The Committees on State Affairs and Energy Resources held a joint public hearing to consider the factors that led to statewide electrical blackouts during the recent unprecedented weather event; the response by industry, suppliers, and grid operators; and changes necessary to avoid future power interruptions.
This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.
Invited Testimony
Christi Craddick, Railroad Commission
- Thanks first responders and reviews their jurisdiction and role
- Explanation of jurisdiction of RRC, including gas production and transportation
- Commissioners convened to prioritize individual priority status as storm severity became apparent
- Authorized LDCs to track and account for extraordinary expenses as a result of the storm
- Committed to preventing undue financial burden
- Proactive measures to protect supply of natural gas
- Learned of frozen roads preventing operators from accessing fields, as well as lack of power at production sites
- Some operators needed to shut down their wells preemptively as a safety measure
- Fields cannot run without power
- Were able to specifically coordinate with electric companies and the PUC to power those fields
- Depleted storage to keep supply up
- 95% of gas customers didn’t lose gas during the storm (about 2,000 people did)
- Some media outlets say frozen lines contributed to the outage, but oil and gas contributed to the solution
- No frozen lines whatsoever – power outages stopped production, not frozen machinery
- Pulled Natural gas from storage at maximum capacity
- Natural Gas backfilled the gaps once power was restored in fields
- Member – previous testimony described the supply issue, specifically the pressure of the gas, as a reason power was not restored, could you clarify?
- Feedback loop in electric power world
- RRC told operators to do whatever they needed to do to keep their wells safe
- If you don’t have power into the wellhead or system, you can’t flow gas
- Gas is reliant on compressors in a pipeline, and most are electric. Without power, we can’t move gas
- Gas goes to processing plants before power plants, shutdown of compressors led to less gas in these plants, and they also lost power, preventing the flow of gas to power plants and some households
- As we had gas go offline in some places, we leveraged our significant storage capacity, but we still need power to draw reserves
- Member – If you could describe exactly what was going on, and what communication you were having and with whom, in the early days of the front?
- PUC contacted us Thursday 2/11, asked for help with the gas supply
- Also contacted by power plants and pipeline suppliers
- Curtailment order from 1973 allows us to prioritize gas distribution and availability; gas utilities for human needs and LDCs take priority right now
- 2nd priority was delivery of gas to power plants that serve human needs customers
- Our bottom priority that did not change was those customers with interruptible gas contracts
- Member – there are examples of critical facilities losing gas/power, was the RRC engaged in registering people?
- Was not aware that this registration was an option or available
- Better communication of the form from ERCOT is probably necessary
- Goldman – take us back 2 weeks, when did you know something was going wrong, what was your role and the other commissioners?
- Our role is to make gas flow
- First call on electric side was 2/11, Thursday, from PUC
- Chair Walker from PUC called us to ask for help with gas flow
- Operators were already aware, and were making people aware of the winter storm coming
- Fields were already preparing
- Goldman – Do you ask operators to ramp up production in these situations?
- We used the curtailment order to prioritize gas flow
- Drafted order and approved it Friday
- PUC was told we were going to issue this order, but they did not see it
- Could not directly contact other commissioners on RRC but staff circulated the order and collaborated
- Goldman – why cant you talk to your other commissioners
- Open Meetings Act prevents us from speaking, because only 3 members of the commission and 2 is a quorum
- Against the law without posting you were having the meeting
- Goldman – What does the curtailment order mean for gas?
- Order tells gas utilities and operators where the gas needs to go
- On Saturday the 13th, after curtailment order on the 12th, many were ramping up and buying gas
- Goldman – Monday was a holiday; how did that affect the industry?
- Most people stay home, and the markets are not as strong
- Issued notice to operators for use of regulatory account for expenses to cover cost of prioritization
- Also issued notice for operators to monitor usage and transport for human and environmental safety
- Everybody being home and running utilities contributed to higher gas usage
- Will likely see higher costs, still collecting the data on it
- First TERC call was Friday morning, correction
- Goldman – how many people?
- Up to 100 people, ad-hoc group, believe it should be formal
- Includes representatives from agencies, power plant operators, utilities, and field operators as well
- Goldman – take me through Sunday, Monday, Tuesday
- Sunday was another TERC call
- Rolled off power Sunday night
- Monday, another TERC call
- We were on max withdrawal from reserves, we were discussing how to get gas flowing from wells again due to power outages
- Tuesday morning, same TERC call, felt like running in place
- Gas utilities were staying on and flowing what gas they had
- Operators in Reeves County called and said they needed power, but could flow gas
- Called grid providers and put a list together to get power to the basin
- Similar calls came in from other operators to attempt getting power back
- Also needed water – could not turn wells back on without saltwater plants also running
- TxDOT did a good job across the state clearing roads as they could, especially for providers
- Eagleford basin came back up on Thursday
- Took some time to get gas flowing because of the process for gas distribution – pipeline, increase capacity, heat up processing plants, etc
- Wednesday, back up to 10%, 40% Thursday
- Hernandez -talk about weatherization
- Not mandated in Texas
- Prudent operators will weatherize, because it is smarter to prevent freezes and burst pipelines
- Will continue to have conversations about weatherization
- Hernandez – Does the firm contract matter in the curtailment order?
- Yes, any entity without a firm contract is the bottom of the priority list
- Herrero – Do you know if all gas companies offer firm contracts?
- Not aware of that
- Herrero – My understanding is not all offer firm contracts, for variety of reasons, some plants may not have firm contracts.
- Herrero – Did PUC prompt you to reevalaute priority list?
- Contact with chair led us to make the order
- Herrero – Would it be helpful in future to have an updated priority list for curtailment?
- Yes it would, we will be having hearings about our curtailment order after gathering data
- Herrero – Would it have been beneficial to hear from PUC earlier?
- As early as possible is helpful for planning
- Herrero – Doesn’t seem like there was a coordinated emergency communication command set up until Saturday?
- Energy Reliability had conversations as early as Friday
- Herrero – Based on forecasts provided to generators, and according to ERCOT, as early as Feb 3 they knew the weather was going to be very cold. Would Emergency Command centers have been useful, around a week in advance?
- As early as anybody knows is helpful
- Herrero – When was communication established?
- Put a representative on the SOC only on the 16th
- Herrero – Would it have been helpful for the RRC to be involved before the 16th?
- Communication is important
- Raymond – Clear that we are dealing with 2 things: How do we prepare for and notify people of a disaster? Most of the hearings have been focused on that. Other issue is never having it happen again – will pass legislation and spend money to prepare for the future and how we deal with disasters. Do you see this?
- Yes, better communication could have prevented the issues that arose
- Raymond – If PUC and ERCOT were under the RRC, things may have gone better. If we move those groups under the RRC, could you handle it, could you have handled it better?
- Possibly
- Would like to be in the room for discussions about that legislation
- Want to formalize TERC – can communicate very quickly with a variety of higher-profile individuals, companies, and agencies
- New and expanded reserve areas are important as well.
- LDCs did a very good job getting gas to homes
- Raymond – What do we do about the compressors losing electricity?
- Expanding reserves are important
- Emergency generating abilities could be important
- Member – State has done a poor job of communicating to operators that they need to register as critical infrastructure, can you help communicate to operators?
- Yes, working to increase communication on this issue
- Member – Are there regulations that constrain your ability to respond?
- Not sure yet, still looking at our response and ensuring everything is fine
- Hunter – Did the grid operator of ERCOT have communication with you before the snow came? (points out that this individual makes $800,000 per year)
- No
- Hunter – Do you agree that the Texas economy is based on Energy? And yet there was no communication from ERCOT about the storm, preparation, or critical infrastructure registration?
- Yes, Texas is based on Energy, and ERCOT did not do any of those things
- Hunter – Do you think ERCOT made errors?
- Communication will be key
- Im sure you’re working through that
- Hunter – Maybe Mr. Raymond should change the name of ERCOT to ERRORCOT in his legislation.
- Hunter – Compliments RRC for communication with legislature and public
- Hunter – Did South Texas do ok dring the storm?
- We didn’t have any challenges we are aware of, other than loss of power in some areas
- Still getting data together on that issue
- Hunter – Urges RRC to continue keeping legislature and public informed and educated
- Darby – How can we best have an organization to bring in providers to the critical infrastructure designation?
- Continuing to have conversations with TERC, believe it should be formal group
- Also working with industry groups to get the word out
- Darby – What kind of formal requirements and organizations do we need to create/implement for this to work and be effective is going to be an important issue.
- Howard – ERCOT failed to understand why power needed to be restored to oil and gas fields, at least until the 16th. Don’t understand why they didn’t communicate with the RRC about the critical infrastructure registration.
- We are working to try and figure it out and how the communication could have gone better
- Howard – Do you accept any of the responsibility for this?
- RRC never got any information from ERCOT about very much of the situation
- The part of the grid that the RRC regulates, gas utilities, did their job
- Would say that we did our jobs better than anyone else in the state
- Howard – ERCOT also testified that they did their job. Appreciates the work of everyone, but clearly was not enough. Storage and on-site storage are also issues that have come up before – 2011 FERC report brought this up, blames deregulation. Do you have a role to play?
- No, storage is done by private companies and we don’t have authority
- We were pumping storage at max to maintain gas supply
- Don’t have authority to tell companies to build new storage
- Howard – Is there capacity/weatherization standards?
- Capacity is based on permit the operator receives
- Weatherization is based on best practices and operator prudence
- We do have pipeline safety authority, but not for storage itself
- FERC and we do not mandate weatherization, but we encourage our providers to treat pipes for winter.
- Howard – Do you have authority with permitting to require those things?
- We do not require weatherization, and it was not necessarily an issue
- Main issue was loss of power
- Weatherization issues we were examining as an agency across the state
- Definitely need to consider formalizing TERC
- Howard – Could have this been prevented?
- Not sure, but better communication could have mitigated the issue
- Howard – Are you considering recommendations for storage?
- No, just know there are opportunities for additional storage?
- Howard – Any specific ideas/regulations to prevent this issue again?
- Working on it
- King – Most gas homes received their gas?
- Yes
- King – How is it that generating plants couldn’t get gas?
- Has to do with contracts and some potential gas issues, and power losses preventing pumping of gas
- Utilities prioritize firm gas
- We don’t work with gas power plants, so we aren’t sure why they went down
- Lucio – Seem to continue to focus on the feedback loop between natural gas and electricity. In how many circumstances did the compressors needed to get to plants were down because of load shedding or generator failure?
- We aren’t sure
- Lucio – Can you appreciate that this is infuriating to Texans? How could we let those compressors be part of the blackout, especially with the critical load process? How does it fall through the cracks?
- I agree
- Lucio – You have said that the incentive for companies is the market for weatherization, but they failed to prepare for the storm. I don’t want other 2011 incident. How do we move forward and say, yes, we need comprehensive management plants and requirements for those we regulate?
- I appreciate the challenge we have, but I believe one size doesn’t fit all
- Mandating is hard and may not work correctly
- Figuring out the closed loop of the energy system is going to be key
- Priority list and communication will be very important
- My industry solved the problem
- Lucio – But you didn’t plan properly. How can prudent operators not contact power providers and ensure that they will be able to maintain their flow of gas? You may have done your job when the problem occurred, but you didn’t prepare ahead of time. Your agency is accountable for this, as well, because you are in charge of regulating the gas pipelines.
- Lucio – You also talk about communication and how important it is, but at no point did you or the RRC communicate with constituents about the power outages that were coming, right?
- Not to my knowledge
- Our job is to ensure gas utilities are up and gas is flowing
- Our communication was mostly to those customers, as that is who we regulate, we aren’t in the electric business
- We don’t know where the gas was going because we haven’t been told that information yet
- Lucio – So through the 14th-16th, the rolling blackouts and permanent outages, you were never made aware of that?
- We were told on Monday/Tuesday on TERC that the blackouts would be happening, same time as everyone else found out
- Our role, from an operating standpoint, is to ensure wells and pipes are safe and don’t have mechanical problems or environmental issues
- We are not privy to the contracts between operators and gas companies and pipeline companies; we also don’t know the volumes of gas they put online
- Cannot operate without electricity
- Lucio – And the reason they didn’t have electricity was because of load shedding? They shut off the groups they needed to keep power on and get power up again.
- Chart came out on the 25th, only 6% of generator shutdowns occurred because of a lack of gas
- Anchia – PUC gave conflicting testimony over their jurisdiction over ERCOT, also failed to apologize to Texans. PUC didn’t communicate with public or the Governor, but they claimed to communicate with you. How often did you speak?
- Every other day, at least
- Were on TERC every day
- Communicated on the 11th about gas supply
- Communicated about getting the power back on to the fields to get gas supply back online
- Anchia – You knew to call PUC over ERCOT then?
- I knew that the Chair of PUC knows power
- Only person I knew to call
- Anchia – What was the response when you requested they turn power back on in the Permian Basin?
- PUC communicated with industry after our conversation, not sure about the exacts of the conversation as I was not a part of it
- Anchia – Did PUC communicate they knew Permian Basin didn’t have power or not?
- I think they were trying to manage
- Didn’t communicate one way or anther if chair knew Permian didn’t have power
- Anchia – Did PUC ever communicate that the grid was experiencing failure?
- No, not until Monday/Tuesday night when the power went off
- Anchia – So you had to call her about power in the Permian?
- Yes
- Anchia – Did you have any other communications with PUC after Tuesday?
- Wednesday we were at a press conference with Governor
- May have spoken about problems and avoiding rolling the fields, but not sure
- Raymond – Disagrees with Lucio that because the RRC is elected officials, they should have been communicating with the public. RRC not responsible for the power situation, but understands the frustration. PUC and ERCOT and the Governor are responsible for communication. Maybe need to have Governor appear before committee for questions as well.
- Reynolds – Troubled that most legislators would be surprised to know there was no ERCOT and RRC communication during this crisis. Definitely an area to look at, lessons learned. Open Meetings Act prevented you from communicating with other commissioners? Should there be exceptions for critical moments such as this storm?
- That’s a policy decision you would have to decide, but we could probably use that in the future
- Reynolds – missed question due to audio problem
- Now have more electric compressors in pipelines and fields
- Only limited diesel backup compressors
- Reynolds – One of the most consistent issues left since 2011 has been the weatherization issue, but you don’t think we should mandate that still?
- Still looking at other states and their plants and practices
- Not sure if one size will fit all
- Gathering data and doing analysis now
- Reynolds – We left it to industry in 2011, and it failed. The narrative is that these companies are choosing profit over preparedness. Would you say that these companies can chose the wrong thing?
- Wouldn’t agree, most companies will do the right thing
- Some companies did winterize post 2011
- Still don’t know for sure because its not regulated
- Reynolds – Do you think those companies that winterized didn’t go low enough, in terms of the temperature prepared for?
- Would have to ask the operators themselves
- Reynolds – NRG CEO acknowledged that we are seeing significantly different weather conditions, possibly due to climate change. Clearly we cant use the same model we have been, do you agree?
- Agree we need to look at new areas of focus and ideas
- Deshotel – is it under your jurisdiction to require redundancy, our offer a tax credit to make the system redundant
- Safety is important for pipelines but don’t think they have authority to mandate the type of compressor stations they use
- FERC states safety standards for pipelines in the country and they do maintain that
- Anchia – notes pipelines cross state lines, curious about timing of export ban? Did you see the Governor’s moratorium?
- No complaints filed at agency
- Governor issued the letter and their general counsel reviewed it
- Anchia – RRC does not have authority to halt exportation?
- Correct, no jurisdiction over interstate pipelines
- Anchia – any data on halting the exportations?
- No data, they would not be privy to it
- Shaheen – can you work with companies under your jurisdiction to work with utilities to ensure emergency operation plans are sufficient, asked for more detail on interruptible gas contracts.
- Discusses firm gas and interruptible gas contracts
- Herrero – reads constituent’s questions, does decisions for profit justify loss, etc? encourages to look for solutions so we don’t have to repeat this again
- Paddie – how do we get coordination between gas and generation facilities; runs through list of things to review
- Could expand storage, moves gas through pipelines, need to site and build
- Paddie – need to build infrastructure so lights come on; if we don’t have infrastructure then we cannot build resiliency
- Would include roads in infrastructure
Todd Staples, President of TXOGA
- Natural gas carried the load during this energy crisis and played a strategic role
- Identified 5 buckets of why natural gas was impacted in the field (does not get into midstream)
- Dominant response was loss of power
- Icy conditions prohibited crews getting in and out of sites
- Communication failure, phones, etc
- Operators had to limit disruption because of third party disruption down the line
- Mechanical issues – dues to weather and weatherization, things that might have been avoidable or not avoidable
- Predominate reason was lack of power
- There are things that can be done to improve and working on those
- Herrero – asked about redundancy; storage
- Some have solar but not as good in middle of winter, generator may not be as good because it runs on diesel
- Not designating themselves as critical load
- More sophisticated users understand market risk and can manage it, need a conversation on the ability to produce when Texans need it
- Raymond – ask for something in writing on what their industry could do better or where they need help from the legislature, ask about memorandum halting exporting natural gas into Mexico?
- Contracts in place you have to comply with
- Every person was diverting gas and making available capacity to Texas market
- Hunter – want to bring out a schedule and points out they don’t have a lot of time between now and the next Hurricane; June 1st is kicking off another time period
- Yes he is aware of this
- Don’t think we need a bunch of drills but need check boxes to ensure these things are being addressed
- Hunter – wants to complement TXOGA for reaching out to them and those that reach out need to be recognized
- Longoria – asked if there was a response to hitting the jackpot with storm
- A lot of contracts that guide the process, contracting will be a big part of it and if contracts were in place it reduced the volatility
- It takes electricity to produce natural gas and natural gas to produce electricity so they are both pulling on each other
- Not heard members make comment like Longoria said, goal is to deliver and the right way
- Howard – hearing electricity was shut off to the gas but want to know where it happened and what was the cause
- Need to analyze wells, etc need to put all data together
- Looking at all things that can be done potentially
- Howard – can you let us know how many sites are weatherized? Cost?
- FERC has report for minimal level of weatherization $2800-$34k per site and sites today may have eight wells
- There may be some survey, but they are focused on safety and environmental performance so not sure how they can respond
- Believes area was a loss of power and other areas that are fixable and can deliver and immediate result with out much cost to consumer
- Howard – no cap on gas prices?
- Internationally traded commodity, not regulated product
- Howard – but electricity is?
- Agrees, points out difference looking at it from residential consumer perspective vs market participant who knows the risk
- Craddick – will organization be for or against weatherization?
- For innovation and allow operators to manage site in most prudent way
- Don’t think weatherization is defined anywhere, would be confusing at midstream/upstream/wellhead, etc so they may not know how to comply
- Need to look at loss of power before anything else
- Deshotel – asked about natural gas storage
- No they favor storage
- In Texas if you want a product it can be provided, just how much cost do you want to put into the system
- Deshotel – asked about redundancy with standby generators?
- Is every person in the supply chain going to be required to have that redundancy?
- Wants to point out needs to be equity in recommendations but point is well taken on innovation
Grant Ruckel, Energy Transfer Partners
- Midstream activities overview provided
- Preparations made for severe weather, operating procedures and practices are implemented to mitigate risk, procured heat tracing and insulation, etc
- Committed to continue working together
- Paddie – asked about pipelines and to speak to challenges
- Pipelines do not freeze
- Need electricity
- Production was shut in
- Herrero – what is heat tracing?
- Underground pipes predominately but in above ground facilities heat tracing can be applied and had ability to transmit and raise temperature
- Pipelines don’t freeze but want to be proactive to protect the pipeline
- Geren – who owns product?
- Manager and ultimately end user, usually not them as the shipper
- In terms of how emergency order was drafted, obligation to move – they did everything they could to make sure it arrives
- Also upheld contractual obligations
- Geren – advance preparation?
- Can put more product in, if operator recognizes higher volume usage
- Geren – it was implied pipes were not getting gas to electricity, and if you don’t have electricity you will have a hard time moving gas, does not believe blame lies solely on pipes what can be done to help
- Agree, appreciates question
- Encouraged form to be completed so all could be considered as critical infrastructure
- Geren – if you are not registered as critical infrastructure please do it
- Lucio – looking at federal code which requires emergency plan to be filed with federal government, do you do that and are they audited?
- Yes, we are aware and do file those plans
- The Federal Code on emergency management planning, our plans would be on file
- Lucio – Does RRC require you to file emergency plans? Is it the same as the federal?
- Yes, files with RRC but there would be differences considering intrastate vs interstate
- Lucio – finding emergency plans on file with ERCOT/PUC lacked critical components, take them seriously
- Take safety as top priority
- Lucio – believes you but mistakes will happen
- Howard – were told plants had power come off and that is why they could not run, do we have specific information about which plants were shut off and who shut them off
- Did not hear specificity in testimony he heard
- From Energy Transfers perspective, did follow up and they met their obligations
- There is a note that should be made when you do a transportation agreement in some instances there could be a provision regarding pressure at which volumes were delivered
- More variables that need to be known before it can be answered
- Howard – can you let us know how many sites are weatherized? Cost?
- In terms of midstream it is something they can explore
- Craddick – would like to know cost per well, or per pad for winterization, thinks it will be tough to define
- Back to understand the definition differences for weatherization which includes geographical consideration
- Deshotel – asked for definition of processing station
- Liquid rich area vs dry gas area there are different types of processing and different type of components
- Ultimately want to get pipeline quality gas
- Deshotel – you need electricity
- We do, but we were meeting our obligations
- Deshotel – asked about redundancy with standby generators?
- They can switch from electric to natural gas depending on circumstances, but in times of peak load can switch to natural gas
Jim Cisarik, Chairman of the Texas Energy Reliability Council (TERC)
- Formed with the purpose of ensuring consumers have access to gas in periods of high demand
- No mandate, budget, regulatory authority, etc.,
- Leadership from ERCOT, PUC, RRC, and leaders in Natural gas and energy
- Provided written testimony, including schematic of well head and energy supply chain
- Includes details on each link of the chain
- Not a conventional supply chain, it is a loop
- Thursday Feb 11, spoke with Craddock and decided to assemble TERC on Friday morning
- ERCOT gave weather forecast, and projected peaks in demand
- Mentioned wind was forced out already on Friday
- 50% of heating provided by electricity; discussion of how to move that demand higher up in priority in RRC order
- 13th and 14th, discussions with each pipeline member based on supply drop, around 50-60% drop in natural gas
- Gas withdrawals began from storage over the weekend
- Gas pipelines that serve significant loads are tied to storage facilities
- Integrity maintained by holding a minimum/maximum range of operating pressure in Natural gas pipelines
- Can pull from storage to increase flow in pipeline and manage swings; saw this when gas supply started dropping
- Pipelines reporting Monday 50-90% of supply lost (gas)
- Began event with an estimated 23 billion cubic ft per day fed of gas, down to 12.5 billion cubic ft by Monday
- Gas begins flowing more again Thursday, Friday exits rolling outages, and Saturday saw surplus gas flow under priority order
- Huge chunks of well production comes offline due to power outages and freezing situations
- Complicated above and below ground processing systems for gas and oil, even with power, some producers would still have been out of it due to freezing
- Icy and impassable roads made it very hard for water haulers to access fields and dispose of water needed for compression and oil piping processes
- Technicians could not access wells to perform maintenance
- Produce around 25% of natural gas and 40% of oil nationally
- Questions for producers include if you had power, could you have stayed online, and could weatherization have prevented the issue
- Also review gas storage, we are fortunate to have it. Do we need more, it’s all private, no new storage built in last 10 years
- Will require new infrastructure for new storage
- Need to be mindful in evaluating what happened in the loop of energy production – how do we address these issues?
- Industry can help answer these questions, and in times of crisis, they stop being competitors and work together to restore power
- Hunter – Have to look at the economic impact of the storm and lack of energy availability. Who would you add to TERC?
- Team is working on recommendations, already in conversations with RRC.
- Had majority of pipelines on TERC, need more providers, including in East/north Texas and TxDOT
- TEMD as well
- Raymond – wondering if this event makes us really consider getting rid of PUC and ERCOT and just reforming them under RRC. If they don’t do a good enough job for the second time, it’s not working
- Electric and gas haven’t been super connected regulatory wise, but they are very connected in terms of actual provision of power
- Paddie – How do you become a member of TERC, what’s involved in being a member, how regularly do you talk
- historically, president of TERC is nominated then approved by the RRC commissioners
- Leadership in industry and company leadership is generally a prereq for TERC leadership
- Goal of chair is to have no conflicts of interest, but have extensive experience in the field
- Calls are oriented around coordination, not competition, its about delivery not prices
- No dues or requirements to join TERC, normally not presidents of companies but the people making the working decisions
- Paddie – question on relationship between RRC
- collaborative relationship with RRC, we help inform decisions
- Paddie – Vision for TERC going forward?
- Involvement in coordination and cooperation of companies, preparation for and response to crises and emergencies
- Paddie – Need solutions right now: we might need, in the short term, an engaged group like TERC to bring the legislature solutions to implement
- TPA is involved, TEXOGA, RRC, TERC, all groups that should be involved
- Heavily linked together, all interconnected
- Need to connect and become more cohesive with the electric side
- Paddie – Concerning winterization, you testify it would be a “herculean task”, if it was done, and they didn’t have power, would it matter? Would they be able to still pimp?
- The question is if these sites had power, and if they did, could they have maintained gas pumping
- Paddie – Winterization is a piece of the solution, not the silver bullet
John Paris, President of Atmos Energy MidTex Division
- Vison is to be safest provider of natural gas services
- Highlight gas supply and operational response
- Atmos only delivers natural gas, they are not an explorational company
- Maintain natural gas storage fields and utilize compressed natural gas
- Curtailment rules dictate supply provisions
- Noon Feb 13 saw implementation of curtailment plan
- First curtailed were those on non-fixed plans and industry
- Goldman – Did the pipelines freeze anywhere?
- Gas pipes don’t freeze, they are buried underground
- Pipes could freeze somewhere, but NG pipes have not frozen before
- Hunter – Would power staying on have helped maintain gas flow?
- If the gas supply could have stayed on, we could have made it through with minor distributions
- Need to continue the resource because population and loads will only increase
- When wind goes off, gas fills it. Much more flexible fuel
- Hunter – top two areas in legislature this session?
- Communication and telecom
- Compliments RRC for communication skill and coordination between each agency
- Raymond – Could you follow up with your written testimony and provide us with better information about your company’s role in the future of TERC and which companies/producers/agencies should get included. Based on experience, do you have an opinion or if it would work/be better to have one agency consolidate control over the grid?
- Don’t really have an opinion, whether it’s one, two, three agencies, we need coordination and communication
- Paddie – Thanks Paris for the job of maintaining gas to homes. Raises question about previous testimony from generators and interruptible contracts – if generators want to be on firm gas but isn’t offered, why is it not available to everyone?
- APT was built and designed to deliver to LDCs. When you have that capacity/delivery capability to LDCs on this kind of pipeline, the first priority of the pipeline is human needs not generators.
Katie Coleman, Texas Industrial Energy Consumers (TIEC)
- Important part of ERCOT market; help with balance of supply and demand
- Expecting detail post mortem from ERCOT
- Problem was shortage of available power plans
- Think we should focus on the cause on the problems before revisiting other ideas
- Weatherization, communication and visiting again renewables
- There were supply chain issues from top to bottom
- Paddie – you don’t believe more plant generators would have said
- Yes, more does not help with performance issues in cold weather
- Will get more of same to just add more money to the market
- Do think renewable issues were part of this, thinks there is an unlevel playing field
- Need to look at things like having alternative fuel sources available
- Could target firm vs interruptible contracts
- Heard more gas available for sources from east to west so plants duel connected would have addressed
- Paddie – can you give us a sense of impact to your members?
- Sophisticated, have access to a broader range than residential consumer
- They are concerned about cost come back in their laps, concern about paying other peoples bills
- Says way to think about it as they serve special needs that the system may have in certain situations – give metaphor of clothing, ancillary services is a coat or hat standing by ready to hand off
- Paddie – what you are describing sounds more market based?
- In capacity market you are paying to reserve capacity, topic that they have been working on for some time
- Think some of approaches would be creating a product so if renewable generators can’t show up they could buy a service like this
- Raymond – have strong opinions on what should be looked at, do you think it could be prevented from happening again?
- We routinely serve load that is higher than what was predicted
- Agrees the problem was once they scaled back trying to bringing them up
- Does not have a lot of detail about what specifically went wrong at each plant, but think we will know that
- Does know that circular relationship between electrical and gas is a huge piece of the puzzle and not that complicated to fix
- This relationship was an issue in 2011 but at that time only focus was power compressor stations and the event was different – in the past they went and had them fill at form for critical infrastructure, but the list got stale
- Need to figure out who is out there today
- Thinks RRC order about moving generation up in priority list was extremely important
- Raymond – said we need to look at all the different energy, fuel oil?
- Understands there are very few sites that rely on fuel oil, its kind of a hassle
- Maybe need to encourage and target different energies, but very few sites do that today
- Darby – are we going to face outcries from businesses and cooperatives that they can’t pay? Will state need to bail them out?
- Don’t have the numbers but it is something people started looking at last Thursday or Friday
- Her understanding is concern of level of short pay and subsequent uplift, they are not as concerned about it as they were but there may still be some uplift
- The question is how big of an uplift – it goes back to everybody in the market and if it happens in one or two days it would be a problem
- Darby – did you say wind and solar are overbuilt? Have heard there is congestion and there are load zones that need additional capacity. Would like to look at transmission
- Not exactly, members do buy a lot of renewables
- Not anti-renewable
- Issue of policies created many years ago not suited to address problems today
- Hunter – ask to submit memo of her thoughts on root cause
- Howard – ask question about lack of cap in gas market
- Price cap for electricity because supply did not meet demand, or it would have gone off the charts
Phil Wilson, Lower Colorado River Authority (LCRA)
- Provides outline of LCRA and what they do
- No taxing authority, do pay property taxes on their transmission lines
- Wholesale power provider, no retail customers
- Have some service outages still but do not impair getting electricity to the grid
- When ERCOT orders a load shed then they must shed a percentage
- 8 customers have ability to provide own load shed
- No single incident last longer than 4 hours as they load shed and they hope they minimized impact to customers
- Paddie – load shed is function of distribution systems?
- Yes
- Paddie – heard generators discussion on a frequency event, do you believe that event happened
- Thinks it might
- If you think about a record spinning around, when a power plant it running it is oscillating – provides an example metaphor of skate night
- When degradation of frequency happened question could be, could they have started shedding load sooner?.… worthy of smart technical people to review
- There is a belief that when you shed load so fast, its hard to put a plant back on after you have taken it down
- Goldman – asked for Wilson’s resume and wanted him to answer as a Texan, where can improvements be made?
- Secretary of State, Luminant, TxDOT and then went to LCRA and interim GLO to solve Harvey housing and just finished up at HHSC
- Starts first with planning and wind challenges
- Last 6 years added wind renewables and is pro wind but challenge is it is an intermittent source that was added to reserve margin
- Compare wind energy to taking a walk with them, but taking baseload off the grid so displacement of thermal generation with plethora of renewables
- So if thermal plan said they are showing up and they are short they have to pay a penalty for not being there but wind can not show up and not pay a penalty
- If that many MW fell, that level of slope decline thinks it needs to be looked at more because perhaps they landed the plane too hard; but worth a root cause analysis
- Paddie – asked for another example of his comment on renewables
- Wind was supposed to show up but they were short on day of the party, how do you do some sort of economic tie to it, not saying a capacity payment
- Goldman – one thing that came up with Craddick testimony was TxDOT, what exists now that would be a better way to communicate with people when they don’t have power
- Thinks TDEM is leading the effort and thinks it is the right place for this type of response effort
- One of issues happened like need to keep cell towers up
- Raymond – that is the bill I have
- I know
- Raymond – most significant event LCRA has had to deal with
- From operational standpoint yes sir
- Raymond – bigger concern in frequency discussion is it stopping, so that was ERCOT challenge
- Yes, that is fair
- Thinks it is worthy of study that when it started going down could they have shedded load more incrementally
- Raymond – could you have done something to prevent
- We stayed on with 82% of capacity but they had one plant knocked off for frequency and one time a motor froze but kept everything else going
- Raymond – how old is your oldest one, asked about makeup of plants
- 100% coal with coal shipped in for Wyoming
- Darby – question on transactions, short pay
- Last week was really cold, some plants shut down and they were short so some members had to buy electricity and they are obligated to buy it – a full service contract
- Short pay happens and then they go to short pay and if that doesn’t work they then have to go to uplift, and you might get cost in both ends of that
- Have not been paid in last few days from ERCOT, but using collateral and credit in meantime
- When someone says they can’t pay means there is a ripple effect
- Darby – but collateral is needed to be put up to play and ERCOT is selling or auctioning off collateral to meet obligations which means they are less likely to meet future obligations, hearing of cascading effect of more markets/co-ops not being able to meet obligations
- Darby – one cooperative passed on obligation to farmers on plains today in anticipate of uplift
- Hunter – appreciated TDEM concept; need to get that in writing to the committee next week
- Howard – didn’t hear anything about hydropower
- LCRA is largest hydropower producer in the state and it was utilized and used and it was there
- Staff slept overnight at dams on site
- They also have a solar site
- Howard – model of $9k cap does not take into account gas
- Gas is an international commodity, held captive to price of gas
- Thinks all generators who could be there were there
- Howard – your systems are winterizing and newest plan built to zero degrees? Need to know cost of winterizing
- Yes, newest plant was build to zero degrees
Jackie Sargent, GM of Austin Energy
- Questions should be why this happened and how to prepare
- Storm was greater than models use for planning
- Reviews challenges in storm and notes they took it seriously
- Now ready to work through details and plan for future
- Paddie – if you made money, customers would see benefit in electric bill
- Yes that is correct
- Goldman – Thank Austin Energy for its commitment to not raise its rates, what is relationship to Austin? Can they do anything they want with that money?
- Example of moon towers
- A department of the City of Austin
- Goes back to general fund, helps support community
- Goldman – money transfer from you Austin can do whatever they want with it?
- Part of construct of utility
- Goldman – does that make you mad, handing hundred of millions of dollars to city to do what they want with it
- Understand this has happened for a long period of time
- Money goes into general fund; based on portion of revenues
- It varies by community
- Hunter – you are here as representative of what is happening across state for municipalities, let me ask you general questions… If you don’t have big reserve you pay a lot when it soars?
- If you are in position to buy it, agrees it could be exorbitant
- Go bankrupt if no backstop
- If utility is in situation correct they will get higher bill
- Or utility could smooth it out over time and look what they could do to smooth it out to customers
- Hunter- get us your ideas in writing
- King – how many power plants do you have?
- A large gas unit, a combine cycle gas turban, partners in coal facility, also partners with South Texas Nuclear Project, a biomass facility, and various wind and solar
- Did have some challenges and did decommission a plant at Decker Creek power station which over 40 yrs old
- Have not had time to discussion future needs/plans at this time
- King – asked about load shed determination, what goes into calculation
- Larger entities have a larger share, they are much smaller system comparatively and Weatherford is even smaller
- Also depends on how many things have critical load
- There is a calculation based on your contribution in summer peak
- Based on the amount ERCOT directs
- King – why could some rotate outages better than others
- Think it has to do with complexity and types of customers
- We were not about to rotate because we have a large number of critical load spread across service territory
- Because load shed request was so large and happened so fast, nothing they could take off to rotate and nothing to move around and were stuck at that point
- Then after at peak were asked to shed more load so they reached out to customers to bring off additional load
- King – it was not market model differentiation if entity had rolling, none or total it was simply unique circumstances of that provider? Competitive didn’t do worse and coop didn’t do better?
- That is true
- Depends on how large area is and how you can spread out
- Howard – didn’t hear anyone asking Oncor what they did with their money; in Austin Energy the citizens are the stakeholders and the money goes back to them; important to get back to the purpose of this discussion
- Howard – my city was asked to shed more load and help others in the state, talks about local leadership and let Austin run Austin
- Lucio – question on allowing permanent installation of natural gas generators for commercial users
- No we allow natural gas
- Lucio – maybe got mis-information, want to know if commercial was not allowed like HEB
- Will look into and get back to them
- Lucio – you all did really well but did not communicate they were not rolling blackouts but on Feb 11th Austin Energy press release was fantastic
- Lucio – which of your portfolio do you think will have most fluctuation in cost to produce power
- Do everything we can to provide stable rates than result in stable bills
- However, they supply to ERCOT so if they don’t get paid and get uplift costs…
- Lucio – you don’t know where your power goes once you supply it to ERCOT
- Simplest way to explain the market; its like a swimming pool and generators from around the state are putting water in and energy is going out like through a straw and ERCOT manages levels
- Lucio – only recourse for invoice to ERCOT is ERCOT
- ERCOT does all invoicing
- ERCOT acts as a clearing house
- Money will flow through ERCOT
- You might not get money, and you might also encounter an uplift charge
- Lucio – continues with questions on how it works incl if they are required to carry insurance
- Don’t have responsibility above what is there collateral but will also look at what they can do to manage risk and exposure
- Paddie – do you have any ideas if there is something we could do about critical load and handle rotating easier?
- If we could sectionalize grid and get them in smaller pieces
- Have advanced meter reading to do disconnect but not on a rotating basis
- Was calling people/businesses asking them to turn off lights
- Goldman – apologizes for tone, will be asking Oncor about excess fund and thinks it should go to improve infrastructure but correct that is Austin’s businesses
- Howard – she was contacted about the Capitol, and would like to think DPS and Capitol Preservation board as they lowered the lights and dimmed the dome
Tom Hancock, Garland Power & Light
- Contributes success of maintain service to weatherization
- Wind and solar contracts delivered approx. 20%
- Paddie – asked about cost for one week; comparison to annual
- $2-3 million annually gas and $2 million on ancillary
- Storm costs: $60 million in one week time on fuel cost and about the same for ancillary which totals about $120 million in one week
- Have a high credit rating, have reserves to handle things like this
- Hunter – you are here as representative of what is happening across state for municipalities, let me ask you general questions… If you don’t have big reserve you pay a lot when it soars? What happens if you can’t pay?
- Go bankrupt
- Ultimately customers have to pay for bill, but we have not determined how we will replenish rate mitigation fund if in a few months from now or not.. but ultimately it will go up
- Hunter – get us your ideas in writing
- Hunter – is payment due to ERCOT
- ERCOT is due a lot of money today, believes if domino effect will take place then after today they will know about it
- King – What is a QSE, how many cities are cities they are a QSE for
- Interacts with ERCOT
- King – Weatherford is expecting a $6 million bill on ancillary services, do you contract with Weatherford ancillary services
- No costs are past directly to Weatherford
- Weatherford has 3rd party contracts and ancillary services are covered in their contract
- King – is Weatherford included in their figures for costs
- No, they are separate
- King – what happens if Weatherford can’t cover cost
- Well have to take what action they can to collect
- King – what options do a small muni have? Their billing cycle is like 72 hours?
- Ultimately have to find funds through customer base
- King – if you are in competitive market and on fixed rate
- Agrees end up in bankruptcy or find a way to pay it
- Agrees index rate means it pass on to customer in a competitive environment
- King – customer in co-op or muni is a fixed rate
- Agrees
- King – Ultimately Weatherford will need to arrange for financing or they begin to pass it through to customers in immediate rate hike? Do you expect to see pretty fast rate hike in munis?
- Can’t really say, expect to see at some level you will see muni’s have to raise cash
- Don’t know how long they have to write the check but as soon as they default
- Agrees they write check to them and its about 15 days after the monthly bill
- King – what happens if a city can’t pay? Clarifies Weatherford no where near bankruptcy
- Don’t know but ultimately it is bankruptcy
- There are so many entities experiencing this would be nice if they could wait a few days
- Darby – wants to hear back how settle up is working out
- You may hear back before we do
- Lucio – what is primary driver in bills coming
- Creating and delivering power
- Lucio – can own own generation, be own retailers? Are co-operatives similarly structured?
- Yes
- Yes
- Lucio – how can some say their customers will not see an increase in their bill?
- Depends on situation, guessing they believe cost associated with the event will not impact them
- Lucio – do they have fixed supply contracts?
- Could have, can’t really speak to it
- If not raising bills then impact to them must have been minimal
- Lucio – asks about structure, not sure if Texans know rates could go up if someone does not pay
- Quality for unsecured collateral in ERCOT but market is cross collateralized
- At end of day it could get uplifted
Mike Kezar, South Texas Electric Cooperative
- Have weatherization plans just like they have hurricane response plans
- Use own marketing group within cooperative
- Operate own transmission system
- Reviewed things they did going into storm and where they get power from which includes coal and renewable energy
- Efforts of employees were heroic
- San Miguel plant was impacted by frequency issue but they kept it online and running
- They were also required to shed load using list of feeders that were sent to them from the members in the way they prioritized it
- Avg number of time of outages was 6 and time duration avg was 3.5 hrs but some went as long as 50 hours
- If we get paid customers may not see net rate increase, may be increase due to their usage
- Paddie – mass transition of customers from Griddy to provider of last resort, ERCOT was about $2 billion short today
- Paddie – current situation?
- We are getting paid right now
- But if we get a bill, just depends on how large it is
- Herrero – You used antifreeze, staffing up, etc prior to the event and how early?
- Yes, weatherization is ongoing process
- Some of the steps mentioned were 2 weeks up to the event, maybe started around Feb 1st
- Herrero – what will be lessons learned?
- Ran out of feeders to shed so working with members to revise the list
- Some entities think they would qualify for a critical load like a gas head or well head
- Could have done a better job on communication – better to over communicate
- Raymond – takes a moment to talk about Congress COVID package and says $1400 checks will not even help in comparison, is there a moratorium on electric?
- PUC issued order, but they implemented it even though they are not part of the competitive market except for the one co-op
- Darby – pulled out short payment noticed and asked questions in general on what acronyms meant; total amount paid out to market $12 billion but net after auction was around $1 billion shortpay
- Yes we were short paid
- Agrees did not get as much as they were supposed to get
- Supplied own ancillary services to hedge position
- Darby – you prepared better than most
- Board tends to be conservative and would rather pay a little more and have it even in price than not know what to expect week to week; so they may decision to pay more money for assets
- Hunter – talked to Mike yesterday and agrees communication is huge and you educated your base on what rolling blackouts may be and what may be impacted, thinks that is a good model
- Hunter makes standard request to get list of their recommendations
- King – compliments both Mike and Cameron on their services and how they handled it
- King – Is a big history of us dealing with large dollars; is it possible that we should call on the PUC to open up cases and mitigate some of these costs and determine where costs should/should not exist?
- Would be surprised if the PUC was not already looking at that
- King – they were not very reassuring yesterday that is something they are looking at
- They should have the authority to do it
- Our gas cost was $153 million over the storm, that is net of paying the gas invoices
Cameron Smallwood, United Cooperative Services
- Member and owner of Brazos Electric
- Did release a press release on the 12th
- Extreme event and request of load shed, avg outages lasted 30 mins long but as large call came into place where limited on what they could shed
- Communicated through entire event which included emails and texts
- Members have let them know what they think, didn’t at first like 30 mins but saw comparison to others
- Didn’t feel like rolling outages were fair
- Underfrequency relay did not did into it but did make request to use UFR circuit
- Paddie – general public does not understand UFR
- Underfrequency relay
- Didn’t shed any critical gas or hospitals
- Hearing about concern of costs, example of Griddy
- Don’t know what rates will be in the future but it depends on what they will be billed by Brazos
- Notes if they were to get $400k bill it will be a stark challenge for them
- Usage was higher by 20-30% in some areas
- Will not be increase in Brazos pass through rate at this time
- Have been working for over a year on a distribution rate increase, so board is pushing that until October 1st but it will put co-op in a bit of negative financial situation
- Paddie – what do you do if number is not manageable?
- A tough situation, been one of lowest rate options for a long time
- Will have to deal it, only a $500 million utility so if they get a $500 million bill it will be traumatic
- Raymond – takes a moment to talk about Congress COVID package and says $1400 checks will not even help in comparison, is there a moratorium on electric?
- PUC issued order, but they implemented it
- Considers this a black swan event but there has to be some discussion about it because agree they don’t know when it will happen again
- Darby – on short pay, can you comment that Brazos is having crisis over the invoices?
- Have not seen invoices
- Brazos did have exposure to market due to issues
- Will do what they can to mitigate costs
- Darby – how long before uplift comes back?
- Paddie – says 90 days per ERCOT protocols before they start uplifting
- Hunter – you educated your base on what rolling blackouts may be and what may be impacted, thinks that is a good model
- Agrees used multiple ways to communicate out
- Hunter – asked about conservation tips, if we follow those tips does it mean others get power or does it just preserve
- Great question because we did that, we issued conservation requests to keep them from turning off and no outage in the area
- Hunter makes standard request to get list of their recommendations
- Reynolds – Biggest takeaway has been there is a lack of communication; commends them for communicating better than most
- Reynolds – NRG executive admitted climate change is a cause of this weather event; hoping to look at science and put politics aside to solve this issue
- Paddie – PUC has already opened rulemaking to establish weatherization standards and relating to emergency service operations
- Slawson – Notes the communications they received from UCS and commends them for that; notes a possible solution could be that PUC commissioner should be a statewide elected official
John Mason, AT&T Attorney
- Acknowledges the devastation around the state
- Wireless emergency alert system is maintained by FEMA and the FCC; alerts appear as text messages, AT&T and other wireless companies participate
- Around 70 local governments and agencies around the state are registered to this system
- Systems performed well; prepared by topping off generators and physically protecting facilities; pulled in an additional generators from outside of the state
- Sites, if do not have a fixed generator, have battery backup; were able to triage generators in advance
- Hired additional contractors
- Restoring service, prioritized critical infrastructure and sites down the longest
- Communications infrastructure relies on electricity, and was greatly impacted by outages issues
- Network was restored by 99% on Thursday and waived billing for members in numerous zip codes
- Are assisting other company’s customers
- Paddie – Recognize interdependency of many different areas and recognize your service/facilities are critical infrastructure as well; inviting you to the table to help find system-wide solutions
- Goldman – Have consistently heard all could communicate better; will work with you on solutions
- Is critical to have us at the table
- Darby – Is a federal program? A cellphone company just pushes out the alert?
- Yes; correct, we just push out the message
- Darby – State agencies eligible? Sent statewide? Charge for the service?
- Public safety officials, yes, and no charge for those who subscribe to wireless services
- Hunter – Were instances where there was no cell service, could you get with our offices what those areas were
- Yes
- Raymond – This is a rural and urban issue that we are working together on
- Hunter – Thanks to the members
Closing Comments
- Paddie – Have covered a lot of ground, now challenge is to figure out solutions in a short period of time
- Paddie – Speaker has confirmed this is a top-priority this session
- Goldman – Thanks to the members for their commitment to the 26+ hours of testimony