87th LegislatureEnergy‘Everything That Needed to be Done, Was Done,’ Abbott Says Signing ERCOT and Power Grid Reforms

Texas Governor Greg Abbott signed into law the state's omnibus response to the February blackouts along with ERCOT reform.
June 8, 2021
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Flanked by members of the legislature, Governor Greg Abbott signed into law two priority bills that are part of the state’s response to the February blackouts.

At the signing, Abbott said, “The bottom line is that everything that needed to be done, was done to fix the power grid in Texas.”

The first bill, Senate Bill (SB) 2, overhauls the Electric Reliability Council of Texas (ERCOT) board and the Public Utility Commission (PUC). Sen. Kelly Hancock (R-North Richland Hills) called it a “total reform of ERCOT.”

“Our goal was to make sure consumers never had to deal with these issues again,” he added.

ERCOT is the quasi-government corporation tasked with overseeing the day to day operations of the power grid. The PUC, meanwhile, is the government entity tasked with regulating Texas’ utility systems such as electricity, water, telecommunications, and sewage infrastructure.

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Under the legislation, appointees to both bodies must live in Texas — something that became a lightning rod issue in February once it was realized that five members of the ERCOT board did not live in-state, including the board’s chair and vice-chair.

Rather than certain ERCOT board members being appointed by their respective industry sectors (e.g. generation, transmission, electric cooperatives, etc.), the bill lays out a requirement that appointees have “executive-level experience” in any of the following areas: finance, business, engineering, trading, risk management, law, or electric market design.

To make the board selections, a three-person committee will be formed to evaluate candidates. The governor, lieutenant governor, and speaker of the House each appoint one person to the selection committee, giving the state’s three highest public officials an indirect say over the ERCOT board’s makeup.

The bill also requires the PUC to approve every proposed action by ERCOT before it is implemented and makes the ERCOT CEO a nonvoting member of the board where before it was a voting position.

For ERCOT board members, there is also a two-year lobbying moratorium after leaving their post.

The other bill, SB 3, serves as a kind of omnibus bill addressing the direct consequences of the blackouts themselves. Sen. Charles Schwertner (R-Georgetown) called it “the largest reform of the electric and natural gas system since the deregulation in 1997.” First and foremost, the legislation mandates power generation and transmission companies to “weatherize,” or protect their infrastructure against severe cold weather.

Asked whether the weatherization directive may come at the expense of resilience to summer heat, Abbott told The Texan, “In short, no — and there’s a reason why we call it ‘weatherization’ and not ‘winterization’ because it will protect against all severe weather.”

Schwertner added, “Fulfilling the weatherization directive is left up to the experts and the individual facilities to choose the best methods for their situation.”

It further requires broad assessments of cold weather vulnerabilities throughout the system including for natural gas systems and ancillary services, the establishment of load-shedding strategies and protocols, as well as a more robust mapping and identification of critical infrastructure.

During the blackouts, some gas producers had their infrastructure cut off from power because they were not marked as critical infrastructure — a simple process that only takes the filing of a small amount of paperwork, but about which The Texan is informed many were not apprised.

Ancillary services, meanwhile, are emergency power generation operations employed only when grid conditions become tight. Because of their nature, the prices for those services far exceed the wholesale cost of electricity, and even reached $26,000 per megawatt-hour (MWh) during the winter weather event.

That, along with the wholesale cost of $9,000 per MWh for electricity on the ERCOT market, led to massive amounts of money changing hands and some companies making out like gangbusters while others emerged drowning in debt. This is the basis of the “repricing” fight from earlier in the session that crescendoed and faded out in a week’s time.

Repricing is not touched in the omnibus bill but it requires caps on emergency condition wholesale and ancillary service prices to be established.

Similar to ancillary services, the legislation directs the regulators to facilitate the deployment and establishment of dispatchable power at generation and transmission facilities — essentially, immediate backup power that can include on-site fuel storage.

On load-shedding, the bill requires transmission and distribution companies to identify “critical load” — such as generators themselves — that cannot be cut off from power. Other more general examples of this include hospitals and emergency response facilities.

Voluntary load-shedders, such as large manufacturing facilities, are also to be identified. This is a practice that already occurs but the directive is more explicit in the legislation. A voluntary load-shedder is a facility, often that uses large amounts of electricity, that agrees to go offline so that residential customers are not removed in its stead.

Another explicit mandate within the bill is that a statewide alert system be created to warn of events like this down the road. Communication failures were a constant theme of the marathon legislative hearings that occurred after the February event. During it, ERCOT sent out alerts and updates — often couched in impenetrable industry jargon — through Twitter and email. But nothing more substantial was available.

That would change under this directive.

Some consumers faced exorbitant electricity bills during the event because they were on wholesale price-indexed plans — plans whose rate ebbs and flows along with the ERCOT market’s wholesale price — rather than a fixed-rate plan. A direct corollary of that was a top-down prohibition on disconnection of consumers from utility services resulting from unpaid bills during the event.

SB 3 prohibits water and sewage utilities from disconnecting consumers for unpaid bills stemming from emergency events.

Rep. Chris Paddie (R-Marshall) concluded, saying, “We worked very hard to address the major issues from the winter storm of oversight and transparency, communication, and, of course, weatherization.”

Much of the legislation tasks the PUC and ERCOT to set protocols and policies aimed at protecting against cold weather issues but also leaves much up to those bodies’ discretion.

With Texas’ sweltering summer heat just over the horizon, Texans and their representatives hope to avoid finding themselves in a similar situation to what transpired in February.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.