Texas Freeze Revisited

This article was originally published in Texas Lawyer. Any opinions in this article are not those of Winston & Strawn or its clients. The opinions in this article are the authors’ opinions only.

Almost a year after winter storms and freezing temperatures left more than 4.8 million Texas homes and businesses without heat or power, robbed 210 people of their lives, and salted the wounds with sky-high electric and gas bills, it is as good a time as any to ask: Will things be different next time? Not unless Texas adds transmission connections to its neighbors.

Mark Twain could have had the Texas grid in mind when he said, “History never repeats itself, but it rhymes.” On Feb. 2, 2011, for example, the Electric Reliability Council of Texas (ERCOT) lost 8,000 MW of generation due to frozen instrumentation; 3,541 MW was unavailable on Jan. 6, 2014, following the media-hyped “Polar Vortex”; and 1,775 MW was out of service during another cold snap on Jan. 7, 2017. The February 2021 deep freeze—when almost 50,000 MW of generating capacity was off-line—overwhelmed past events.

The several “surprise” winter freezes of the past 10 years produced a raft of reports and recommendations by an alphabet soup of federal and Texas agencies: generator weatherization, better plant maintenance, on-site inspections by regulators and better coordination among generators, gas suppliers, transmission owners, and grid operators. The February 2021 freeze produced more of the same.

ERCOT delivered its “Roadmap to Improving Grid Reliability” in July, which included a list of 60 actions to address reliability, communications, generator outage reporting, extreme weather assessments and improved load forecasting. Last August the Federal Energy Regulatory Commission (FERC) approved new rules proposed by the North American Energy Reliability Corp. (NERC) that required generators to have cold weather preparedness plans. And in November, FERC produced a 360-page outage report with 28 recommendations that plowed much of the same ground with updated recommendations on generator reliability, load management practices, communications, and utility coordination. Some fall in FERC’s bailiwick while others are the responsibility of Texas.

Meanwhile, Texas legislators wrestled the issues to a draw. On June 8, 2021, Gov. Greg Abbott signed Senate Bill 3 to add still more generator weatherization, inspection, and emergency communication requirements, and to allow municipal utilities to issue bonds to securitize their financial losses from the February freeze and thereby ensure two decades of higher rates for their customers. “Everything that needed to be done was done to fix the power grid in Texas,” Abbott said at the signing ceremony. But one topic broached by the FERC outage report left untouched by Texas regulators is whether the state has adequate transmission connections with its neighbors.

ERCOT has four asynchronous (DC) interties with other regions that allow 1,220 MW of power flows across them—two with the Southwest Power Pool (820 MW) and two with the Mexican grid (400 MW). As a point of reference, 1 MW can power about 800 average-sized homes, making these four regional interties a fraction of ERCOT’s needs. By comparison, the Midcontinent Independent System Operator and Southwest Power Pool have 193 cross-region interties.

Texas has long resisted federal intrusion in its power business, ever since Congress staked its claim through the Federal Power Act of 1935 in response to the Supreme Court’s decision on the limits to state jurisdiction over interstate power sales in Public Utilities Commission of Rhode Island v. Attleboro Steam & Electric. Since then, FERC and the courts have held that federal jurisdiction over power regulation depends on interstate transmissions using “free-flowing” lines of the sort provided by synchronous (AC) interconnections because they allow power from diverse suppliers to be commingled for resale to consumers across state lines.

FERC has disclaimed rate-setting and transmission planning jurisdiction in Texas because transmission connections with neighboring states are exclusively over non-free-flowing asynchronous (DC) transmission lines and thus not simultaneously commingled with interstate power. These DC lines permit the controlled flow of energy between ERCOT and its neighbors in a way that functionally isolates the independent AC frequencies on either side of the connections. The Federal Power Act gives FERC authority to approve DC transmission connections with Texas, but specifically forbids it from approving AC lines. The Public Utility Commission of Texas has been a jealous guardian of the state’s jurisdictional independence and has never approved an AC connection with another state.

Synchronized (AC) connections between ERCOT and its neighbors would allow instantaneous access to a much larger pool of electric generation in the event of widespread outages as occurred last February and in prior years. Given the current jurisdictional impediments, however, the next best thing is to add more DC connections and improve interregional coordination between ERCOT and the Southwest Power Pool.

As the FERC outage report observed, additional DC transmission connections would allow more power imports during emergencies caused by extreme weather and allow ERCOT more easily to restart off-line generation. Congress’ recently passed Investment and Jobs Act could even lend a hand. The new federal law authorizes Department of Energy loans of up to $10 billion to build new high-voltage lines to transmit at least 1,000 MW (or upgrades to existing lines already carrying at least 500 MW). It includes funding for grid resiliency of up to $5 billion to transmission owners and grid operators to harden transmission assets through weatherization and undergrounding. And it provides up to $5 billion for state and local governments to develop innovative approaches to improve transmission and distribution resiliency.

Texas can benefit from the Investment and Jobs Act to build new regional DC transmission lines while retaining its jurisdictional independence from federal public utility regulation. Perhaps the time has come for Texas to change the power outage rhyme by building new regional transmission tie lines.