2021-03 Lab Notes Header—Frozen TX road

What should be learned
from Winter Storm Uri?

Winter Storm Uri affected more than half of the United States from South Texas to Maine. Texas was the hardest hit in terms of loss of life, infrastructure failures, damage to homes, and business interruptions. Impacts from the storm paint a sobering picture for today and the future. In addition to the loss of and damage to human life, nearly every segment of the state’s infrastructure system was impacted, including transportation, power generation, drinking water, agriculture, and food supply chains. More than thirty percent of the state’s power generating capacity went offline, leaving four million Texans in the dark and in frigid temperatures at the storm’s peak. Power losses and freezing temperatures led to cascading effects in water infrastructure, with approximately 12 million people—more than 40% of the state’s population—experiencing disruptions to their sources of clean, potable water. Oil refineries, chemical manufacturers and other industrial plants in Texas reported releasing around 3.5 million pounds of extra pollutants into the air.

 

Winter Storm Uri clearly revealed that the state of Texas has developed an electric power system that does not prioritize infrastructure resilience. Rather, for many years the state’s energy policies can be characterized as “a race to the bottom” by power generators to provide the lowest-priced power and ensure cost reductions. And in fact the result has been that in recent years Texas could boast about some of the lowest power prices in the U.S., which politicians leaned on in its boasts of being one of the nation’s most business-friendly states. Yet, to be clear, its approach to energy market structure, planning, and cost control has centered around consistent under-investment in every aspect of power infrastructure.

In the aftermath of Winter Storm Uri, members of the Public Utility Commission of Texas (PUCT) were discussing what happened and why. The answers should have been obvious since the PUCT intentionally had not adopted resilience standards for the state’s electric power utilities. Hence, without such standards, the likelihood of the state’s power generators taking the necessary investment action over the years was very low. Texas’ deregulated electricity market, which was supposed to provide reliable power at a lower price, left millions in the dark, together with a very clear and sobering message for not only Texans but for the rest of the nation.

 

Continued from the emailed newsletter

Winter Storm Uri caused the state’s deregulated power generation system to fail. But the deregulation story in Texas is much more complex and revealing. Nearly 20 years ago, Texas shifted to using private retail power companies instead of full-service regulated utilities to generate power and deliver it to consumers. One important consequence of this shift in power providers was that for the last two decades, according to a Wall Street Journal analysis, a great many residential and business customers have paid more for electricity in Texas than residents served by traditional utilities.

 

As many as 60% of energy consumers in Texas have been buying their electricity from retail power companies rather than local utilities. The WSJ analysis, drawing on data from the Federal Energy Information Administration, shows that, under deregulation, Texas residential electricity consumers paid $28 billion more for their power since 2004 than they would have paid at the rates charged to customers of the state’s traditional utilities. Since 2004 Texans had to choose their electricity provider from competing retailers. In conclusion, the recent energy crisis and aftermath were driven by public policy primarily catering to power producers. The hardest hit customers were those who had chosen variable rate plans linked to wholesale energy prices, which skyrocketed from the impact of Winter Storm Uri.

 

None of this was supposed to happen under deregulation. Backers of competition in the electricity supply business promised that in fact it would lower prices for consumers, who could shop around for the best deals. The system, they said, would be a significant improvement over monopolistic utilities which had no incentive to innovate and provide better service to customers. From the then-governor, George W. Bush, to politicians, down to local councils, the switch to variable-rate plans was proclaimed to benefit Texans by reducing monthly rates. In fact, in the 2004–2019 period, the annual rate for electricity provided by utilities in Texas was lower than the national average. The electricity rates of retail providers, however, were more than 50% higher than the nationwide rate. In other states that allow retail competition for electricity, customers have the option of getting their power from a regulated utility. In many parts of Texas, most consumers did not have that choice or apparently did not know that they had it.

 

Some of us might remember the national push to deregulate the electricity supply that began in the 1990s. Most memorable was Enron, the Houston energy company and champion of free markets, leading the charge for deregulation in the energy industry, only to end up bankrupt in 2001 amidst revelations of major fraud. In the following years, the state’s laissez-faire attitude towards utility regulation was supposed enable companies to sell electricity more inexpensively and still recover their capital costs. The catch, however, was that deregulation provided no incentives or requirements to invest in infrastructure to protect power plants during severe cold events. In the process of creating deregulation at national and state levels, no one in government even raised the specter of climate change. Electricity retailers, politically led by the Texas Energy Association for Marketers, reiterated from the beginning that electricity customers would have more choices and the option to switch plans.

 

In the end, however, the deregulated market consolidated into a few huge retail energy providers that sold most of the retail electricity in Texas due to mergers. These large energy providers (no names mentioned here) assured most electricity customers in the state that they would not be hit by spiking prices due to blackouts. Why? Because supposedly their electricity plans weren’t tied to swings in the state’s wholesale electricity market. The most vulnerable customers for price increases were those who signed up for variable-rate electricity plans in order to benefit from falling rates that would result from competition. Wrong! In fact, residential and small commercial customers in Texas with variable rates were hit with a dramatic surge in the wholesale electricity market resulting from the big freeze.

 

The frigid winter storm and power failure that left 4 million people in Texas shivering in darkness and hundreds of thousands without water will hopefully trigger an aggressive national push for renewable energy. But the St. James Faith Lab (SJFL) also wants to see a national reckoning with the false claims proliferating on social media that pinned the crisis on wind turbines and solar panels freezing when people in Texas needed them most. At least one piece of good news out of the disaster has been a very clear statement by the Electric Reliability Council of Texas (ERCOT), which oversees the Texas grid, that outages of solar and wind energy were only a minor factor in blackouts. Post-freeze analysis showed that natural gas, which supplies about half of Texas’s electricity, seized up due to frozen pipes and a lack of standby reserves.

 

The fact that the energy crisis in Texas has led to political and media attacks on renewables is very concerning to SJFL. The scorn heaped on renewables in Texas has echoes of the aftermath of blackouts suffered by California during devastating wildfires last year. Critics of the expansion of wind and solar blamed the wildfire disaster on California’s shift to cleaner energy. SJFL sees that the Biden administration’s commitment to renewable energy has to be accompanied by systematic opposition to the use of “targeted disinformation” and conspiracy theories to obscure and undermine how states across the nation cope with the challenges of extreme weather linked to climate change. Much like how the U.S. reacted to the 9/11 attacks by escalating its national security activity, the country now needs a similar level of response to the climate crisis by a combination of weatherizing infrastructure and continuously informing and educating the public about the critical importance of generating and keeping reserve power in store.

St. James Faith Lab will continue to keep an eye on this issue of energy policy as it relates to climate change as we move forward in our research.

The Rev. Canon Cindy Evans Voorhees

Executive Director

St. James Faith Lab

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