Natural gas companies were paid to turn off power during Texas winter storm: report

Source: By Haley Samsel, Forth Worth Star-Telegram • Posted: Sunday, July 18, 2021

The February winter storm that nearly brought the Texas electricity grid to its knees likely stressed the state’s natural gas infrastructure “more than any time in history,” according to the authors of a new UT Austin report analyzing the power outages and their financial implications.

The report includes previously undisclosed data about how the Electric Reliability Council of Texas, the grid’s manager, responded to the unfolding crisis, which led to widespread outages and hundreds of deaths statewide. The report was released just before ERCOT announced its own “roadmap” of 60 proposals to improve the grid.

“This isn’t the only time natural gas has constrained electricity generation — it happened in other recent blackouts (1989 and 2011) — but this time was unique,” said Carey King, the assistant director of UT’s Energy Institute and a co-author of the report. “The system was stressed to its absolute maximum capability.”

One striking revelation from the report involves ERCOT’s Emergency Response Service (ERS) program, which pays enrolled customers to reduce the amount of electricity they are purchasing from the grid or start using backup generators during emergencies. The goal is to decrease ERCOT’s need to start rolling blackouts, according to the agency’s website.

UT Austin researchers discovered that 67 electric meters run by natural gas companies were enrolled in the program. In turn, those meters, which were part of the fuel supply chain providing energy to millions of Texans, lost power when the program was activated on Feb. 15.

At least five of those meters were later identified as “critical natural gas infrastructure,” including natural gas compressors, processing facilities or other parts of the supply chain, according to Joshua Rhodes, a research associate and co-author.

“It seems inconsistent that critical infrastructure should also voluntarily allow themselves to be turned off when they are needed most,” Rhodes said.

Natural gas production, storage and distribution facilities played a key role in the electricity crisis by not providing the amount of fuel demanded by power plants during the storm, the report found. That failure led to a dramatic drop in power plant capacity and forced ERCOT to cut power across the state to “avoid a catastrophic failure,” researchers wrote.

Researchers attributed those failures in the natural gas system to direct freezing of equipment and failing to inform electric utilities about which parts of their systems were critical and needed power at all times.

The outcome was a nearly 85% drop in dry gas production between early February and the winter storm, leading some companies to experience financial windfalls when they could provide scarce gas during the storm.

In a statement to WFAA-TV, ERCOT spokeswoman Leslie Sopko said the agency cannot provide details on which natural gas companies participated in the Emergency Response Service program because they use an outside contractor to pay companies who volunteer to sign up for four-month contracts, promising to either reduce their power demand or generate it.

“If an entity is considered critical infrastructure, then it should not be offering to participate in the ERS program,” Sopko said.

Jay Zarnikau, a research fellow for UT Austin’s economics department and a report co-author, said the effectiveness of ERS needs to be evaluated by ERCOT and other experts.

“It’s a topic that deserves some further consideration,” he said. “What are the eligibility criteria for participating in a demand response program or an emergency program?”

Other findings of the report included the financial implications of the Public Utility Commission’s decision to set wholesale electricity prices at $9,000 per megawatt hour.

The move proved controversial after energy companies and the commission’s independent market monitor, Potomac Economics, accused state officials of keeping electricity prices too high after most outages ended on Feb. 17. That led to about $16 billion in overcharges to the electricity market, according to Potomac.

Commissioners declined to reprice electricity during a 32-hour period, arguing it could create “another huge mess” with unknown consequences. But the UT Austin report, which focuses on data analysis rather than recommendations, found that the $9,000 price cap kept the wholesale market from charging more than $15,000 per megawatt hour.

Without the commission’s actions, overall energy costs would have been about $5.2 billion higher, or about 11% more expensive, during the week of the storm, according to the report.

“We think (the impact) was in the millions of dollars, perhaps, in 2011,” King said. “This one is in the billions of dollars … so the financial impact does seem much more, perhaps three orders of magnitude higher, for the 2021 event.”

While the report was funded in part by the state’s Public Utility Commission, researchers said on Tuesday that their content and analysis was not influenced by state officials. Members of the Energy Institute have tentative plans to release future reports featuring recommendations to improve the grid’s management, King said.