“ERCOT: Texas Was 4 Minutes and 37 Seconds Away From a Blackout That Could Have Lasted Months” (news headline)
ERCOT centrally plans the electrical current of generation, transmission, and substations serving approximately 26 million Texans, 90 percent of the state’s load. (below)
Yesterday’s post documented why the Electric Reliability Council of Texas (ERCOT) is a government agency, not a private-sector institution. Nonprofit status and board “independence” cannot negate this de facto or de jure.
ERCOT, on cue from the Public Utility Commission of Texas (PUCT), centrally plans a huge market. PUCT-ERCOT performs financial functions around the electrical current of generation, transmission, and substations serving approximately 26 million Texans, 90 percent of the state’s load. In terms of size, this composes 81,000 MW of generation (680 units), 46,550 miles of transmission, and 5,000 substations, representing 85 percent of the Texas market.
Here is the information provided by ERCOT president & CEO Bill Magness on February 24, 2021, “Review of February 2021 Extreme Cold
Weather Event,” subtitled “Urgent Board of Directors Meeting.”
• Fulfills four responsibilities required by law as the independent organization certified by the PUC (PURA Section 39.151):
‒ Maintain electric system reliability
‒ Facilitate a competitive wholesale market
‒ Ensure open access to transmission
‒ Facilitate a competitive retail market
• Manages the flow of electric power over the bulk power system to approximately 26 million Texas end-use customers.
‒ About 90% of the state’s electric load
‒ Over 680 generation units
‒ Over 46,500 miles of transmission lines
• Must, at all times (24/7/365), balance all consumer demand in the ERCOT region (load) and the power supplied by companies who generate electricity (generation) while maintaining system frequency of 60 Hz.
• Performs financial settlement for the competitive wholesale bulk power market and administers retail switching for nearly 8 million premises in competitive choice areas
[What ERCOT does not do–and what private companies, coops, and munies do]
• Own, operate or have any enforcement authority over any electric generation facilities or any electric transmission or distribution lines or substations.
• Sell or send bills for retail electricity to residences or businesses.
• Control or operate electric service to local areas, neighborhoods or individual premises.
• Establish pricing or rates for retail electric customers.
• Have any direct customer relationships with the public
Significant modifications include:
• Implemented the Seasonal Assessment of Resource Adequacy report that includes an analysis for extreme winter weather.
• Began a resource weatherization process that includes an annual workshop, review of resource weatherization plans and spot checks of facilities.
• Modified the Ancillary Services procurement to allow additional procurement in anticipation of severe weather.
• Established the Gas Electric Working Group and created a notification procedure for QSEs to notify ERCOT if there are anticipated fuel restrictions.
• Modified the survey sent to natural gas generators that collects fuel switching capability for some resources in preparation for each winter season.
• Changed the rules and processes for withdrawing approval of resource outages in anticipation of severe weather.
The above description confirms ERCOT as a planning agency within a highly regulated nexus. ERCOT does not set prices, but it follows rules that help plan the power market. It
In a free market, private companies would determine what a private ERCOT would do. With profit incentives, and without mandates, electric companies, integrated or not, internally or externally (via contracts), would determine electron control areas.
Prior to the Public Utility Holding Company Act of 1935, “electricity majors” controlled much of the domestic power market. These majors would control ERCOT’s 90 percent share in to-be-determined fashion. These shares might be across state lines or not. Interconnections would be determined by the companies themselves and not based (such as by ERCOT) on jurisdictional issues such as escaping federal control.
“Planning” would be decentralized, and bypass within any territory would be legal so long as contractually permitted. “Wires on a pole” hardly necessitates a “natural monopoly,” and control areas do not constitute a “commons problem” beyond market entrepreneurship.
With ERCOT’s massive failure, the solution is not more regulation, more controls, which could well overcorrect for today’s problems at the expense of captive users.
The choice can and should be regulatory repeal to promote innovation and market discovery. Calling all classical liberals ….