Texas blackouts may bring winterization mandates from FERC, shape federal spending priorities

Source: By Jasmin Melvin, S&P Global • Posted: Thursday, March 25, 2021

New York — Policy activity on grid resilience has seen an uptick in the month since an Arctic blast left millions of Texans without power for days, and the federal policy response could bring new requirements for generator winterization and inform stimulus and infrastructure spending priorities, a Washington insider said March 24.

The federal response starts with the Federal Energy Regulatory Commission, Jeff Dennis, managing director and general counsel for Advanced Energy Economy, said during an AEE-hosted webinar on the policy fallout from the Texas blackouts.

While the Electric Reliability Council of Texas’ power markets are not subject to FERC’s jurisdiction, the commission maintains authority over the reliable operation of the bulk electric system. As such, FERC can order the North American Electric Reliability Corp. to develop mandatory reliability standards.

Winterization requirements

A more-than-200-page report issued by the commission following 2011 power outages in Texas brought on by extreme cold weather recommended winterization of electric and gas system equipment, as it identified a lack of any mandatory standards at the federal, state or system operator level regarding generator winterization.

NERC followed up on that recommendation in 2012, initiating a standards development process within its stakeholder process, but ultimately issued guidance instead of adopting a mandatory reliability standard.

“The FERC chair and commissioners have pointed to that and hinted that they are looking at whether it is time to order NERC to develop some more mandatory standards around this,” Dennis said. “So that could be a very specific and relatively near-term policy impact at the federal level.”

Dennis said he expected FERC to engage in “significant discussion” on that in the coming months,’ he said. “One hurdle could be that reliability standards are directed at the operation of the bulk power system and there have often been “questions about how far that extends into generator operations. That’ll be one sort of legal question that will have to be considered. But I think what you’ve heard from FERC and others is that is something that is high on their agenda.”

Suzanne Bertin, managing director of the Texas Advanced Energy Business Alliance, chimed in that state-level legislation that the Texas lieutenant governor and speakers of both chambers of the Texas legislature have set as priorities include requirements on winterization. “So I think it is probable that the Texas legislature will ultimately pass something requiring some kind of winterization,” she said.

Market manipulation

FERC also has authority to regulate natural gas markets and the transportation of gas via pipeline across the country.

“We saw significant price increases in the gas market, with prices spiking not just in Texas, but across the Southwest and the West as well in response to this event, and so there are questions about market behavior,” Dennis said.

FERC has announced that its Office of Enforcement will examine what occurred in the gas and electricity markets during the extreme winter weather, he added.

“If it finds market manipulation, it has authority to impose civil penalties of up to $1 million a day per violation,” Dennis said. “That’s a significant penalty power that it has, if it determines based on a legal record that there was some kind of manipulation of natural gas or electricity markets here.”

Dennis added that FERC’s review will go beyond ERCOT as neighboring regions, namely Midcontinent Independent System Operator and Southwest Power Pool, were also impacted by the historic winter storm. Further, FERC plans to conduct a two-day technical conference June 1-2 to examine the impacts of climate change and extreme weather on the grid.

Congressional actions

Turning to Congress, which has held three hearings on the matter, one in the Senate and two in the House, Dennis said the federal policy impacts were less clear.

“We think the major policy impact is that it is likely that [the hearings] will inform priorities that Congress as well as the [Biden] administration has in upcoming stimulus and infrastructure packages that we expect will start to move through Congress now that Congress has passed the COVID-19 relief bill and signed that into law in the last month or so,” Dennis said.

“I think our immediate assessment is that it’s unlikely that we’ll see broader legislative impacts,” he continued. “For example, it’s unlikely that Congress will turn to taking another look at the status of ERCOT’s interconnection to the rest of the country or even suggesting that ERCOT become subject to federal jurisdiction.”

However, topics such as the need for more deployment of energy storage resources and the role of transmission could gain traction in infrastructure and economic stimulus measures, he said, adding that “there will continue to be legislative policymaker impacts at the federal level in terms of putting pressure on folks to come up with solutions and to provide information” to ensure the next winter storm does not produce the same results.