After Blackouts, Texas Moves to Make Power Plants Weatherize

Source: By Mark Chediak, Bloomberg • Posted: Tuesday, May 25, 2021

Texas lawmakers advanced a sweeping and potentially costly measure that would require power plants and some gas facilities to prepare for extreme winter weather as part of an effort to avoid a repeat of February’s energy crisis.

The Texas House of Representatives on Monday gave final approval to a billrequiring power generators and critical gas infrastructure to make upgrades enabling them to function during freezing temperatures. It’s unclear how much the upgrades would cost power and gas companies, but violators would face a minimum penalty of $5,000 a day. In extreme cases, fines could reach $1 million.

The bill, which received initial approval after being amended in the House on Sunday, will head back to the state Senate for passage before it can go to the governor’s desk for signature.

What’s moving marketsStart your day with the 5 Things newsletter.

The measure is the most ambitious attempt yet by the legislature to address the causes of blackouts that left more than 4 million Texans in the dark for days and resulted in at least 100 deaths. The state grid operator had to institute the catastrophic power cuts when nearly half of the state’s generation capacity failed during an Arctic blast that froze wind turbines, coal piles, power plant instruments and gas wellheads.

House representative Chris Paddie, who presented the bill on Sunday, said the measure represented lawmakers’ best effort “to try to address the systematic failures from wellhead to light switch.”

Shares of NRG Energy Inc., a Texas-based power generator and retailer, fell 0.5% to $33.67 at 1:16 p.m. in New York Monday. Vistra Corp., which also serves the state, fell 0.6%.

Prior to passing the bill, the House made changes that will need to be endorsed by the Senate or resolved in a conference committee. The amended measure approved Sunday limits the number of gas facilities subject to the upgrade requirements — something the gas industry has lobbied for. Lawmakers also struck a provision that would have required renewable generators to buy backup power and other grid services used to maintain reliable power deliveries.

In addition, House members rejected a proposed amendment that would have asked a state committee — set up to evaluate the state’s electricity market — to study back-power power options such as the one pitched by Warren Buffett’s Berkshire Hathaway Inc. to spend $8 billion to build gas plants. Utilities would be allowed to contract for battery storage under a late change adopted in the bill.

Separately, the House passed legislation that would expand the number of commissioners at the Public Utility Commission of Texas from three to five. The chamber also initially approved a bill that would require increased oversight of the Electric Reliability Council of Texas, the state’s main grid operator, and require all its board members to live in Texas.

(Updates with bill final passage in second paragraph.)