Houston may claim the title of oil and gas capital of the world, but San Antonio is leading the way to build the energy grid of the future.

The key to the Alamo City’s success was a decision made decades ago to keep its municipally-owned utility rather than adopt a competitive retail electricity market. CPS Energy, the largest community-owned electric and gas utility in the nation, is proving nimbler than private competitors.

More than 20 years ago, the Texas Legislature voted to introduce competition into the electricity market managed by the Electric Reliability Council of Texas. Private companies would compete to produce the cheapest power, a state-managed utility would manage transmission lines, and retail businesses would sell kilowatts to customers.

Except where cities and electricity cooperatives maintained the old system. In those areas, residents stuck with a quasi-governmental provider such as CPS, Austin Energy, Pedernales Electric Cooperative or one of the others owned by their customers.

Competition between generators has worked out spectacularly well, with ERCOT’s wholesale electricity prices among the lowest in the nation. The competition in generation allowed Texas to become a global leader in wind power, and soon solar power.

Tomlinson’s Take: The competitive Texas electric grid proves critics wrong again

Retail competition, though, has not worked out as well. For most of the last 20 years, CPS and other community-owned utilities have consistently charged customers less than private-sector retail providers.

Since CPS owns the generation down to the customer’s meter, this not-so-traditional utility has also implemented cutting-edge energy efficiency programs, cut reliance on coal power from 32 percent in 2010 to 18 percent in 2018, and kept prices lower than what the average Houstonian pays.

“For us, we think reliability and customer affordability have to be part of innovation,” Cris Eugster, chief operating officer at CPS, told the City of the Future conference, organized by Zpryme. You never hear for-profit companies talking about making less money.

Because CPS is fully integrated, the utility can install batteries near substations along the distribution grid, which then collect power the company generates when it’s cheap, and then release it to customers when prices spike, saving everyone money. In competitive markets, that would be illegal.

CPS is also proposing to use cheap nighttime wind power to liquefy and compress air and then use it to spin turbines when electricity prices spike in the afternoon.

“They basically can go to six, eight or 12 hours or even longer based on the size of the tank capacity,” Eugster added.

Lastly, the utility is embracing the coming wave of electric vehicles, trying to set up a regional charging program. A key feature: encouraging customers to charge at night when most of the Texas grid is wind-powered.

Ultimately, though, Eugster and CEO Paula Gold-Williams want to get out of the business of selling kilowatt-hours. The future is selling energy as a service, where customers pay a flat price based on their devices and then allow CPS to focus on efficiency, not selling a commodity.

“If we can make that transformation, we can decarbonize our grid and bring value to our customers. We can bring new products and services to our communities,” Eugster added.

Meanwhile, in Houston, retail electricity companies blitz customers with nonsense offers such as “free nights and weekends,” or tricky plans, where electricity is really inexpensive until the consumer hits 1,001 kilowatts, then the price skyrockets.

Competitive markets stifle innovation under layers of bureaucracy and regulation. Oncor, the transmission utility in North Texas, proposed installing batteries along powerlines to increase resilience and lower prices, but generators objected.

Tomlinson’s Take: Company’s failure reveals biggest challenge for power grid

Four years ago, retail power companies blocked legislation that would have allowed firms that turn off lights and turn up thermostats when prices spike to participate in the Texas wholesale electricity market. Setting up electric vehicle charging stations in Houston is a nightmare, requiring permits and permissions from landowners, the city and CenterPoint.

San Antonio has rolled out a Climate Action Plan with the goal of carbon neutrality by 2050, which means it will add no new carbon to the atmosphere. Most emissions come from energy use in buildings and transportation, including personal vehicles.

The goal meshes with the Paris Climate Accords and is not very ambitious. But with a municipally-owned utility, the city has a pretty good chance of neutralizing emissions.

Houston’s Climate Action Plan is still in draft form, but will likely establish a similar goal. The problem is that City Hall has no control over electricity usage, and the Public Utility Commission of Texas has recently favored fossil fuel generators by allowing them to charge more during peak demand periods.

Private-sector competition makes sense most of the time, but when it comes to things like energy and health care, consumers are the losers.

Tomlinson writes commentary about business, economics and policy.

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chris.tomlinson@chron.com