Texas House passes sweeping legislation that seeks to fix power grid failures

State lawmakers on Sunday gave initial approval to an omnibus bill overhauling the state's electric supply system in response to February winter storms and power outages that left millions without power and more than 100 dead.

With a week to go in the legislative session, the Texas House on Monday approved a sweeping bill aimed at shoring up the state’s electric supply system and infrastructure, a proposal crafted in response to statewide power outages in February amid deadly winter storms that plunged millions of Texans into cold and darkness for days.

Senate Bill 3 would require infrastructure upgrades to prepare for extreme weather, seek to improve oversight of the state’s electricity supply chain and create a statewide emergency alert system in the event of future power outages.

Rep. Chris Paddie, R-Marshall, who carried the bill in the House, said it targets “the systematic failures from wellhead to light switch to try to address three main buckets: oversight and accountability, communication failures, which we saw throughout the system, and weatherization.”

“I don’t think it is acceptable for us to leave this session not having passed this bill and these reforms,” Paddie said.

Now the bill heads back to the Senate, where members must decide whether to accept changes made in the House. 

Rep. Trey Martinez Fischer, D-San Antonio, said he expects senators to form a conference committee instead of accepting the new changes to the bill, meaning select lawmakers from both chambers will meet behind closed doors to hash out a compromise.

Martinez-Fischer asked Paddie on Monday whether he would "protect the House and represent the interests of the House" during that process to ensure that amendments added in the chamber remain in the final version of the bill.

"When the will of the House is expressed, it is my intent at that point to defend the position of the House," Paddie said in reply. "I'm not going to commit to you that I will be 100% successful in doing that, but I feel I owe this body that and that is my intent."

Natural gas weatherization

Some energy experts and advocates have criticized the legislation, arguing that it does not go far enough to prevent a future power crisis, particularly in ensuring weatherization of the natural gas supply chain.

Industry advocates have worked behind the scenes to lessen the weatherization requirements in SB 3 for some natural gas wells and pipelines.

Among numerous provisions, the bill would require weatherization at certain gas supply chain facilities — those identified through the supply chain mapping process called for in the bill. This electric supply chain mapping would identify critical natural gas infrastructure necessary to maintain electricity service.

The bill tasks the Texas Railroad Commission, the state oil and gas regulatory agency, with determining the appropriate weather-related upgrades facilities would need to make. Companies could face a fine of $5,000 per day if they fail to comply with the weatherization requirement, or up to $1 million per day for "the highest class of violations."

The bill does not outline who would foot the bill for weatherization: taxpayers, energy companies or some combination of the two.

Paddie said the intent of the bill is to limit the weatherization requirements to critical natural gas infrastructure. 

“If you extend beyond that and you just say any old well out in West Texas, they may have nothing to do with the supply chain of electric generation and in fact may be one of 70,000 plus wells that are considered marginal wells,” Paddie said, referring to low-producing oil wells. “If we all of a sudden blatantly say that you have to weatherize everything, all of a sudden you’ve made 70,000 plus marginal wells uneconomical, probably.” 

Statewide natural gas production fell dramatically during the winter freeze as prices for the commodity soared. 

Data from the Electric Reliability Council of Texas, the nonprofit entity that operates the state’s electric grid, shows that failures by natural gas producers and suppliers during the winter storm may have been behind as much as a fifth of freeze-related power outages.

Other requirements

The bill also would require all other power generators who sell electricity in the ERCOT market to comply with "weather emergency preparedness" reliability standards determined by the Public Utility Commission, the governor-appointed board that oversees the ERCOT, as well as all utilities in the state.

The bill also tasks the commission and electric utilities with determining how "involuntary load shedding" should occur during a future energy emergency.

Load shedding, or rolling blackouts, is when electric providers shut down power supply to some customers across a service region to reduce overall strain on the grid. This typically occurs when demand for electricity approaches supply.

At the start of the February power outages, major generation units began failing in rapid succession and ERCOT ordered rolling blackouts to protect the grid from catastrophic failure.

But instead of rolling blackouts, millions of Texans were left without power for days.

More:ERCOT says Texas' risk of summer blackouts low despite high power demand

The bill also would create an energy emergency alert system to notify residents when the state’s power supply may be unable to meet demand or in the event of future power outages.

The original bill filed in the Senate prohibited wholesale indexed retail electric plans, which allows residential customers to purchase power at the prices wholesalers pay. Texas customers who purchased power through Griddy Energy saw their electric bills soar as high as five figures for just a few days worth of power during the winter storm.

But changes made to the bill in the House State Affairs Committee removed the ban on these plans and instead “establishes certain consumer protections and conditions” that providers must comply with to offer these types of electric plans.

Solar, wind

The House version of the bill removes language from the original legislation that targeted renewable energy sources such as wind and solar, by requiring these producers to pick up the tab for ancillary services and replacement power, which are charges for reserve power supply.

Currently, those costs are covered by consumers.

“Natural gas failures were primarily responsible for the deadly February blackouts, but some have unfairly blamed renewables and are working to saddle wind and solar with new costs while doing nothing to improve reliability,” said Luke Metzger, executive director of Environment Texas, in a statement. “Section 13 of SB 3 would have hamstrung the wind and solar industry and we appreciate Chairman Paddie and the committee for significantly improving the legislation.”

ERCOT, PUC reform

Also Monday, lawmakers approved SB 2, which seeks to reform ERCOT.

The bill would require all 16 board members to reside in Texas and mandate that five of its members be appointed by the governor.

Previously, board members have been selected in different ways, including by a nominating committee at ERCOT or by companies that participate in the electricity market. The residency requirement arose after the February outages, when lawmakers questioned why five members of the board lived outside of the state, including the chair.

All five out-of-state members resigned from the board by the end of February and two other board members later tendered their resignations. ERCOT CEO Bill Magness was fired from his post in March.

More:ERCOT facing fresh skepticism as strains on Texas power grid continue

Under SB 2, the governor would be responsible for appointing the “unaffiliated members” of the board, who serve as outside expert voices in decision making.

House members approved an amendment to the bill that would prohibit any member of the ERCOT board from working as a lobbyist within two years of leaving the board.

“It's very simple, it says if you serve on the board of ERCOT you cannot go into the lobby when you come off the board,” said Rep. Trey Martinez-Fischer, D-San Antonio, who authored the amendment. “You have to wait two years, no revolving door at ERCOT.”

The  bill next heads back to the Senate where members must decide whether to accept changes made in the House or take the bill to a conference committee.

The House on Sunday unanimously passed SB 2154, which also would prohibit PUC board members from lobbying for two years after leaving the board. The bill also increases the number of commissioners from three to five and introduces certain requirements for service.