Correction: An earlier version of this report stated that the Public Utility Commission required facilities to meet weatherization requirements starting in 2023. However, those requirements were in addition to rules developed by the PUC in 2021.
After the snow and ice of February 2021 had melted and power and water service finally returned, catastrophe turned to criticism.
How could a state known for energy production get so dangerously close- just under 5 minutes away- from a massive grid failure that could have wiped out power in Texas for months?
Lawmakers went to work. During the 2021 legislative session in Austin, there were 185 bills filed tied to the February freeze.
In the end, two main pieces were signed into law: Senate Bill 2 and Senate Bill 3.
SB 2 changed the governance of ERCOT, the Electric Reliability Council of Texas.
“The ERCOT board is no longer self-selecting or self-perpetuating, like like many corporate boards would be,” said Ed Hirs, energy economist and Energy Fellow at the University of Houston. “It’s appointed by a commission or a group appointed by the governor and the legislature. So at this point, the governance of ERCOT is directly controlled by the governor of Texas.”
Standing up to winter weather
SB 3 required the weatherization of power generators and power providers. However, the legislation did not specify how to weatherize.
That was left up to the Public Utility Commission to decide on electricity providers and the Texas Railroad Commission to decide on natural gas generators.
The Railroad Commission laid out its weatherization requirements.
It includes steps like “correct... failures that occurred during previous weather emergencies” and “install equipment to mitigate weather-related operational risks.”
Starting this year, electricity providers have to meet additional weatherization requirements created by the PUC.
However, the PUC announced its first round of weatherization rules months after the 2021 winter storm and began implementing some of those rules late that year.
Some of those requirements include maintaining freeze protection equipment and making sure additional fuel supplies are stored and available during a winter weather emergency.
While the PUC said it found ‘widespread compliance’ for winter weather readiness, there were some facilities found to be in violation.
In December 2021, the PUC increased the penalty to $1,000,000 per day per violation.
But weatherization was only part of SB 3.
“The other big piece of this was to try to make the grid stronger in times when wind and solar energy weren’t running very strong, like if the sun has set or the wind’s not blowing,” said Emily Foxhall, Energy Reporter for The Texas Tribune. “So that’s what legislators this session are really focusing on.”
‘Untried, Untested’ credit idea
Texas legislators are considering an idea unanimously approved by the PUC in January: The Performance Credit Mechanism.
“This plan is is untried, untested, unproven, never been done before,” said Hirs.
Here’s how it’s supposed to work:
Power providers could buy credits from power generators.
Those generators would sell the credits on the promise that power providers can cash them in for extra power when it’s needed most, like during extreme weather.
“The PUC chairman has said two things: One is that it could increase capacity, so maybe more plants would be built. And, in fact, there are power generators who have said they’re going to build more gas plants if this goes into effect,” said Foxhall. “But it also would incentivize, kind of, these older plants to stay around a little longer.”
The PCM plan would create a new revenue stream to boost power capacity in Texas.
So, why can’t power generators increase capacity now?
“Texas only pays the generators when they actually are producing electricity,” said Hirs.
Texas is an electricity-only market, meaning power generators only get paid for the power they’re actively providing, not what they could provide.
Hirs uses the Astros as an example.
In the Texas energy market, only the players who take the field get paid. Not the ones on the bench, he says.
“The coal-fired plants, the natural gas plants, they’re not in the game year in, year out... day in, day out,” Hirs said. “And so if you’re if you have to build a plant to operate for all of August, but you’re only going to get revenue in August, it doesn’t pay off.”
Hirs believes fossil fuel generators need to be paid more to provide more.
It’s called ‘dispatchable energy,’ meaning it can be turned on and off quickly. However, he argues the PCM idea is flawed.
“The companies know that if if they accept the money today and don’t show up with the electricity tomorrow, they have a very easy way out,” said Hirs. “They can just simply file bankruptcy. Federal bankruptcy court trumps the Public Utility Commission in ERCOT every time.”
The PUC has asked lawmakers to weigh in on the credit idea before it goes further.
“The Public Utility Commission, which is overseeing this effort, has said there’s going to be a penalty,” said Foxhall. “The problem is we don’t know yet what that penalty is going to be because it hasn’t been decided.”
Environmental advocates are concerned the credit plan would encourage the building of more fossil fuel plants.
Renewable energy production, like wind and solar, is expanding in Texas, but the technology to store that kind of power isn’t widely available yet.
“For them to take the reins today, the renewable fleet, the wind and solar fleet needs to be two, three or four times as large as it is,’ Hirs said. “Over the next 5 to 10 years, we need to keep the coal and natural gas plants available to run.”
We asked head of CPS Energy about the plan
“I think it was always meant to be a framework and a starting point for a conversation,” said Rudy Garza, President and CEO of CPS Energy. “If it fails to incentivize new generation, then it probably has fallen short of what the goal is.”
WATCH: Full Interview with CPS Energy President and CEO below
Garza said that if the Performance Credit Mechanism plan moves forward, CPS Energy wants to ensure that it doesn’t “overly penalize renewables.”
“Right now, we need every megawatt of power that we can get our hands on,” said Garza. “And our our approach is balanced. We we’ve got fossil fuels. We continue to maintain generation capacity, but we’re also investing heavily in solar.”
CPS Energy is both a power provider as well as a generator.
Garza shared details on battery technology for renewables in the video below.
Garza says that increasing power capacity, or generation, in Texas is the answer. The question is how to get there.
He says customers can expect increased costs to go along with increased capacity.
“Ultimately, there will be cost implications for every customer. And I think most customers would tell you that they’re willing to pay for, you know, for reliability to the extent that it’s in question,’ he said “I mean, what would you have paid for power back when we were in Winter Storm Uri?”
“If it ensures reliability and it doesn’t break the bank to get there, then I think we’ve reached a balanced approach,” Garza added.” But, you know, there’s no solution that is a free solution for customers.”
WATCH: What changes CPS Energy has made since the 2021 winter storm in the video below.
