Last year, Texas voters approved $5 billion for the Texas Energy Fund – a pot of state money to help pay for new power plants or upgrades. The idea is to bolster the grid after winter storms in 2021 and 2023 kept millions of Texans cold and in the dark for extended periods.
The Public Utility Commission of Texas is responsible for choosing projects to receive loans. But lawmakers are now concerned about the commission’s vetting process after serious problems were discovered about a finalist’s application.
Doug Lewin, author of the Texas Energy and Power newsletter and host of the Energy Capital Podcast, spoke to Texas Standard about the issue. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: I understand you sounded the alarm about a power plant project in the Rio Grande Valley that was on track to receive some of this $5 billion. This is loan money or is it just an outright grant or what? Maybe you can tell us what the problem was.
Doug Lewin: Yeah, this is loan money.
I go through the U.S. dockets and see what’s there routinely. One night I was looking and saw that NextEra, a very large company – it’s actually an affiliate or subsidiary or something of Florida Power and Light, one of the largest utility use energy companies in the U.S. … And they put something in the docket saying, “hey, this company, Aegle Power, put us on an application ‘without our knowledge or consent.’
And I thought, well, that is fascinating. Why would they do that? So I tweeted that. I started getting calls from people that “you ought to look into this. There’s more there.”
And sure enough, the CEO had been convicted of an embezzlement scheme just seven years prior, and it wasn’t like they were convicted for an embezzlement scheme in Europe or Canada or something. It was in Texas and it wasn’t like it was for something wholly unrelated. It was for a power plant project in Texas.
So within a day or two, the PUC canceled the project. And the day after that, the Senate Finance Committee had them in front of them and they were not pleased.
Very interesting indeed. How did they make it to the finalist line there? I mean, I think that’s something that surprised a lot of folks.
I have no idea. I think that was really what was bewildering everybody, including the PUC chairman and the Senate Finance Committee.
The PUC had hired Deloitte Consulting. They had paid them, it appears, somewhere around $12 million over the past 6 or 7 months to do a lot of things, but specifically including vetting the applicants, and somehow they missed this. A Google search on the CEO’s name would have come up with the Department of Justice press release that that CEO was convicted of this embezzlement scheme.
So it’s hard. I can’t tell you why they missed that. It doesn’t make much sense.
Well, now I have a question about the PUC’s involvement here, because I don’t normally think of the Public Utility Commission as being in the business of approving or selecting recipients for loans or for grants for projects.
It is not something that, to my knowledge, they have ever done before. You know, I don’t think it’s impossible that they could be able to do this well.
But I think it’s really important to understand that the PUC is a fairly small agency – much, much smaller than, for instance, the Railroad Commission or TCEQ. Something like 80% smaller budget than the TCEQ or Railroad Commission, just as one example.
This is not a large agency. They already have a whole lot on their plate. They have a very long to-do list given to them by the Legislature. And I think ultimately one of the problems here, is they are stretched far too thin.
You mentioned that the Aegle Energy Project has been removed from contention. How’s that sitting with lawmakers, from what you can tell? I mean, they set up this fund to try to stimulate the construction of new gas power plants or maybe upgrading existing ones, right?
Yeah. I mean, this was one of 17 projects. Now it was the second largest, but there’s still 16 other projects. If they fund all of those, it’s more than 8,000 megawatts – like 8,500 megawatts.
I think it makes sense. It seems to me like they’re heading in a direction of really focusing on those 16, making sure there’s no problems with those 16, making sure that this money gets spent well or at least not wasted.
Is there a loss of confidence or is everyone feeling okay with the PUC’s management so far?
Well, I mean, you’d certainly obviously have to ask the senators themselves. Just based on what they said during the one-hour hearing, it sure seemed like there was a loss of confidence. Didn’t seem like it was fatal – like the PUC might be able to earn it back.
But certainly the senators were very, very angry about the situation, I think it’s safe to say.
I have to ask about the idea of having a $5 billion pot for new gas power plants and upgrades, especially given that Texas seems to be sort of making a bit of a name for itself when it comes to renewable energy. Any thoughts on the strategy here, of issuing these loans and grants?
Yeah, well, a couple of things here.
One, I do think it should be technology-neutral. They ought to define what they want. What are the attributes and qualities you want? Is it to operate in a winter storm? Is it to have a certain amount of duration and then allow different technologies to compete for that?
You know, the other part of the Texas Energy fund… There’s actually four parts. One is for the in-ERCOT loans and grants. One is for outside of ERCOT, right? Because this is a constitutional amendment and it’s state money and not all the state is within ERCOT.
And then there was $1.8 billion for for microgrids – for backup power at critical facilities like hospitals and nursing homes, fire departments, all of which we saw horrible examples of when they lost power during Hurricane Beryl. You know, people died. Fire departments weren’t able to respond as quickly as they otherwise would have.
I still don’t understand why the PUC and the Legislature aren’t at least prioritizing that on the same level as the gas plants because it does add supply just like the big gas plants, but also adds in resiliency, which a large gas plant won’t do if it’s located hundreds of miles away from where the power is needed, as they typically will be, as opposed to a microgrid that’s right there at the hospital or the nursing home. So I think that needs some priority.
