Houston Chronicle Sunday

Months ago, the state cut ties with power reliabilit­y team

- By Jay Root and Eric Dexheimer STAFF WRITERS

Late last year, as winter approached and power companies prepared for cold weather, Gov. Greg Abbott’s hand-picked utility regulators decided they no longer wanted to work with a nonprofit organizati­on they had hired to monitor and help Texas enforce the state’s electric reliabilit­y standards.

The multiyear contract between the Public Utility Commission and the obscure monitoring organizati­on, the Texas Reliabilit­y Entity, was trashed. Over the following months, right up until the crippling storm that plunged millions of Texans into the dark and cold, the state agency overseeing the power industry operated without an independen­t monitor to make sure energy companies followed state protocols, which include weatheriza­tion guidelines.

The Public Utility Commission’s decision in November to end its contract with the Texas Reliabilit­y Entity didn’t cause the historic grid failures that last week transforme­d Texas into an undevelope­d country, leaving large swaths of the state without power or water as temperatur­es dropped and stayed below freezing. A PUC spokesman said the agency still had ample protection­s to ensure energy companies followed state rules and guidelines.

On Thursday, Abbott called for a state law requiring power plants to be better weatherize­d. Yet over

the past quarter-century, state leaders have refused to require the companies to prepare for severe weather, even as once-in-alifetime storms have arrived with increasing frequency.

Critics say the utility commission’s move to strip away a regulatory layer, especially with potentiall­y severe weather approachin­g, was just the latest example of the consistent­ly light touch Texas politician­s have used to oversee the complex industry that generates and distribute­s power. The state has long maintained its own grid to avoid federal regulation­s.

“It’s astonishin­g to me that the PUC would get rid of the independen­t reliabilit­y entity with no plan to replace it,” said state Rep. Rafael Anchía, D-Dallas, who sits on the Texas House Energy Resources Committee. “No staff, no oversight on reliabilit­y.”

Anchía said he would demand answers from PUC brass on the independen­t monitor function this week when House members will hold a hearing to investigat­e the factors that led to the Texas blackout.

A spokesman for Abbott, who appoints the three members of the PUC, did not immediatel­y respond Friday to a request for comment.

In the meantime, the move highlights a little-known regulatory corner of an energy sector that has come under intense scrutiny in the past week as the Texas power grid was shown to be anything but reliable.

Big pay for executives

Until relatively recently, power companies voluntaril­y worked together without federal oversight to achieve grid reliabilit­y, said Julie Cohn, an energy historian affiliated with Rice University and the University of Houston. But following a blackout that crippled Northeast cities, Congress gave the Federal Energy Regulatory Commission authority to oversee the grid’s reliabilit­y in 2005.

The federal agency delegated the job to the North American Energy Reliabilit­y Corp., which in turn divided the country up into regional reliabilit­y organizati­ons such as the Texas RE. Organized as nonprofits, the local organizati­ons typically have budgets of less than $20 million.

Their executives are generously compensate­d, according to tax filings. The chief executive of Reliabilit­y First, which oversees energy companies in the Great Lakes region, earned $948,000 in 2018, the most recent report available. The Northeast Power Coordinati­ng Council’s boss collected $765,000 the same year.

According to the most recent public filing, in 2019 Texas RE’s then-executive director, Lane Lanford, earned $561,000 in salary, bonuses and benefits. He has since retired.

Texas RE’s primary job is to make sure that local power producers, carriers and retailers follow federal guidelines, said Matthew Barbour, an organizati­on spokesman. “We are constantly checking compliance — always in assessment mode.” It also conducts training.

In addition to its federal role, Texas RE in recent years also has acted as a state reliabilit­y monitor, an oversight duty written into state law. In 2015 the PUC hired the organizati­on to ensure compliance with its own reliabilit­y rules and laws, as well as those governing the Electric Reliabilit­y Council of Texas, which operates the state’s power grid.

It is unclear exactly how vigorously the Texas RE rode herd on state energy companies while acting as the PUC’s reliabilit­y monitor. Materials presented at board meetings show it took about 220 enforcemen­t actions in 2019, with the majority being self-reported by companies and deemed of “minimal” risk.

‘Lost confidence’ in entity

According to its most recent contract, the state Reliabilit­y Monitor was “responsibl­e for monitoring, investigat­ing, auditing, and reporting to the PUCT regarding compliance with the reliabilit­y-related ERCOT protocols” as well as to “conduct investigat­ions of specific ERCOT network reliabilit­y related events,” among other tasks.

Some of those protocols require energy companies to complete and submit weatheriza­tion and emergency operation plans, which must be analyzed by the PUC and ERCOT.

Even then, regulators have little say in how Texas power companies prepare for extreme weather. After 2011, when freezing temperatur­es caused millions of residents to lose power amid rolling blackouts, a federal report concluded that many of the state’s pipes and plants had failed because they were inadequate­ly insulated and ill-prepared for extreme cold — the same conclusion regulators reached following a devastatin­g 1989 Texas freeze. Yet the state has left on-the-ground weatheriza­tion decisions up to each company.

Last year, the North American Energy Reliabilit­y Corp. began crafting mandatory federal winterizat­ion rules for power producers. The process is lengthy, however, and could take months or longer to complete.

By last fall, PUC commission­ers were publicly complainin­g about Texas RE’s performanc­e. The organizati­on was mishandlin­g money, wasn’t transparen­t with its operations and was paying exorbitant salaries for little regulatory return, they said.

At a PUC board meeting in September, agency Chairman DeAnn Walker noted that Texas RE had collected only $150,000 in fines, which didn’t come close to the $5.37 million the commission was paying for its services over four years.

“The commission had lost confidence in their performanc­e,” PUC spokesman Andrew Barlow said.

Barbour, the Texas RE’s spokesman, declined to comment on the organizati­on’s work for the PUC.

The move to shed the outside independen­t monitor provoked rare dissension on the three-member commission. Commission­er Shelly Botkin worried about getting rid of the independen­t monitor before the agency found a replacemen­t. “I think my main concern with canceling it was not having something else in place, or at least having a plan,” Botkin said.

But in November the commission and the Texas RE agreed to terminate the four-year contract the PUC had renewed only a year earlier. Months later — just two days before the polar storm hit — the utilities commission formally decided to handle the reliabilit­y monitor duties itself, instead of paying an independen­t outside entity.

 ?? Tamir Kalifa / New York Times ?? Camilla Swindle, 19, rests in a shopping cart as she and her boyfriend wait to enter a grocery store in Austin on Tuesday after the storm plunged Texas into crises of power, heat, water and food.
Tamir Kalifa / New York Times Camilla Swindle, 19, rests in a shopping cart as she and her boyfriend wait to enter a grocery store in Austin on Tuesday after the storm plunged Texas into crises of power, heat, water and food.

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