PUC to replace the state's energy-only market with an unnecessarily complex, capacity-style design that puts the competitive market at risk without guaranteeing the delivery of new dispatchable generation," said state Sen. Charles Schwertner, who helped write Senate Bill 3 directing the PUC to devise a plan to overhaul the grid after the deadly 2021 winter storm. "My colleagues and I intend to hold hearings and consider new legislation to fulfill our obligation to protect the people of Texas."