Texas lawmakers over two days last week held a series of hearings tied to the Electric Reliability Council of Texas (ERCOT) last month entering emergency conditions and initiating rotating outages in the state in the wake of an arctic blast.
On Feb. 25, ERCOT President and CEO Bill Magness appeared before the Texas Senate’s Committee on Business and Commerce. Magness offered a presentation and fielded questions from state senators for a little over six hours during the hearing.
Magness said that “this storm, at its worst, took out 48.6 percent of the generation available to ERCOT to manage the system. Now, we always keep reserves. We don’t ever want to manage it down to zero. But when you lose almost half of your generation. When you have record demand like we have never seen in the winter in Texas, you’re going to have a problem.”
He said that if ERCOT had not acted by calling for controlled outages, “Texas was headed for a blackout.” Magness said that if the outages had not been ordered, “we’d probably be talking today about when the power’s going to come on. And what my team and the folks at the utilities in Texas would be doing is an exercise called black start, and we drill it every year, but we’ve never done it.”
Magness noted that Texas has never had a blackout. “There’s been blackouts in the Northeast. There’s been blackouts in New York. There’s been blackouts in California. Several places have had major blackouts. But if we have one, we’re going to be relying on folks in the utility industry to basically restart the electric grid,” which he said is a “very difficult process” and it is at a minimum weeks in terms of duration. “There’s no way it’s not weeks and it could be months,” he said.
“I feel a great deal of responsibility and remorse about the event,” he said at a later point. “I believe the operators on our team did everything they could have.”
“But you wouldn’t have changed anything in terms of your play calling during those critical hours?” asked Texas Sen. John Whitmire.
“As I sit here now, I don’t believe I would,” Magness responded. “I wouldn’t step in front of them and question their judgement and their experience,” he said in reference to ERCOT’s operators.
“If we listen to all the tapes and we look at all the evidence and there were things that they should have done differently, that should certainly be on me because I’m ultimately responsible” for ERCOT.
Whitmore also asked Magness whether he was “ever concerned in the early parts of the crisis when the generators were saying, we’re doing the best we can because the gas lines are freezing up – do you ever" worry about the natural gas lines "not being really as frozen as were being claimed for the purposes of raising the price of gas?”
“What we were concerned about at the time was the generation units that were reporting that they couldn’t run or could run less because of gas shortage kind of issues. We don’t have any real significant interface with the gas industry. We don’t manage any of their operations,” Magness said.
The Federal Energy Regulatory Commission on Feb. 22 said that its Office of Enforcement is examining wholesale natural gas and electricity market activity during recent extreme cold weather to determine if any market participants engaged in market manipulation or other violations.
When asked by another state senator whether the market construct in ERCOT is adequate or should be changed, Magness said that “We’re certainly not the policymakers on that. We’ve seen a lot of success with the market structure we’ve got. We’ve served the highest demands during the summer that we’ve ever seen. We’re getting some new investment – maybe not the type of investment everybody wants – but we’re getting new investment.”
Along with the Committee on Business and Commerce, the Texas House Committees on State Affairs and Energy Resources on Feb. 25-26 held a joint public hearing related to the outages.
Texas governor delivers speech on response to power outages
Texas Gov. Greg Abbott on Feb. 24 delivered a televised statewide address on the state's response to the recent power outages.
Among other things, he said that ERCOT must be overhauled. He noted that five ERCOT board members have already resigned, including the Chair and Vice-Chair. “But more must be done,” he said.
“I am already working with the Legislature on reforms to add more power to the grid and to ensure that we never run out of power again. Also, the Office of the Attorney General has launched a formal investigation into ERCOT,” he said.
City of Denton files suit against ERCOT
On Feb. 25, the City of Denton, Texas, filed suit against ERCOT in the District Court of Denton County seeking to prevent the unconstitutional use of public funds. The City of Denton owns and operates Denton Municipal Electric (DME).
ERCOT is using a mechanism within its protocols known as “uplift,” the city noted in a news release.
“Due to the recent record-high wholesale energy prices, some ERCOT market participants have failed to pay ERCOT for power purchases. Ultimately, uplift may spread the costs of those ERCOT market participants to other market participants, including DME,” the city said.
The city “views the payment of the costs of other utilities as an unconstitutional gifting of public funds and unconstitutional lending of its credit,” it said.
Late Thursday, the district court granted a Temporary Restraining Order in favor of the City of Denton in this matter.
The City of Denton said it “will explore all legal options to protect the financial assets of the City of Denton and its ratepayers from improper use. As this is a pending legal matter, there is currently no additional information or comment.”
Texas cooperative files for bankruptcy
Brazos Electric Power Cooperative, Inc., Texas’ oldest and largest generation and transmission power cooperative, announced on March 1 that it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas.
Brazos Electric initiated this financial restructuring to maintain the stability and integrity of its entire electric cooperative system.
Brazos Electric provides wholesale power supply to its sixteen member-owner distribution cooperatives whose service territory extends across 68 Texas counties from the Texas Panhandle to Houston.
Brazos Electric said in a news release that before the severe cold weather that blanketed Texas with sub-freezing temperatures February 13-19, “it was in all respects a financially robust, stable company with a clear vision for its future and a strong ‘A’ to ‘A+’ credit rating.”
Brazos Electric said that as a result of the catastrophic failures due to the storm, it was presented with excessively high invoices by ERCOT for collateral and for purported cost of electric service, payment of which was required within days.
“As a cooperative whose costs are passed through to its members, and which are ultimately borne by Texas retail consumers served by its member cooperatives, Brazos Electric determined that it cannot and will not foist this catastrophic financial event on its members and those consumers,” it said.
Throughout the forthcoming financial restructuring process, Brazos Electric said it will remain committed to:
- Delivering affordable and reliable electric service to its member cooperatives and their retail members;
- Assisting its member cooperatives, their retail members and their communities impacted by the extreme cold weather event in the rebuilding effort; and
- Supporting the orderly, fair and expeditious treatment and satisfaction of its liabilities resulting from the extreme cold weather event
The filing also includes several “first day” customary operational motions Brazos Electric filed with the court in support of its financial restructuring including requests of authorizations to continue paying employee wages and benefits and certain critical vendors.
Brazos Electric will pay all obligations under normal terms of business for goods and services provided on the filing date of March 1, 2021 and thereafter.
Granholm comments on Texas situation in Q&As with Washington Post, NPR
Meanwhile, in a Q&A with the Washington Post, the newspaper noted that Secretary of Energy Jennifer Granholm recently tweeted that what happened in Texas, and what happened in California in the summer heat there, shows a need to upgrade the grid. “But was there anything that happened in Texas that was new to you, that made you think again about what kinds of changes are needed?,” Granholm was asked.
“A hand of friendship extended to Texas — to consider upgrading their connectivity to the national grid so that their neighbors can help them in times of crisis,” Granholm responded.
“Obviously, they have to winterize their energy system. I understand the desire to be independent. I get that that’s the ethos in Texas. But in emergencies, it would be good to know there’s backup,” she said.
The transmission grid that the ERCOT independent system operator administers is located solely within the state of Texas and is not synchronously interconnected to the rest of the United States. The transmission of electric energy occurring wholly within ERCOT is not subject to the Commission's jurisdiction under sections 203, 205, or 206 of the Federal Power Act.
Similarly, in an interview with National Public Radio, Granholm said “I think the country would welcome Texas being at least connected to the national grid in some way, shape or form that allows for its neighbors to help.”
Granholm said that "We all plan for redundancies and backups in our lives and this might be just a backup that Texas might want to consider at this time."
She also told NPR that “Texas needs to weatherize, winterize its energy systems.”