Paperwork blunder left Texans in the cold
Dozens of natural gas facilities went offline over lack of a two-page form
When Texas lawmakers met last month to begin sifting through the wreckage of the state’s energy grid, many expected to hear tales of poorly insulated power plants rendered inoperable by the latest winter storm.
Instead, energy executives raised an even more confounding problem: Dozens of natural gas facilities had not filled out a two-page application for outage exemptions before the storm, meaning their facilities lost power at a moment when their fuel was needed most to feed struggling power plants.
“We had basically people calling saying hey, turn a power plant back on, or turn a gas processor back on, and it’s like, it’s too late,” said Curtis Morgan, CEO of Vistra Corp., whose subsidiary, Luminant, is the state’s largest power generator. “You can’t do it when you’re in the middle of it.”
Oncor scrambled to flip power on to more than 150 gas facilities in the Permian Basin after receiving urgent calls from the Public Utility Commission that gas providers needed their power restored, said Allen Nye, chief executive of Texas’ largest electricity delivery company.
The problem, Morgan and Nye said, was that unlike hospitals, 911 call centers and fire stations, many gas production plants had never been identified as “critical” facilities, a designation that could have
shielded them from outages during emergencies.
Yet the process of getting a facility designated as critical infrastructure couldn’t be easier. The owner simply needs to fill out the two-page form each year and turn it in to the local utility company.
A full assessment of how big a role electric power cut to gas facilities played in the grid outages is likely months away. Yet how some of Texas’ largest and most sophisticated energy companies, depended upon by nearly every resident and business, failed to complete a two-minute paperwork chore remains one of the most baffling mysteries of last month’s deadly outages.
Deepening the puzzle is that the same problem was identified during the state’s last major freeze, in 2011. A federal after-incident report concluded that just under a third of production losses in the Permian and Fort Worth areas were caused by outages, mostly power cut to electric pumps on gathering lines at the wellheads. It advised gas and electric companies to close the communication gap so the same thing didn’t happen during the next emergency.
“Gas producers, processors, pipelines, storage providers, and LDCs should identify portions of their systems that are essential to the ongoing delivery of significant volumes of gas, and which are dependent upon purchased power to function reliably under emergency conditions,” it recommended.
As the deep freeze settled over the state a decade later, however, it became clear that the problem remained unfixed.
A fix that costs nothing
The failure of gas and electric companies to communicate with each other — again — demonstrates how, just as Texas’ power grid is a complex web of producers, transporters, deliverers and regulators, its near-collapse last month, too, was an integrated failure spread throughout the system.
Generators and pipeline owners balked at weatherizing their equipment. Lawmakers and regulators neglected to exercise meaningful oversight of the state’s deregulated power industry, leaving it vulnerable to emergencies. Even power to the grid’s single biggest fuel source, natural gas, wasn’t secured.
The discovery a decade ago that gas suppliers’ poor communication with power companies had threatened the integrity of the grid prompted a flurry of urgent discussions and meetings about how to assure the electricity would stay on. A follow-up report, the Texas Energy Assurance Plan — a federally funded initiative meant to protect the grid against natural and human-made emergencies — warned that “the reduction or termination of natural gas supply to power plants during critical periods can have dire consequences.”
Discussions of how to improve emergency communications between the state’s gas and electric providers continued into 2013 but then appear to have petered out.
The inability to solve the problem is especially incomprehensible because, unlike many of the other solutions to the state’s grid failure, whose costs are projected to run into the billions of dollars, ensuring that key components of the gas supply chain are protected from outages is virtually costfree, said Arvind Ravikumar, an assistant professor at Harrisburg University in Pennsylvania.
It’s “not difficult to implement, and it probably wouldn’t have even cost any money,” he said.
Warnings of grid failures
At the height of the “snowpocalypse,” social media teemed with pictures of the power haves and have nots — prompting outrage that vacant downtown office buildings had electricity they didn’t need while average citizens endured teeth-chattering cold or worse.
Former utility regulator Jennifer Hubbs saw those pictures and wondered why her bosses at the Public Utility Commission and her counterparts at the Texas Railroad Commission had not followed through on simple recommendations to keep power flowing to gas suppliers and adopt the emergency procedures she and others proposed years earlier.
“I’m on Twitter and I see a photo of downtown Houston lit up like a freakin’ Christmas tree and all the houses around it dark. It hit me like a physical blow,” she said. “You know, we might have avoided rotating outages entirely if we had just approached it with some sense.”
While working as a policy analyst in the utility commission’s Infrastructure and Reliability Division, Hubbs was tasked to work with the Texas Railroad Commission, which regulates the oil and gas industry, and make recommendations about energy supply emergencies — not only from bad weather but terrorism and criminal acts.
Hubbs and her counterparts at the Railroad Commission had the benefit of recent hindsight. The February 2011 winter storm prompted rolling blackouts and identified power outages among gas suppliers as a problem requiring intervention from regulators.
The final 2012 report Hubbs oversaw — the Texas Energy Assurance Plan — concluded that if the companies that provide fuel for power generation lost power themselves, it could create “cascading” grid failures.
But with no single elected official or bureaucrat in charge of ensuring the two industries work out an emergency plan to keep the power supply chain powered up, the push for voluntary compliance never fully materialized.
According to agency emails, the Railroad Commission in April 2013 sent a letter to the operators of natural gas infrastructure — which Hubbs helped draft — urging them to seek exemptions from power outages during grid emergencies. Why more didn’t sign up Hubbs can’t say. She had already moved on from her job as a utility regulator.
A Railroad Commission spokesman said the agency is trying to find a copy of the letter.
A mid-disaster scramble
In testimony to legislators, Vistra’s Morgan said 60 percent of Luminant’s electricity was generated by gas-fired plants and that Luminant’s capability was “significantly curtailed” by gas system problems.
“Our fuel supply issues were exacerbated as power outages hit gas processing facilities, natural gas pumping stations and electric compressors on pipelines and at power plants,” he said.
Jim Cisarik, a former gas company executive and chairman of the Texas Energy Reliability Council, cited lost electricity as one of a half-dozen factors responsible for plummeting natural gas production. Downstream, Texas Pipeline Association President Thure Cannon said loss of the gas supply and cut electric service caused plants and compressors to shut off.
As Texas froze, gas suppliers whose power was cut off began contacting Public Utility Commission Chairman DeAnn Walker. (Walker has since resigned under pressure from lawmakers.) She in turn called transmission and distribution utilities — the “wire” companies that control the flow of electricity — to ask why the gas companies’ power had been shut off.
The answer: because they’d never filled out the two-page form.
When Oncor checked its records during the storm, it found only 35 Permian Basin gas facilities had registered as critical infrastructure to be protected from power shutoffs, Nye said; none had had their power turned off. He said the company added another 168 facilities to the list during the freeze.
As calls from gas facilities whose power had been cut off poured in to CenterPoint Energy, another large distributor, Executive Vice President Kenneth Mercado said the company deployed a special “tiger team” whose sole job was to review the emergency applications. Before the storm, CenterPoint had only 10 gas pipeline facilities that had requested critical infrastructure designation, he said.
Acknowledging the outages were “a little bit of a repeat from 2011,” Calpine CEO Thad Hill hypothesized that the gas industry’s rapid growth over the past decade had produced new companies that may have been unaware of the simple shutoff exemption process. “We’ve got a lot more new critical gas infrastructure than we had in 2011,” he said.
‘Not sure they ever asked us’
As Texas warmed and energy companies faced growing public and political wrath last month, the gas and electricity industries tried to deflect any blame.
Larry Jones, a spokesman for AEP Texas, an electric distribution company that serves the southern and central portion of the state, said the utility had only one gas supplier exempted before the storm. During the crisis, the company received frantic requests to add 20 additional sites, he said.
AEP would consider exempting anything that “contributes to the production of electricity in a crisis like this,” Jones said. “At the same time, the responsibility to let us know falls with them.”
Gas companies said the exemption form was ambiguous as to which companies qualified.
But Christi Craddick, the state’s top oil and gas regulator at the Railroad Commission, asserted during legislative testimony last month that it was electricity regulators who had failed to communicate properly about keeping the gas supply chain electrified and didn’t understand how “fully integrated” the two industries are in Texas.
“When you ask if we have enough gas in the state, the answer is yes if we can keep the electricity on,” Craddick told a Senate Committee on Feb. 25. “I’m not sure they ever asked us until this past week, do you need a gas field to stay on? Do you need a gas processing plant? Do you need a pipeline or a compressor to stay on, so we can move gas?”
Yet it was also Craddick who, on behalf of the Railroad Commission, jointly signed an “electric reliability” letter in 2019 — alongside the Public Utility Commission chairman — urging the two industries to collaborate to help keep pipelines powered up ahead of the hot summer and to “ensure necessary coordination of natural gas availability and delivery to electric generation facilities to prevent disruptions.”
In an email, Craddick said her agency was working with the Legislature to better identify critical gas infrastructure to ensure electric power keeps flowing to it.
‘Our hands were tied’
What is clear is that the gas and electric industries had ample time and opportunity to address the problem.
Both the Railroad Commission’s Texas Energy Reliability Council and the Electric Reliability Council of Texas’ Gas and Electric Working Group are intended as forums for industry members to work together to ensure the grid operates as intended.
But Cisarik told lawmakers that TERC hadn’t included major players such as gas producers in West Texas, power generators, electric utilities or even state emergency officials in its meetings.
James Mann, a legal adviser to members of the Texas Pipeline Association, said he first heard about an electricity outage exemption form at a meeting convened last month, in the middle of the storm. He said he wasn’t even aware if ERCOT’s group met in the past year.
“How this communication didn’t work I don’t know,“Mann said.
Hubbs, the former utility regulator, said there is no excuse for allowing a problem that she and others started trying to address a decade ago — and could still cripple the grid today — to remain unfixed until dozens were dead and millions more suffered for days without electric power and water.
“We worked on solving those problems, but our hands were tied,” Hubbs said. “It was industry who didn’t want us to force them to do these things. But it looks like they didn’t cooperate when we asked them to do it voluntarily. They need to take responsibility for that.”