Reports blame regulators, gas generation for Texas' mid-February storm blackouts

New reports blame Texas' mid-February energy emergency on the state's energy regulatory structure and gas-fired generation, and less than a third of Texans think state government "will adequately tackle issues" related to the deadly winter storm, which left about 4 million customers without power, some for several days.

Report recommendations include substantial regulatory changes and market changes affecting the Electric Reliability Council of Texas' generation capacity and wholesale power prices.

More than 39% of 1,500 respondents to a University of Houston survey conducted May 13-25 expressed a lack of confidence in the state government's action to address issues arising from the storm, according to the survey results released June 25, and 27.8% said they were "neutral" regarding the issue.

In the recently released July issue of the academic journal "Energy Research & Social Science," researchers at the University of Texas and other institutions said in an article, "The 2021 freeze suggests a need to rethink the state's regulatory approach to energy to avoid future such outcomes."

"Weatherization, demand response, and expanded interstate interconnections are potential solutions Texas should consider to avoid generation losses, reduce demand, and tap neighboring states' capacity," states the article entitled, "Cascading risks: Understanding the 2021 winter blackout in Texas." The article included work from researchers at the University of Colorado, the Colorado School of Mines, the Georgia Institute of Technology, AB Power Advisors and Engie, the French energy company.

Other major fuel sources -- coal-fired, nuclear and wind generation – also underperformed, the article states.

Capacity reserve requirement

San Antonio, Texas-based CPS Energy, the nation's largest city-owned energy utility, on June 24 released a winter storm report from its Community Emergency Preparedness Committee that states, "Deregulation of electric power in Texas by the Legislature has degraded the resiliency and reduced the reliability of the Electric [Reliability] Council of Texas grid over the last 20 years; subjecting CPS Energy customers to a greater risk of extended power outages during a crisis."

Recommendations include:

• Require all ERCOT market participants to maintain a certain level of reserve capacity from "baseload plants, dispatchable plants or energy facilities"
• Require Texas to guarantee loans for the construction or contracting of such capacity
• Require Texas to invest in larger grid connections from the ERCOT grid to the east and west
• Eliminate the Public Utility Commission of Texas' ability to set ERCOT wholesale power prices

The PUCT on Feb. 16 noticed that in certain circumstances over the previous day, wholesale power prices were clearing well below the systemwide offer cap of $9,000/MWh. Therefore, in order to continue to incentivize output from existing generation and to encourage wholesale-indexed power consumers – mostly industrial facilities – to conserve energy, the PUCT ordered ERCOT to set the wholesale price at the $9,000/MWh cap for the duration of the emergency.

A $365 million impact

The term of that emergency remains a bone of contention in the San Antonio report, as ERCOT stopped requesting load shedding at 12:42 am on Feb. 18, but did not allow prices to fall to market level until 9 am Feb. 19.

The price situation has been especially galling for CPS Energy, as outages among its own fleet required the utility to purchase from the market, ultimately racking up extra costs of about $365 million from Feb. 9 through Feb. 20, according to the report.

"Unfortunately, the indirect effect on natural gas prices when PUCT artificially set the electric power price at $9,000/MWh inflicted even greater economic harm on CPS Energy," the report states.

Spot gas prices charged to CPS Energy jumped from $3.17/MMBtu on Feb. 9 to $175/MMBtu on Feb. 13 and $386/MMBtu on Feb. 17 before dropping to about $25/MMBtu on Feb. 19.