Texas regulators advance rules for natural gas facilities as critical power loads

Texas power and gas regulators on Nov. 30 approved for publication rules on how to designate natural gas facilities as critical loads so they would not normally lose electricity as part of a load-shedding event needed to prevent a widespread blackout.

To meet a statutory deadline imposed by laws enacted in June, the Public Utility Commission of Texas and the Railroad Commission of Texas, which has intrastate oil and gas industry jurisdiction, advanced the "critical load" rules for natural gas facilities such as wells, gas processing plants and pipelines that supply power plants.

"This is a fundamental reason that the Texas power grid will be more resilient this winter than last winter," PUC Chairman Peter Lake said. "For the first time ever ... our power lines and poles companies, will know where the critical natural gas facilities are from production to conveyance, gathering and midstream to the power plants. ... For the first time ever, both of those industries will know where the key pieces are and how to keep both sides of that equation functioning in an extreme winter event."

The PUC also reached a consensus to set the new high systemwide offer cap, known as the HCAP, at $5,000/MWh. Without the change, the current $9,000/MWh HCAP would go into effect Jan. 1. Since the mid-February winter storm that resulted in about 4 million Electric Reliability Council of Texas customers losing power, the system crossed a threshold causing a drop from the HCAP to the $2,000/MWh low systemwide offer cap, known as the LCAP.

The critical load rule and HCAP changes resulted from the outcry over the February power emergency, recently confirmed by the Federal Energy Regulatory Commission and the North American Electric Reliability Corp. as "the largest controlled firm load shed event in US history."

"As everyone knows, one of the failings from the state's perspective from February was the lack of coordination between the electric and gas industries," PUC general counsel David Smeltzer said. "We got clear direction from the Legislature that can't happen again, and one of the aspects of that was electricity not going to the gas people ... It's kind of a cycle."

The new proposals for publication let natural gas facilities submit a single form with all the information transmission and distribution utilities need so the grid operator will have access through a single portal.

Gas not 'primary culprit': RRC chairman

During the Railroad Commission meeting, Chairman Wayne Christian defended the Texas gas industry and his commission's regulation of it against recent media allegations that it was primarily to blame for the widespread blackouts.

"While no form of energy performed perfectly during Winter Storm Uri, the insistence that natural gas producers are the primary culprit behind the February blackouts is pure hyperbole," Christian said. "It is hypocritical to blame natural gas for an electricity shortage due to a weather emergency while routinely applauding efforts by the Biden administration to kill natural gas."

Gas-fired generation offline hit a peak of about 18 GW, according to ERCOT, compared with about 52.3 GW of all types of generation offline at peak. These are nameplate numbers, and ERCOT's winter 2020-21 Seasonal Assessment of Resource Adequacy lists 55.7 GW of gas-fired generation capacity.

The wind nameplate capacity offline during the February storm's peak was about 25 GW of the total 30.1 GW of operational or synchronized wind capacity, but ERCOT's SARA only showed about 6.1 GW would be available at forecast peak.

Railroad Commissioner Jim Wright said the new winterization rule divides gas facilities into three groups:

• Facilities capable of supplying 23 Bcf/d that are considered "supercritical" and therefore unable to opt out of being designated as critical load
• Facilities that produce little or no gas and are therefore good candidates to curtail load
• Facilities that have marginal productivity between the first two groups, that can apply to opt out of critical designation, which is not guaranteed

Texas has sufficient natural gas storage capacity to supply about 8 million homes for a month, Wright said, and the commission encourages gas-fired generators to "fully utilize this capacity for this coming winter."

"The Railroad Commission has no authority to require operators to release gas at a specific time or, for that matter, at all," Wright said.

Compliance affidavits due Dec. 1

ERCOT's generation and transmission operators are required to submit affidavits by Dec. 1 that they have complied with winterization rules, and ERCOT plans to complete inspections of more than 300 such facilities between Dec. 2 and Dec. 23.

Barksdale English, PUC director of compliance and enforcement, told the PUC on Nov. 30 that his staff recognizes that the Texas Legislature authorized regulators to impose penalties of up to $1 million per offense for noncompliance, and PUC staff plans to use that authority if a market participant fails to address any shortcomings in compliance after a reasonable "cure period."

"The bottom line is we'll have much more resilient grid this winter both on the gas supply side and on the power generation side," Lake said.

Regarding the proposed HCAP change from $9,000/MWh to $5,000/MWh, Commissioner Will McAdams noted that the cap, which sets the high price when operating reserves drop to scarcity levels through the Operating Reserve Demand Curve price adder, "is not designed to incentivize the building of new generation on its own."

"I have asserted that the ORDC is a stabilizing force and should be designed and changes should be implemented with the goal of stabilizing our existing fleet, providing [generators] revenues with the right price incentives to behave the way they should in the real-time market, so that they are online when we believe the likelihood of scarcity is growing," McAdams said. "So, I am not trying to bake in a whole lot to what ORDC should accomplish."

Stakeholders have advocated a range of HCAP values, from $4,000/MWh to $6,000/MWh. McAdams advocated setting the value at $5,000/MWh as "an appropriate level, given the insistence of load resources that they need to see higher prices in order to justify turning off their facilities and responding to real-time price conditions."