Stan Silverman: Texas energy disaster another reminder of the need to plan for catastrophe
In mid-February, during a severe winter storm and freezing temperatures, the Texas power generation system failed, depriving electric power to over 4 million customers. It’s a lesson in what can happen when a mission-critical system is not designed to handle an extreme adverse situation, even one with a low probability of occurrence, that can result in a catastrophic outcome.
Texas’ coal, oil and natural gas power plants as well as wind turbines, were not designed to operate in severe cold weather conditions, unlike power plants and turbines in other parts of the U.S. and around the world.
The Electric Reliability Council of Texas (ERCOT), the organization that manages the power distribution grid in most of Texas, instituted rolling blackouts as power generation plants shut down to avoid losing the entire grid, which would have taken months to repair.
The ERCOT power grid is independent. There is a cost, however, for this independence. The power grid is not interconnected to the power grids outside Texas, so when it lost power supplied by the state’s power plants, it could not call on outside power grids as backup.
Why did this happen? Texas operates an energy market unencumbered by regulation, as a path to low-cost electric power. However, according to a study by The Wall Street Journal, since 2004, customers paid $28 billion more for electric power due to deregulation.
Electric power is the backbone of modern civilization. Due to the system’s failure, there was insufficient power to keep pipelines operating to deliver natural gas from the wellhead to power plants during and after the winter storm.
Many residential electric customers were in variable rate plans with their power suppliers, purchasing power at the wholesale rate, which constantly fluctuates. With the shortage of power due to the storm, the monthly bills of customers on variable rate plans who didn’t lose power saw their bills skyrocket, being charged at one point $9,000 per megawatt-hour, resulting in monthly bills of many thousands of dollars. Those customers who permitted automatic payments of these bills saw their bank accounts drained.
The Brazos Electric Cooperative filed for bankruptcy on March 1 because of the high cost of scarce electric power it purchased from ERCOT with little to no hope of being paid by its customers. The financial and legal fallout of the power disaster is just beginning.