How a Winter Storm Tested Texas’ Go-It-Alone Attitude

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Al Hazara

“It’s tougher when you aren’t interconnected and not part of the mix,” says Pat Wood III, CEO of Dallas-based Hunt Energy Network and a former Texas and federal energy regulator. Wood, who was appointed to the Public Utility Commission of Texas by Governor George W. Bush, lost power for 36 straight hours in Houston before rolling blackouts kicked in on Tuesday. “At least you could recharge your stuff and cook dinner,” he says.

“I think a go-it-alone attitude within a republic of states is always a very tricky situation,” adds Carlos Kevin Blanton, head of the history department at Texas A&M University.

As politicians call for investigations and committee hearings—with ERCOT as the focal point—energy experts say the council’s leaders are being used as a scapegoat. ERCOT, which runs as a nonprofit with a board of directors, is overseen by the state Legislature and the state’s Public Utility Commission, whose members the governor appoints; all three of the commission’s current members are Abbott appointees. An investigation might turn up more details, and possibly some serious failures on ERCOT’s part, but it is state executives who ultimately make the decisions about the Texas energy grid.

“I always viewed ERCOT as the air traffic controllers and plumbing contractors for the state’s electric grid, but the policymakers are the legislators and the [public utility commission],” says Ray Sullivan, who served as chief of staff to former Governor Rick Perry and also worked for Bush. Sullivan says he doesn’t recall having a single meeting with ERCOT staff when he was working for Perry.

Texas took control of its grid in the 1930s after the Federal Power Act was passed to regulate interstate electricity sales. ERCOT was created in 1970 and took on more responsibility for managing the Texas grid over the following decades. The current structure of Texas’ energy system has its roots in the mid-1990s, when the state government moved to deregulate the energy market here. ERCOT at that point became the country’s first independent service operator. According to both Sullivan and Wood, Republicans and Democrats agreed back then on restructuring the state’s power industry and breaking up utility monopolies in an effort to make the market more competitive.

“It didn’t get that partisan,” Wood recalls. “Everybody agreed wholesale competition made sense.” A 1995 law required the state to study connecting the Texas grid to the rest of the country, but the resulting report recommended against it so the state could maintain access to cheaper power, according to Wood.

A series of reforms over the next few legislative sessions in the late 1990s and early 2000s—the regular session lasts only 140 days every other year—focused on keeping energy costs low, especially for industrial customers, and bringing in new power companies. The reforms helped to usher in new technology, like wind and solar energy, while helping to meet demand for the state’s burgeoning population—and keeping prices low.

ERCOT’s role was and is essentially as the intermediary, mostly acting as a broker between energy buyers and sellers. It was never tasked with deciding on the state’s overarching approach to energy policy; it just carries it out. While ERCOT does have to make sure the grid is reliable, it can’t force changes such as infrastructure upgrades.

The trade-off that Texas lawmakers and regulators have made over the years, says Michael Webber, an energy resources professor at the University of Texas at Austin, is focusing on cost over reliability. Some states like Georgia require operators to maintain energy reserves almost double what Texas requires. This costs energy companies more money, but it also ensures that a grid is more reliable. Treating turbines, natural gas wells, coal plants and nuclear plants so that they can withstand winter weather also costs money. The state government in Texas, which has no state income tax, has avoided budgeting funds to prepare the grid for winter, knowing that customers would have faced higher bills.

“There is always a balance between just going as far as you can and keeping the market affordable,” says Texas energy lobbyist Michael Jewell.

After a major winter storm knocked out power in Texas almost exactly a decade ago, federal regulators called on the state to fortify its grid against deep freezes. But the federal government had no authority to mandate such measures. Wood says this is typical of Texas’ approach to federal oversight. Even though the federal intervention was “relatively benign,” Texas still didn’t want to deal with it. “I just threw my hands up in the air,” he says.

Even at the height of the crisis this week, Rick Perry said Texans would rather go without power for days than deal with federal energy regulations. Never mind that Texas readily accepts federal help when disaster strikes: So far this week, Abbott has made at least two official requests to the White House for federal aid.

Instead, for decades, Texas has let power operators decide whether and how to prepare for extreme weather. For the most part, they do this. Texas generators focus on summer, planning for peak demand from air conditioning during 108-degree August days, which are all too common in most of the state. These companies plan for minor winter storms, too. ERCOT said last week that it was ready for this week’s storm. Of course, that turned out not to be true.

After the state was plunged into darkness, Abbott on Thursday asked the Legislature to mandate and find funding for the “winterization” of Texas’ power system. But beyond this step, state leaders are unlikely to fundamentally change the Texas energy grid, by subjecting it to more federal oversight or connecting it to the rest of the country. Some Texas Democrats have said the state should consider joining the national grid, and there is a debate about whether it would have made a difference, considering the whole country was struggling with power problems over the course of a frigid week.

But it’s unthinkable to Republicans governing the state, who still sell the idea of Texas’ independence. This is the state, after all, where a Republican state lawmaker recently filed a bill to pave the way for Texas to leave the United States—a long shot, but a powerful symbol.

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