Calls for power system reform in Texas grow loud but may end in a whimper

As the energy crisis in Texas dragged into its fourth day, with millions of residents still without power and more wintry conditions in the forecast, calls for a reform of Texas' electricity market grew louder. It is unclear, though, whether demands for change will have much effect or keep the lights on in future extreme weather events if they do.

Texas Gov. Greg Abbott, a Republican in his second term, called for the state Legislature to investigate the state's grid operator "and ensure Texans never again experience power outages on the scale they have seen over the past several days."

At least 10 people have died in weather-related incidents since the cold snap began, according to media reports.

"The Electric Reliability Council Of Texas Inc. has been anything but reliable over the past 48 hours," Abbott said Feb. 16. "Far too many Texans are without power and heat for their homes as our state faces freezing temperatures and severe winter weather. This is unacceptable."

Abbott said he wanted to review the preparations and decisions by ERCOT as an emergency item in the current legislative session "so we can get a full picture of what caused this problem and find long-term solutions." An emergency item allows lawmakers to move bills through the legislative process faster.

Texas' biennial legislative session, which started Jan. 12, lasts 140 days. If no power market reform legislation passes this year, Texans will have to wait until 2023, absent a special session.

Dade Phelan, R-Beaumont, the speaker of the Texas House of Representatives, said in a statement that he asked the House State Affairs and Energy Resources Committees to hold a joint hearing to "review the factors that led to the megawatts of electric generation being dropped off the ERCOT system and the subsequent statewide blackouts that affected millions of Texans across the state."

The joint hearing is scheduled for Feb. 25 "for the express purpose of helping Texans understand what went wrong and how we can prevent these conditions from happening again." The chairs of the two committees said they supported such an investigation.

An island grid

Texas has long fought off federal oversight of its power system. After the 1935 passage of the Federal Power Act, utilities formed an interconnected system in the state, avoiding federal regulation. ERCOT was created in 1970 as one of many regional grid reliability councils formed in the wake of nationwide blackouts in 1965. In the mid-1990s, Texas lawmakers and then-Gov. George W. Bush began to deregulate the state's electricity market to allow consumers to choose their providers. ERCOT was given the role of overseeing the restructured, competitive market. Since then, the grid operator has overseen an islanded power market that is not linked to the Western or Eastern interconnections, so it does not import power from those major grids.

Although the Federal Energy Regulatory Commission has nominal authority over the reliability of the nation's power system, transmission within ERCOT is not under FERC's jurisdiction.

Cal Jillson, a professor of political science at Southern Methodist University, said the appetite for expensive reform that requires state funding to firm up the grid will be weak as lawmakers face down a budget crunch. Nor will the state's lawmakers be eager to require private companies to spend more money on grid resilience, he said. Republicans have controlled both houses of the state Legislature and the governor's office since 2003. Allowing Texas' grid to take power from other parts of the country, which would bring in more federal oversight, "would be very expensive financially and would go against the Texas culture," Jillson said.

"We've seen this before, and the whole ethic of Texas of government is low taxes and deregulation," he said. "And so the reasons that the power producers have relatively few requirements are that that's the Texas way, that is a deregulatory environment, and I don't see that changing."

In 2011, after rolling outages on ERCOT's grid in a less-severe cold snap that froze natural gas equipment, there were proposals to require generators to weatherize power infrastructure to protect against inclement weather. Lawmakers instead required that generators file reports with the Texas Public Utilities Commission on voluntary weatherization measures.

The law required the PUC to prepare a report assessing those measures and said the commission "may" submit subsequent reports if it finds that "significant changes to weatherization techniques … are necessary to protect consumers or vital services."

ERCOT in November 2020 reminded generators to complete declarations that they had made "all weatherization preparations for equipment critical to … reliable operation." Power generators' emergency preparedness reports are mostly confidential unless deemed otherwise by the Texas attorney general.

In 2015, Dallas Mayor Eric Johnson, then a Democratic representative in the state House, introduced a bill that would have mandated weatherization, Democratic Rep. Michelle Beckley noted on Twitter. That bill, H.B. 2571, failed to pass. Along with other critics, Beckley called the current crisis a result of government deregulation and privatization.

Federal regulators with FERC and the North American Electric Reliability Corp. said they would also open inquiries into the power system failures in Texas.

Lessons from 2011

Following the 2011 outages, lawmakers also called for more transparency in the inner workings of ERCOT, a private nonprofit corporation that is overseen by the PUC. PUC members are appointed by the governor.

In a Feb. 17 press conference, Abbott called ERCOT "opaque the way that it runs; it is not transparent. ... And the one thing everybody needs out of ERCOT is greater transparency, especially the residents of the state of Texas."

El Paso, a border city of nearly 680,000 that is not part of ERCOT, experienced brief power outages Feb. 14 but has been spared the widespread, prolonged blackouts that have crippled other large cities in the state. El Paso Electric Co. officials said they have benefited from lessons learned during the 2011 winter freeze, which essentially shut down the city.

Those lessons were apparently lost on ERCOT, whose executives have also called for a review of its handling of the crisis.

Bill Magness, president and CEO of ERCOT, on Feb. 17 responded to Abbott's earlier comments suggesting ERCOT leaders should resign.

"I will say that the fundamental decision that was made in the middle of the night at 1 a.m. on Monday to have outages imposed was a wise decision by the operators that we have here," Magness said.

If ERCOT had not ordered load shedding at that time, Texas may have faced a statewide blackout lasting "months," Magness said.

Sally Talberg, chairman of ERCOT's board, in a Feb. 17 letter to board members called for an "urgent meeting" Feb. 24 to "obtain from ERCOT management an initial accounting of details that led to the sustained power outages for millions of Texans this week as well as ERCOT's preparations and decisions."

Blaming ERCOT officials for the current crisis is not enough, said state Rep. Lyle Larson, a Republican who represents Bexar County. "We in the legislature are culpable and must accept responsibility for millions of Texans going without power," he tweeted. "We must make changes to keep this from happening again."

"What I think Abbott and other elected officials are doing is simply scrambling to provide an explanation to a shivering public that they're doing something," said Jillson, the SMU professor.