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Texas governor signs ERCOT reforms so February blackouts 'never, ever ... again' recur

Highlights

ERCOT oversight intensified

Weatherization required

Conflicts of interest banned

Texas Governor Greg Abbott on June 8 signed two bills considered by one senator the biggest changes to the Electric Reliability Council of Texas since the deregulation, to ensure consumers "never, ever have to deal ... again" with the massive blackouts resulting from the mid-February winter storm.

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"A top priority we had this legislative session was to fix the power grid to prevent any other grid failure in the future," Abbott said during the signing ceremony for Senate Bill 2, reforming ERCOT oversight, and Senate Bill 3, an omnibus bill addressing weatherization of power and gas facilities, emergency pricing, ancillary services, and a power outage alert system.

"The Legislature passed comprehensive legislation to fix all the flaws that led to power failure," said Abbott, a Republican. "There's not greater accountability in the system than ever before with sweeping reform of ERCOT and the [Public Utility Commission of Texas], and more oversight by the Railroad Commission."

Texas' Railroad Commission oversees intrastate natural gas markets and infrastructure.

"Everything that needed to be done was done to fix the power grid in Texas," Abbott said.

State Senator Charles Schwertner, a Republican from Bryan, Texas, said, "Senate Bill 3 is the largest reform of the electric generation and natural gas system since deregulation."

Penalties for not weatherizing

Senate Bill 3 requires the weatherization of power and power-related natural gas facilities, the mapping of such gas facilities and the designation of such gas facilities as critical infrastructure so that they do not lose power in the event of an energy emergency.

The bill also provides for substantial penalties for such facilities that fail to weatherize, specifying up to $1 million per offense for gas facilities.

Representative Chris Paddie, a Republican from Marshall, Texas, chairs the House State Affairs Committee, through which these bills passed, also attended the signing ceremony.

"I am very confident that folks are going to comply [with the weatherization rules], because if they don't, there will be pretty strong penalties," Paddie said.

State Senator Kelly Hancock, a Republican from North Richland Hills, Texas, who sponsored Senate Bill 2, said the Legislature "really focused No. 1 on take care of consumers."

"Our ultimate concern is that our constituents back home never, ever have to deal with this issue again," Hancock said. "There's no one sitting or standing here that doesn't remember that week [in February]. None of us. Miserable. We don't want people to go through that again."

Paddie said lawmakers found in ERCOT "a system that wasn't working properly."

"We had folks who were serving in those capacities who might have had their own best interest at heart, as opposed to the ERCOT system itself and the citizens of Texas," Paddie said.

Hancock noted that ERCOT's 16-member board has for decades been primarily formed from representatives of various power market interests, such as independent generators, retail electric providers, city utilities and power marketers. Such persons, in combination with unaffiliated board members who often came from the power or utility regulatory sector, were "industry experts, which was all great, but what we found was that there tend to be conflicts of interest, so we blew it up," Hancock said.

Key provisions of two big Texas power market reforms
Bill
Primary focus
Key provisions
Estimated two-year cost
Senate Bill 2
PUC oversight of ERCOT
Board membership falls from 16 to nine voting members, plus two non-voting
0
Members must reside in Texas
Three board members serve ex-officio, eight picked by selection committee
Governor, lieutenant governor, speaker of the house pick selection committee
Sets board member qualification standards
Bans those involved in the electricity market
ERCOT rules require PUC approval
Senate Bill 3
Omnibus reform bill
"Emergency pricing" replaces high systemwide offer cap after 12 hours
$38.7 million
Requires weatherization for electricity and natural gas facilities
Authorizes penalties for failing to weatherize properly
Excludes power-related gas facilities from rotating outages
Orders mapping of power-related gas facilities
Directs PUC to oversee ancillary services market
Requires ERCOT to allocate ancillary services on "cost-causation principles"
Establishes Texas Energy Relibility Council
Orders registration of distributed generation at the local utility
Standardizes emergency preparedness for water utilities
Orders development of power outage alert system
Requires notification of consumers about load-shedding procedures
Source: Texas Legislature