After the Storm: Changes to Texas Electricity Regulation in the Wake of Winter Storm Uri
Nineteenth-century German philosopher Friedrich Nietzsche once said, “What does not kill me makes me stronger.”[1] Those who lived through Winter Storm Uri in February 2021, however, may disagree when it comes to the Texas electric grid.
The storm and its resulting blackouts caused 69% of Texans to be without power—for several days in some areas. Failures in other critical infrastructure also led to disruptions in water service for 49% of Texans.[2] As a result, at least 246 people died, and the total economic damage was estimated to be between $200 and $300 billion. [3] The storm and its aftermath also left lingering doubts about the ability of the grid to effectively function in the coming years. The actions taken in the aftermath of the storm defy easy characterization. Some have served to reduce the risk of future outages; others have done little to reduce the risk at a high cost to consumers. And some risks remain unaddressed or may have been exacerbated by regulatory action. In this article, I summarize some of the major changes that have been implemented in the wake of the storm as well as major regulatory changes now being considered by the state’s electricity regulator, the Public Utility Commission of Texas (PUCT), and the grid operator, the Electric Reliability Council of Texas (ERCOT). I also briefly note where some actions by state policymakers may prove counterproductive over the long term.I. The Cause of the 2021 Blackouts
To understand the changes made to and being considered for the ERCOT system in the wake of the blackouts, it is helpful to provide a background and explain briefly what happened during the blackouts in February 2021. Electric demand in Texas tends to be highest during the summer, and the system is optimized around that fact. As a result, historically, far less attention has been paid to distinct risks to the system that could exist during periods of extreme cold. In early 2021, not only did Texas face extreme winter warnings throughout the entire state, with temperatures in some areas dropping to century-long record lows, but temperatures stayed unusually low for extended periods.[4] This, combined with ice events and other weather effects, compounded the stress on the system. The unusually cold weather increased the demand for electricity to heat Texas homes and businesses. In February 2021, ERCOT set an all-time winter record for electrical demand of 69,692 MW, which was more than 13,000 MW higher than the peak in February 2020.[5] Absent the forced outages, demand would have been even higher. Yet increased demand was not the main problem. Rather, at the same time that Texans were trying to use more electricity than ever before, extremes of cold and ice were rendering a substantial portion of the state’s generators unable to function.[6] The level of generator outages was staggering. At its worst point, more than one-third of all power generation was offline, and the outages occurred for every fuel type: coal, natural gas, wind, and even nuclear.[7] According to a review by the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC), a majority of generation outages during Winter Storm Uri were due to freezing equipment or other on-site problems. An additional 31% were due to fuel-supply issues, mostly at natural gas plants; this is in line with data showing that combined daily natural gas production for Texas, Oklahoma, and Louisiana fell by more than half during February 2021.[8] As a result, even many plants that could have still operated in the cold were not able to run because they could not obtain fuel.II. Changes to the ERCOT System Post-Uri
After Winter Storm Uri, the Texas legislature passed SB 2 and SB 3, major pieces of legislation aimed at reforming Texas’s electric market.[9] SB 3 required Texas generators to weatherize their power plants so that they would be operable in extreme weather conditions.[10] The legislation also reorganized the ERCOT board, took steps to increase preparation, planning, and communication for future events, and contained a variety of other provisions making adjustments to the electricity market.[11] The weatherization requirements for power plants were promptly implemented by PUCT.[12] Efforts to protect natural gas infrastructure, which lies within the purview of a different regulatory body (the Texas Railroad Commission) have been slower and less extensive.[13]