Snow began strafing Texas a week ago, creating a winter wonderland. Texans rushed outdoors to enjoy a frosty adventure. However, their glee quickly turned into a nightmare as the state's power grid suffered an epic meltdown, plunging Texas into darkness.
At the apex of the blackout, more than 4.5 million Texas households were without electricity in bone-chilling, sub-freezing temperatures. For an energy rich state, it dealt a humiliating blow to Texas' image. Liberal media, such as The Washington Post, mocked Texas and blamed Republican leadership.
In the midst of the Apocalypse, the state's electric grid operator and city-owned power companies neared collapse as an historic, unrelenting Arctic storm camped over Texas. Instead of admitting failure, the state's grid operator and local utility companies dodged responsibility for the blackout.
Electric industry executives blamed the unanticipated, fierce storm for their lack of preparedness. To make matters worse, they faulted customers for turning up thermostats during the cold snap in an effort to deflect criticism of their own mismanagement, while practicing dreadful public relations.
To find out what happened, here is a snapshot of the grid operator and its key players:
The state's grid operator, the Electric Reliability Council of Texas (ERCOT), was thrust into the spotlight overnight. Few Texans know about ERCOT, a not-for-profit (501 (c) 4) entrusted with managing 46,500 miles of transmission lines and more than 650 electric generation units.
ERCOT supervises the flow of power on its grid, funneling electricity to 26 million customers, representing 90 percent of the state. El Paso and parts of East Texas and the upper Panhandle are on another grid. During peak demand periods, ERCOT orders utilities to reserve or ration power.
The news media failed to make it clear that ERCOT neither owns, maintains nor operates any electric generation. Electric utilities, primarily private firms, but also electric cooperatives and city-owned firms, do the heavy lifting. These utilities are responsible for generation, transmission and maintenance.
The most relevant starting point for the blackout fiasco is Bill Magness, the president and CEO of ERCOT, charged with managing the grid. Magness has no electric industry operational experience. He is an attorney who once served on the Texas Public Utility Commission.
Magness answers to the ERCOT board, which consists of 25 members who are either consumers, representatives of the utilities, power suppliers or independent outsiders. Texans were outraged when word leaked that at least five key board members do not even live in Texas.
Sally Talberg, chairwoman of the board of directors, is a former state utility regulator who resides in Michigan, according to the ERCOT website. Vice Chairman Peter Cramton is a professor of economics at the University of Cologne in Germany, but lists his residence as Del Mar, California.
Board member Vanessa Anesetti-Parra serves as vice president of regulatory and compliance at JustEnergy and posts her address as Toronto. After this became public, ERCOT abruptly erased this information from its website, contending board members received threats.
Governor Gregg Abbott called for the firing of the board over the blackout. But the state's chief executive has no authority to either hire or fire directors. In a cozy arrangement, ERCOT's board appoints a nominating committee of current members to fill vacancies and determine board tenure.
ERCOT is nominally regulated by the Public Utility Commission and overseen by the Texas legislature. But that oversight has been at best lenient or at worse negligent. ERCOT, as well as its regulator and state lawmakers, have a lot of explaining to do to angry Texans, who suffered through the blackout.
Now let's turn to the criticisms of the Texas electricity model.
Outsiders and the the media pinned blame for the blackout on Texas' decision to operate an independent, single-state grid. The lower 48 states are part of one of two giant synchronous grids, the Eastern Interconnection and the Western Interconnection, both run by not-for-profit boards.
The insinuation is that if Texas was connected to one of those extensive grids, it could tap spare capacity from other utilities during peak demand. It is an appealing theory, but California is a member of the Western Interconnection, yet endures regular rolling blackouts during unusually hot summers.
When a grid is overwhelmed with demand, there is little or no excess power to shift from one city to another. All grids experience blackouts. One of the best known occurred in 2003 when a mammoth grid stumbled, blacking out large swaths of the Northeastern and Midwestern United States.
A media narrative also hoisted by liberal sources laid responsibility for the blackout on Texas' decision two decades ago to de-regulate the energy market. Critics contend deregulation emphasized cheap electricity prices at the expense of reliable service. That cheap shot tells only one side of the story.
Under Texas' free market model, more than 300 retail electric outlets offer service to Texas customers. Deregulation has actually spurred investment, especially by manufacturers of electricity. Since 2001, electric generation in Texas has soared nearly 30%. That is three times the growth rate nationwide, reports the U.S. Energy Information Administration.
In 2019, Texas generated twice as much power as Florida, the state in second place. Electric rates also plummeted under deregulation. Average electric rates nationwide are about 26% higher than in Texas. Low rates have fueled an influx of businesses and jobs from high-cost states, like California.
From 1999 to 2015, power firms in Texas constructed 50,000 megawatts of new generation, enough to power 10 million homes during peak demand. In addition, investment has been plowed into wind and solar, ushering in new green energy sources online. Deregulation facilitated those investments.
For those who pine for a return to a heavily-regulated, monopoly system, heed this assessment of its potential chilling impact on investment in power generation:
"A single rate case takes six to nine months in some regulated states, so it would have taken forever," says Bruce Bullock director of the Maguire Energy Institute at Southern Methodist University. "And the price would be exorbitant." Those investment costs would be passed along to ratepayers.
Those who bash Texas for a single grid and deregulation are well advised to consider all the facts, not just the half-truths circulated by the media and some partisans trying to politicize the blackout. The deployment of a single grid and the introduction of deregulation did not trigger the blackout. That is a fact.
So what crashed the electric system, causing the colossal blackout?
The chief mission of operators like ERCOT is to prevent a cascading series of blackouts that would collapse the electric grid. Once that happens, restoration takes weeks or months. By that standard, ERCOT did its job. However, that does not absolve ERCOT of any responsibility.
ERCOT cannot escape blame in two areas: the most damaging blunder was to recommend, rather than insist, that Texas utility operators invest to winter-proof their generation facilities. Magness and others should have gone to the Public Utility Commission and the legislature with the issue.
In addition, ERCOT tried to soft-peddle the dereliction on the part of its member utilities.
As an example, here is Magness in a television interview on a Dallas station: "...We saw real improvements in the winterization of Texas power plants in the last several years. The last time we had rotating outages was back in 2011. We've seen a lot of progress."
That sound bite does not jibe with the reality on the ground. Wind turbines froze because of lack of winterization, knocking the facilities offline. Wind generates 17.4% of the state's energy, not the 10% widely reported in the media. A few turbines operated during the blackout, but the majority failed.
As temperatures nosedived into single digit territory, gas pipelines froze because of moisture in the gas. Pumps stalled. Backup diesel engines powering the pumps went silent. One power plant after another ground to a halt. A single reactor at one of the state's two nuclear plants fizzled after equipment froze.
According to ERCOT, frozen gauges and instruments at natural gas, coal and nuclear plants were the major culprit sparking the failure of power facilities. To exacerbate the situation, some natural gas producers in Texas were selling supply to utilities outside the state instead of to home-grown utilities.
On February 16, ERCOT reported that 87% of total power shortages were from outages at natural gas and coal generators. About 13% of the outages were attributed to wind turbine failures. An estimated 46,000 megawatts of power generation was lost, enough to power nearly 9 million households.
Neither ERCOT nor the state's utilities can legitimately claim they were not warned about the need to winterize. After the 2011 massive power outage in Texas, a 357-page investigative report cited the lack of winterization in too many critical generators across the state as the cause of the disaster.
The report was issued by the Federal Energy Regulation Commission (FERC) and the North American Electric Reliability Corporation, which set reliability standards for electric grids. The study recommended more insulation for facilities, heated pipes and increased energy reserve.
After the report landed on the desks of electric industry executives, heads nodded and a few meetings were held to discuss the recommendations. But little else was done.
According to an estimate from the FERC, the cost to winter-proof a natural gas well is more than $34,000. At the end of 2019, Texas had over 122,000 gas wells. The cost would top $4 billion. It is uneconomic to invest that much capital in a single year and most firms lack the financial resources.
However, since 2011, the energy suppliers and gas producers had a full decade to spread those investments, ameliorating the hit to firms' bottom lines. Instead, they nipped at the edges, making a few changes, but avoiding the big ticket items, while ignoring the advice of the report.
As the storm barreled into Texas, ERCOT cautioned of the need for rolling blackout to maintain grid integrity. Indeed, there were some cities that experienced rolling blackouts, where electricity came on for 30 minutes or an hour, then was shut down to conserve energy.
The lower temperatures dropped the higher customer demand rose. At one point, the grid was near disintegration when 185 of the state's 650 generators went offline, sometimes multiple times. ERCOT generation sank to 40% of capacity as the Ice Age descended. It's reserve margin of 12.6% evaporated.
In its role as grid operator, ERCOT essentially tells utilities how much power they can distribute and how much they need to hold in reserve to prevent the entire system from cratering. Utility companies in turn decide which businesses and neighborhoods receive electricity and which don't. It's that simple.
Now here's an examination of one local utility's performance during the life-threatening storm.
A least one large city, San Antonio, was smothered in total darkness instead of a rolling blackouts. CPS Energy, the state's largest city-owned utility, hedged in its public communications. CPS President and CEO Paula Gold-Williams initially warned residents of rolling blackouts as demand sharply spiked.
After insisting the blackouts were rolling, Gold-Williams was forced to admit the city was experiencing a total loss of power. Later she told a local television station the blackouts were only for three hours at a time. This was a falsehood but it was never challenged by the pliant local media.
In fact, the blackout durations were for 34 hours in parts of San Antonio until power was restored for six hours. Before residents could celebrate, the electricity snapped again only to return like Lazarus from the dead 30 hours later. Residents shivered in sub-freezing temperatures in their homes.
Yet small, mostly affluent enclaves in the city were spared a blackout. Also a flood of lights blazed in downtown SA, including at the mostly vacant CPS offices. Asked to explain the inconsistency, Gold-Williams offered this clarification:
The suburban areas were on the same electrical supply source as critical fire departments, police facilities and hospitals, sparing those households of the misery others felt. Under intense heat, Ms. Gold Williams had the CPS office lights dimmed a day later to avoid a further public relations disaster.
This was just the beginning of what turned out to be CPS' worst catastrophe in many years. One of the company's gas power plants was offline when the customer demand skyrocketed. The plant had been shuttered for maintenance, which takes an average of 30 days. That reduced CPS' power capacity.
As the crisis deepened, the CPS chief ordered staff to intentionally cut off power to some of the San Antonio Systems (SAWS) pump stations, throwing a double-whammy at citizens. Not only were many shivering in their homes and apartments, but now they had no water either.
CPS attempted to soften the public relations blow by telling the media only an estimated 30% of its customers lacked water. Small consolation to those without power and water. Even customers with a supply of water were advised to boil drinking water because of the risk of contaminants in the system.
Some of those downed circuits impacted water pump stations CPS had deemed critical, which means under even extreme circumstances, the facilities are to be protected. "As the crisis got worse, we, in turn, had to hit some of those critical circuits," Gold-Williams admitted.
The CPS executive's revelations increased the public fury, especially when she initially tried to fend off blame by declaring the Arctic burst could not have been anticipated. That was laughable because local meteorologists had predicted the cruel weather two weeks prior to its crash landing in San Antonio.
With storm roaring through Texas, CPS gave no warning to its customers so they could prepare for what was almost certainly a loss of power. Once the weather system slammed into Texas, CPS did little to communicate directly with customers on when or how electricity would be restored.
The next shock wave to smack Texas: Soaring customer bills.
As the deep freeze subsided last weekend, some Texans faced the prospect of even more grim news: the shock of super-sized electric bills.
Some of the state's electric retailers were forced to purchase wholesale power to keep power trudging to customer homes and apartments. Wholesale prices rocketed from a seasonal average of $50 per megawatt hour to more than $9,000.
A Reliant Energy Customer in Mansfield told NBC News she typically pays $63 per month the electric bill for her one-bedroom apartment. Her bill is projected to between $114 and $133, according to estimates provided by the utility.
Within hours of the storm's arrival, the Public Utility Commission held an emergency meeting where officials approved an order that would adjust energy prices statewide. The following is a part of the order:
"Energy prices should reflect scarcity of the supply. If customer load is being shed, scarcity is at its maximum, and the market price of the energy needed to serve that load should also be at its highest."
That is government gobbledygook for: Expect sticker shock when you get your next electric bill.
Some lessons learned in this year's once-in-a-century winter storm.
Texas utilities deferred capital investments for winter-proofing its generating facilities and paid the price during the storm. Technically, customers will pay the price. But continuing to ignore winterization will lead to more statewide blackouts that could crush the grid, prompting a months-long power outage.
ERCOT has operated in anonymity for too long. The grid operator needs to be more transparent. If ERCOT will be held responsible for grid failures, then it must also have the authority, with consent of the PUC, to require critical changes by its member utilities regarding generation, transmission and maintenance.
Finally, Texas utilities should continue to increase power capacity as the state's population growth spirals. Green energy has proven cost-effective and deserves to be expanded. Additionally, more investment in other forms of energy are required to support mushrooming demand.
If Texas wants to restore its image as an energy state, the top imperative is to learn from the failures of this storm. Repeating the same mistakes will only ensure another calamity that might jeopardize not only its reputation but the future growth of Texas.
