Months ago, the state cut ties with power reliability team
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.