October 1, 2023

Deregulation leaves Texans unprepared for winter slap!

Deregulation leaves Texans unprepared for winter slap

Texas was brought to its knees this past week after a historic winter storm blew in, bringing temperatures the Lone Star State hasn’t seen in over the last 70 years. At one point, CenterPoint Energy, which serves the Houston area, was feverishly working to restore service to nearly 1.27 million people who were impacted by outages.

It was a “blame game,” with both the Governor of Texas and the Houston mayor pointing fingers at Electric Reliability Council of Texas (ERCOT), saying it was responsible for the state not being  prepared to handle the epic cold, leaving millions of residents without power, water pipes bursting in homes statewide, hotels closures limiting places to evacuate to, and dozens of people dying from either cold exposure, house fires and carbon monoxide poisoning while just trying to stay warm.

“Neither the City of Houston nor Harris County controls or regulates ERCOT or the power generators. The power outages are the responsibility of the state,” Houston Mayor Sylvester Turner tweeted. He also acknowledged that he, too, was without power and frustrated.

As the Energy Capital of the World, Houston is the headquarters and the intellectual capital for virtually every segment of the energy industry including exploration, production, transmission, marketing, supply, and technology. Houston employs nearly a third of the nation’s jobs in oil and gas extraction and has specific focus on energy tech and renewable forms of energy.

With these bragging rights, many were wondering how could a winter storm that so other states breeze through wreak havoc in our lives?

Experts say the ERCOT market design was fatally flawed, with it not being a question of it would ever fail, but rather “when” it would fail.

In 2013, Ed Hirs, an energy fellow at the University of Houston, predicted grid failure would occur in Texas if the market wasn’t redesigned.

And he was correct.

The grid reached a breaking point early Monday as conditions worsened and knocked power plants offline, ERCOT president Bill Magness confirmed. Some wind turbine generators were iced, but nearly twice as much power was wiped out at natural gas and coal plants.

Republican Gov. Greg Abbott called for an investigation of ERCOT.

“Far too many Texans are without power and heat for their homes as our state faces freezing temperatures and severe winter weather,” Abbott released in a statement. “This is unacceptable.”

But not so fast.  What happened cannot be blamed solely on ERCOT, an engineering problem, nor frozen wind turbines, the failure can be summed up in one word – MONEY!  Let’s throw in another word – DEREGULATION!

With Texas’ electricity market being deregulated, no one company owns all the power plants, transmission lines and distribution networks. Instead, several different companies generate and transmit power, which they sell on the wholesale market to yet more players. In plain terms, Texas has created an electric grid that puts an emphasis on cheap prices over reliable service.

Electricity deregulation in Texas, approved by Texas Senate Bill 7 on January 1, 2002, called for the creation of the Electric Utility Restructuring Legislative Oversight Committee to oversee implementation of the bill.

As a result, 85% of Texas power consumers (those served by a company not owned by a municipality or a utility cooperative) could choose their electricity service from a variety of retail electric providers (REPs), including the incumbent utility. The incumbent utility in the area still owns and maintains the local power lines (and is the company to call in the event of a power outage) and was not subject to deregulation.

So, Texas is the only state to use its own power grid, which is mostly isolated from other areas of the country. It has some connectivity to Mexico and to the Eastern U.S. grid, but those ties have limits on what they can transmit.

The solitary set up frees Texas from federal regulations, including ones that could have required it to be better prepared for the freak cold snap. Grid operators knew one day an event like this could happen, but they were not forced to do anything about it.  It was left up to the power companies to invest in the costly upgrades to prepare their systems for a massive storm, but many opted out of that decision.

An ERCOT representative explained the upgrades are not mandatory, but there are financial incentives to stay online, but no regulation at this point.

Hirs said deregulation is not an excuse.

“If you’re going to say you can handle it by yourself, step up and do it,” he said.

So, with that being said, we have to ask: have we learned anything yet? Greed costs lives.




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