Texas Legislature approves bills to require power plants to “weatherize,” among other measures to overhaul energy grid

Texas Politics

(TEXAS TRIBUNE) – The Texas House and Senate on Sunday approved sweeping legislation to overhaul the state’s power grid following the disastrous and deadly winter storm in February that left more than 4.8 million homes and businesses without electricity for days. More than 100 people died.

As time ran out in the legislative session, the Texas House and Senate made last-minute changes to the bills. State lawmakers responded to February’s deadly winter storm with a few key changes to the state’s power grid that would address some issues exposed by the storm — such as requiring power plants to upgrade for more extreme weather — but did not make the sweeping structural changes to Texas’ electricity market that some experts have called for in the aftermath of the power crisis.

Senate Bill 2 and Senate Bill 3 will still need to be approved by Gov. Greg Abbott.

Power plants required to weatherize in Senate Bill 3

Texas lawmakers approved a bill to require power generation companies to better prepare their facilities to withstand extreme weather.

The requirement for power generators and transmission lines to “weatherize” had broad support in both the House and Senate for inclusion in Senate Bill 3, a sweeping piece of legislation that attempts to overhaul the state’s power grid laws and was approved by both chambers Sunday night.

The House had advanced a $2 billion plan to help power companies pay for the upgrades, but the bill to create the fund with the state’s rainy day fund dollars for the low-cost loans and grants stalled in the Senate and no language is included in Senate Bill 3 to create the fund.

After negotiations between the Senate and the House, the requirement for natural gas fuel facilities to weatherize will be limited. The negotiated bill requires only gas facilities that are deemed “critical” by regulators to be able to withstand a weather emergency. Some power plants were unable to operate during the storm due to natural gas fuel shortages.

The power grid overhaul leaves out reforms to encourage residents and businesses to conserve electricity beyond providing educational materials to consumers, and it does not require more weatherization for homes, pipes and other consumer infrastructure. Experts called that a significant oversight during hearings on the legislation.

Proposal to help fund backup power at health care facilities stripped

Lawmakers stripped a proposal out of their preeminent power grid bill to aid critical water, health care and electric facilities in funding backup power generation.

During the winter storm, hundreds of public water systems in Texas were disrupted and millions of people lost access to safe drinking water. The loss of electricity at nursing homes and dialysis centers created life-threatening conditions for patients. More than 1,400 people sought care at emergency rooms and urgent care clinics for carbon monoxide poisoning, and at least 11 people died.

The House’s version of Senate Bill 3 had an amendment to create a grant program for projects that improve the resiliency of water, electric and health care infrastructure, including hospitals, nursing homes, and dialysis centers. But the amendment was taken out during the two chamber’s negotiations.

Texas does not require carbon monoxide alarms in homes, and there is no legislative proposal that advanced in either body to do so.

The legislation would, however, direct electric providers to give customers information about how to register as “critical,” a designation that is intended to ensure power is not cut to households that require electricity for live-saving medical devices.

The compromise on Senate Bill 3 also includes requirements for state regulators to establish a process to designate natural gas facilities as “critical infrastructure” so that that electricity isn’t disconnected during an emergency; many failed to do the registration paperwork, and as a result, some power plants couldn’t get the fuel they needed to produce electricity. Only gas facilities deemed “critical” by regulators will be required to prepare for a weather emergency.

Electric, power and gas companies could seek billions in ratepayer-backed bonds, loans

Most Texans will likely have higher charges on their power bills for years to come to cover gas utilities’, electric cooperatives’ and electric companies’ financial losses from the storm and prevent customers from having to pay huge bills in a short time.

Lawmakers are close to passing bills that would allow companies to seek billions of dollars in state-approved bonds backed by charges on customers’ bills to stabilize the state’s distressed energy market.

After state electricity regulators set power prices at the maximum rate, $9,000 per megawatt-hour, and natural gas fuel prices spiked during the storm, many companies — especially natural gas utilities and rural electric cooperatives — were financially wrecked. Others owe massive debts to the Electric Reliability Council of Texas.

Lawmakers on Friday approved bills that would allow around $4.5 billion in ratepayer-backed bonds for natural gas utilities and another $2 billion in such bonds for electric cooperatives. The measures will now go to Gov. Greg Abbott for approval.

But the two chambers still must finalize differences in House Bill 4492, a bill that seeks to allow electric companies, including retail electric providers, to finance around $2.1 billion for electricity that companies paid for but never received during the storm, as well as additional charges from the high wholesale power prices. Another $800 million would be loaned to pay off debts to ERCOT.

The Senate has pushed hard — but ultimately failed to agree with the House — for a financial remedy to the infamous 32-hour period during the week of the storm when regulators kept wholesale power prices at the $9,000 cap after more electric generation came online. Many people dubbed that controversial decision a regulatory pricing error.

House Bill 4492 would also loan $800 million to ERCOT through the State’s Economic Stabilization fund, known as the rainy day fund, to pay for debts to the grid operator. ERCOT acts as a transaction house for the electricity market, so when companies couldn’t pay their debts after the storm, other companies got shorted for the electricity that they sold. ERCOT will pass on the cash to companies that are owed money. The state’s rainy day fund ended 2020 with a balance of nearly $10 billion.

The Senate approved its version of the bill in the early hours of May 27, but on Friday the House refused to agree with the changes on how the financing would work. The chambers need to vote on HB 4492 before Monday’s deadline.

Texans could be notified of future outages with emergency alerts

In the days leading up to February’s winter storm, Texans were not warned about the prospect of widespread power outages lasting for days in freezing temperatures. At least 4.8 million homes and businesses lost power and didn’t know when it would return.

While power was out, the Texas Division of Emergency Management didn’t provide accessible and life-saving updates on outages and inclement weather.

Senate Bill 3, which passed both chambers Sunday, includes a requirement to study and implement an emergency alert system similar to an Amber Alert — an emergency message sent to people’s cellphones when a law enforcement agency determines that a child has been abducted and is in imminent danger.

ERCOT board to be appointed by politicians under Senate Bill 2

The governance of the state’s main grid operator, the Electric Reliability Council of Texas is set to change under Senate Bill 2.

After a bipartisan group of lawmakers made changes to Senate Bill 2 behind closed doors, the legislation unveiled late Saturday would shrink the number of seats on ERCOT’s board of directors from 16 to 11, and the state’s top politicians would have strong influence over the board. Both chambers approved the bill Sunday evening.

A selection committee would appoint eight of the 11 board members. The selection committee would be made up of three people — one appointed by the governor, one appointed by the lieutenant governor and one by the speaker of the House. The committee would use an “outside consulting firm” to select the eight members.

Nine of the 11 ERCOT board seats under SB 2 would be voting members, handing politicians significant power over the ERCOT board. Already, the governor appoints the board members of the Public Utility Commission, which oversees ERCOT.

Politicians previously have not had such involvement in choosing the ERCOT board, whose members are currently selected in a variety of ways; some are chosen by ERCOT’s own nominating committee while others are appointed by companies and consumers participating in the electricity market, with members representing various power sources.

“I am pretty upset by this massive change,” Cyrus Reed, president of the Lone Star chapter of the Sierra Club, tweeted early Sunday. “This should be debated in public not snuck in a bill in the dead of night!”

The changes to ERCOT’s governance captures the essence of what lawmakers have tried to do in recent weeks: Replace experts on the ERCOT board with political appointees — a change energy experts said would do little to improve the power grid.

Both chambers have also approved a bill to increase the number of seats on the Public Utility Commission. Senate Bill 2154 would increase the number of PUC board members from three to five. The governor would continue to appoint PUC board members, and they would need Senate approval.

All three board members of the PUC resigned after the storm.

Renewables avoid attack from lawmakers

The final version of Senate Bill 3, the sweeping legislation to reform the power grid, aligns with the Texas House proposal, which would not require renewable energy companies to cover the costs of purchasing reserve power for the grid. The Senate unsuccessfully tried to shift the financial burden of these costs to wind and solar producers.

Renewable sources of energy, such as wind and solar, have been under attack by some Texas Republicans since the storm occurred; many incorrectly said clean energy sources were the primary cause of the widespread power outages.

The amended legislation would require state regulators to review whether there is enough reserve power available and if additional reserves from nonrenewable sources are necessary.

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