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We need more focus on the Public Utility Commission

Let’s start with this tweet:

Now keep that in mind when you read this.

In January 2014, power plants owned by Texas’ largest electricity producer buckled under frigid temperatures. Its generators failed more than a dozen times in 12 hours, helping to bring the state’s electric grid to the brink of collapse.

The incident was the second in three years for North Texas-based Luminant, whose equipment malfunctions during a more severe storm in 2011 resulted in a $750,000 fine from state energy regulators for failing to deliver promised power to the grid.

In the earlier cold snap, the grid was pushed to the limit and rolling blackouts swept the state, spurring an angry Legislature to order a study of what went wrong.

Experts hired by the Texas Public Utility Commission, which oversees the state’s electric and water utilities, concluded that power-generating companies like Luminant had failed to understand the “critical failure points” that could cause equipment to stop working in cold weather.

In May 2014, the PUC sought changes that would require energy companies to identify and address all potential failure points, including any effects of “weather design limits.”

Luminant argued against the proposal.

In comments to the commission, the company said the requirement was unnecessary and “may or may not identify the ‘weak links’ in protections against extreme temperatures.”

“Each weather event [is] dynamic,” company representatives told regulators. “Any engineering analysis that attempted to identify a specific weather design limit would be rendered meaningless.”

By the end of the process, the PUC agreed to soften the proposed changes. Instead of identifying all possible failure points in their equipment, power companies would need only to address any that were previously known.

The change, which experts say has left Texas power plants more susceptible to the kind of extreme and deadly weather events that bore down on the state last week, is one in a series of cascading failures to shield the state’s electric grid from winter storms, ProPublica and The Texas Tribune found.

I get that everyone is mad at ERCOT, and I’ve certainly tossed that name around quite a bit myself. But the real power is in the PUC, and the PUC is appointed by the Governor. That’s where the buck stops, and as this story demonstrates, they have a lot to answer for.

This is a long story, which goes deep into the failures by the PUC to force power companies to do anything as well as the failure of the Legislature to take any meaningful action, and I want to encourage you to read the whole thing. If there’s one bit of good news in all this, it’s that this massive screwup happened at the start of the legislative session, so not only is it all fresh in everyone’s mind, there’s also the time to do something about it if we want to make it a priority and we don’t get buried under self-misinformation. Dan Patrick does have “ERCOT Reform” and “Power Grid Stability” high on his priority list, one spot ahead of the extremely pressing matter of sports teams not playing the national anthem before games (which you just know he would have had higher had it not been for the blackouts), but note that he’s focusing on ERCOT and not the PUC. Note also his item about preventing cities and counties from hiring lobbyists, and then read this:

Experts and consumer advocates say the challenge to the 2014 proposal by Luminant and other companies, which hasn’t been previously reported, is an example of the industry’s outsize influence over the regulatory bodies that oversee them.

“Too often, power companies get exactly what they want out of the PUC,” said Tim Morstad, associate director of AARP Texas. “Even well-intentioned PUC staff are outgunned by armies of power company lawyers and their experts. The sad truth is that if power companies object to something, in this case simply providing information about the durability of certain equipment, they are extremely likely to get what they want.”

Luminant representatives declined to answer questions about the company’s opposition to the weatherization proposal. PUC officials also declined to comment.

Michael Webber, an energy expert and mechanical engineering professor at the University of Texas at Austin, said the original proposal could have helped in identifying trouble spots within the state’s power plants.

“Good engineering requires detailed understanding of the performance limits of each individual component that goes into a system,” Webber said. “Even if 99.9% of the equipment is properly rated for the operational temperatures, that one part out of 1,000 can bring the whole thing down.”

Emphasis mine. You can be sure that the Capitol will be swarming with energy company lobbyists for the rest of the session. But then, Dan Patrick is “not in the business of trying to tell everyone what to do”, so don’t be surprised when he fails to deliver any tangible results.

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9 Comments

  1. Lobo says:

    IT’S TIME TO TALK ABOUT DISMANTLING THE LONE STAR ELECTRIC-POWER CARTEL

    Texas policymakers created an “evil” electric power scarcity-management system.
    It’s set up as a cartel and operates the brinkmanship principle. This is not just because supply and demand have to be balanced for technical reasons (to prevent overloading circuits and precipitating a systemwide blackout), but because scarcity is lucrative and therefore desirable for the generators in the regulatory regime adopted by our state politicians.

    The scarcer the commodity, the higher the price they get to charge regardless of the production cost, thereby widening the profit margins. So, there is a shared interest among the members of the Texas cartel in having conditions of scarcity, and a winter freeze is the perfect storm to bring on the windfalls. If the scarcity can be facilitated or aggravated, so much the better for the revenue stream.

    Check out the pricing info for last week’s energy emergency compared to the month and year prior:

    Real Time Pricing in January 2021: $20.79 per MWh
    Real Time Pricing 2/14/21-2/19/21: $6,579.59 per MWh
    Real Time Pricing in February 2020 $18.27 per MWh

    HUMAN VS. NONHUMAN CONSUMERS

    Large industrial consumers of electric power can slow down or shut off production and usage in response to a rise in bulk electricity prices, but residential customers are a captive market segment. When it’s cold, resident human beings still need power. Indeed, they need more of it. And they need more of it at night because that’s when it is coldest and the sun don’t shine. (Politicians: Blame solar production shortfalls and the sun for not shining throughout the night.)

    If Texas weren’t independent and instead fully integrated with a larger intracontinental grid, generators in other states with spare capacity could contribute power in demand-surge events, but that would amount to competition that might keep bulk rates below the current cap of $9,000 p/MWh. In other words, out-of-state suppliers of energy would pose a competitive threat to the profits of the Texas cartel under the most lucrative energy scarcity conditions, such as experienced last week. And the industry, of course, argues that we need those spreads to keep us incentivized to produce and make capital investments (which they didn’t do as far as non-mandatory weatherization goes).

    “LOAD-SHEDDING” (We cut you off)

    Instead of meeting the shortfall in local/in-state power production (due in large part to failure to weatherize), the industry players simply use ERCOT to cut off vast swathes of mostly residential consumers and assure themselves of the highest rate ($9,000 per MWh) for whatever amount of energy they are able to produce in adverse weather conditions, including “dirty” energy thanks to environmental waivers that become necessary in a situation that can be compared with “extortion”: Let us pollute or freeze (or sizzle, during peak heat and humidity in summer). Again, ERCOT does the industry’s bidding. See ERCOT Request to DOE to bring non-permitted “dirty” generating capacity online.

    ERCOT should be renamed Electricity Rationing Commission of Texas

    Cutting off residential consumers is the “insurance” mechanism to maximize profits on the brink, while avoiding total system breakdown, which would not just hurt consumers, but the industry players too.

    System integrity is the mantra: What that means in Texas is that the profits of the generators are protected and maximized in a crisis, but not the interests of the residential “human-needs” consumers. — Let them freeze.

    For timeseries data on the Texas power production shortfall (relative to estimated demand/need), see ERCOT’s slide presentation at yesterday’s hearing: Graph title “Available Generation and Estimated Load Without Load Shed” on page 15.

    A graph showing the duration of top-dollar pricing ($9,000 p/MWh) is on page 22.

    http://www.ercot.com/content/wcm/key_documents_lists/225373/2.2_REVISED_ERCOT_Presentation.pdf

  2. robert says:

    Texas’s deregulated electricity market, which was supposed to provide reliable power at a lower price, left millions in the dark last week. For two decades, its customers have paid more for electricity than state residents who are served by traditional utilities, a Wall Street Journal analysis has found.

    Nearly 20 years ago, Texas shifted from using full-service regulated utilities to generate power and deliver it to consumers. The state deregulated power generation, creating the system that failed last week. And it required nearly 60% of consumers to buy their electricity from one of many retail power companies, rather than a local utility.

    Those deregulated Texas residential consumers paid $28 billion more for their power since 2004 than they would have paid at the rates charged to the customers of the state’s traditional utilities, according to the Journal’s analysis of data from the federal Energy Information Administration.

  3. Lobo says:

    Here is a link for the story referenced by robert:

    Texas’s deregulated electricity market raised consumer costs by $28B: WSJ
    https://thehill.com/homenews/state-watch/540271-texass-deregulated-electricity-market-raised-cost-to-consumers-by-28
    The data used for the analysis came from the federal Energy Information Administration.

    (The WSJ article itself is behind a paywall).

  4. […] and school districts to hire lobbyists to advocate for their issues at the Legislature. As we have discussed, the power companies have plenty of well-paid lobbyists at the Capitol representing their […]

  5. David Fagan says:

    “Since 2017, Vistra Energy and its political action committee has donated more than $1.4 million to Texas politicians and groups associated with both political parties” -ABC NEWS

    Kuff, if this is to boil down to a partisan blame fest, throw in the Democrats also. There are only two political parties, according to ABC news, who recieved contributions that led to this disaster, so don’t forget to point out the Democrat individuals who recieved contributions also.

    As for the third parties, it was not reported that they recieved ANY contributions. So, if people want a change, it will not come through either the Republican or the Democrat parties.

    DeAnn Walker of the Public Utility Commission states she has no power, but her authority makes her the punching bag to make it look like the Lege is actually doing something. But, due to deregulation, the Lege cannot do anything. Which means the people cannot do anything, congratulations.

  6. David Fagan says:

    From ERCOT’S webpage about DeAnn Walker

    Previously, she spent 15 years at CenterPoint Energy serving as Associate General Counsel and Director of Regulatory Affairs. Her career in the electric industry began at the PUCT and spanned from 1988 to 1997 – first as an Assistant General Counsel and later as an Administrative Law Judge.

    This is a nice article from the Dallas Morning News, look it up:

    “The Public Utility Commission has a secret: Regulator quietly dissolves its enforcement division”

    So she kinda made herself a powerless political punching bag.

  7. […] here for why we all needed more focus on the PUC and its all-Greg-Abbott-appointed board. I didn’t […]

  8. […] the Kuff advises you to be more mad at the Public Utility […]

  9. Lobo says:

    TEXAS ELECTRICITY CARTEL UPDATE:

    PUC DOESN’T BUDGE ON SYSTEM-WIDE PRICE GOUGING DURING THE COLD WEATHER EVENT

    “Texas grid operator made $16 billion price error during winter storm, watchdog says.” (Reuters, crediting Bloomberg and Texas Tribune).

    Here is the March 4, 2021 letter from Potomac Economics re: PUC Project No. 51812, Issues Related to the State of Disaster for the February 2021 Winter Weather Event http://interchange.puc.texas.gov/Documents/51812_61_1114183.PDF

    NO REPRICING (No retroactive correction of the $9,000 p/MWh maximum wholesale price kept in place *after* the controlled black-outs had stopped, which is the cause of the 16 billion “error”).

    PUC held public meeting this morning (3/5/2021). New Abbott-promoted Chairman and the other remaining commissioner (1 of 3 is positions vacant due to D’Andrea’s promotion after Walker’s resignation) don’t feel like correcting the colossal “error” that brought a windfall to power producers and pushed buyers into insolvency and bankruptcy.

    Governing metaphor: Can’t unscramble the egg.

    PUCT Agenda Item: Project No. 51812 – Issues Related to the State of Disaster for the February 2021 Winter Weather Event. (Discussion and possible action)

    Also see WSJ: “Texas Opts Not to Fix $16 Billion Power Overcharge: Utility commission says repricing power markets [would be] too difficult, despite recommendation that overcharges during storm be reversed”