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FTR #420 The Destabilization of California Pt. 2

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Sup­ple­ment­ing FTR 280, this pro­gram high­lights the cyn­i­cal, con­spir­a­to­r­i­al machi­na­tions of major ener­gy com­pa­nies, the Bush admin­is­tra­tion and the Cal­i­for­nia Repub­li­can estab­lish­ment in effect­ing Cal­i­for­ni­a’s “ener­gy cri­sis” of 2000–2001. High­light­ing the inter­play of Bush crony Ken Lay’s now dis­graced Enron firm, an advi­so­ry task force head­ed up by Bush asso­ciate James Bak­er and the Bush admin­is­tra­tion ener­gy com­mis­sion head­ed by Dick Cheney, the pro­gram access­es a very impor­tant paper authored by Kather­ine Yuri­ca. Be sure to check out this work at her web site. There are strong indi­ca­tions that Cal­i­for­ni­a’s “ener­gy cri­sis” was delib­er­ate­ly engi­neered in order to under­mine Demo­c­ra­t­ic gov­er­nor Gray Davis, enrich the ener­gy indus­try, and pro­vide the ratio­nale for the Bush admin­is­tra­tion’s for­eign pol­i­cy.

Pro­gram High­lights Include: For­mer gov­er­nor Pete Wilson’s chair­man­ship of Arnold Schwarzeneg­ger’s cam­paign; a very sus­pi­cious (prob­a­ble) test of the Cal­i­for­nia elec­tric­i­ty-bro­ker­ing infra­struc­ture; the Bak­er advi­so­ry group’s cit­ing of the Cal­i­for­nia “cri­sis” as the basis for domes­tic and for­eign pol­i­cy rec­om­men­da­tions; the Cheney group’s sus­pi­cious cit­ing of the Cal­i­for­nia ener­gy cri­sis; high­ly sus­pi­cious and con­tra­dic­to­ry word­ing of the “Nation­al Ener­gy Pol­i­cy” drawn up by the Cheney com­mis­sion; the Project for a New Amer­i­can Cen­tu­ry’s dis­cus­sion of the poten­tial use­ful­ness of “a new Pearl Har­bor”; the desta­bi­liza­tion of Jim­my Carter’s pres­i­den­cy by the oil indus­try, George H.W. Bush’s CIA and the Saud­is.

1. A major con­tribut­ing fac­tor to incum­bent gov­er­nor Gray Davis’ unpop­u­lar­i­ty is the enor­mous increase in elec­tric­i­ty prices due to the dereg­u­la­tion leg­is­la­tion effect­ed by for­mer gov­er­nor Pete Wil­son. Wil­son is “out­sider” Arnold Schwarzeneg­ger’s cam­paign man­ag­er, giv­ing the lie to Schwarzeneg­ger’s claim that he will kick the spe­cial inter­ests out of Sacra­men­to. He is, in fact, a tool of those very same spe­cial inter­ests.

“Admon­ished by his advis­ers not to make news out of the box, Mr. Schwarzeneg­ger left his cam­paign chair­man, Pete Wil­son, the for­mer Cal­i­for­nia gov­er­nor, to attack Mr. Davis as an incom­pe­tent spend­thrift, and less­er polit­i­cal min­ions to explain his per­son­al finances to a press corps demand­ing details, any details.”

(“In Full Field, It’s All About Schwarzeneg­ger” by Char­lie LeDuff and Alan Feuer; The New York Times; 8/11/2003;.)

2. Bush’s Sven­gali Karl Rove was appar­ent­ly among those who helped to anoint Schwarzeneg­ger as the stan­dard bear­er for Cal­i­for­nia.

“. . . From what we’ve heard, the Repub­li­can hierarchy—especially those close to for­mer Gov. Pete Wilson—would favor Schwarzeneg­ger. At least that’s the word that came out of the Bohemi­an Grove this past week­end, where a num­ber of state and nation­al GOP­ers, includ­ing pres­i­den­tial advis­er Karl Rove, hap­pened to have gath­ered at a club get­away . . .”

(“Mati­er & Ross: Schwarzeneg­ger to Decide”; San Fran­cis­co Chron­i­cle; 7/23/2003; p. A21.)

3. Begin­ning the dis­cus­sion of the delib­er­ate manip­u­la­tion of Cal­i­for­ni­a’s dereg­u­lat­ed elec­tric­i­ty mar­ket, the pro­gram chron­i­cles a star­tling fluc­tu­a­tion of rates in 1998. The author of this impor­tant, inci­sive arti­cle observes that this was appar­ent­ly a test of the “pow­er lift­ing” that desta­bi­lized Davis and boost­ed Schwarzeneg­ger in a posi­tion to move to Sacra­men­to. “This sto­ry begins with the Cal­i­for­nia ener­gy cri­sis, which start­ed in 2000 and con­tin­ued through the ear­ly months of 2001, when elec­tric­i­ty prices spiked to their high­est lev­els. Prices went from $12 per megawatt hour in 1998 to $2000 in Decem­ber 2000 to $250 in Jan­u­ary 2001, and at times a megawatt cost $1,000.” (“Fraud Traced to the White House: How Cal­i­for­ni­a’s Ener­gy Scam Was Inex­tri­ca­bly Linked to a War” by Kather­ine Yuri­ca; The Yuri­ca Report; p. 1; avail­able online at www.yuricareport.com/PoliticalAnalysis/FraudinWhiteHouse.htm .)

4.

“One event occurred ear­li­er. On July 13, 1998, employ­ees of one of the two pow­er-mar­ket­ing cen­ters in Cal­i­for­nia watched incred­u­lous­ly as the whole­sale price of 41 a megawatt hour spiked to $9,999, stayed at that price for four hours, then dropped to a pen­ny. Some­one was test­ing the sys­tem to find the lim­its of mar­ket exploita­tion. This inci­dent was the ear­li­est indi­ca­tion that the peo­ple and the state could become vic­tims of fraud. The Sacra­men­to Bee broke the sto­ry three years lat­er, on May 6, 2001. Today, Cal­i­for­ni­ans are still pay­ing the costs of the deba­cle while accord­ing to state offi­cials the pow­er com­pa­nies who manip­u­lat­ed the ener­gy mar­kets reaped more than $7.5 bil­lion in unfair prof­its.”

(Idem.)

5. Cal­i­for­ni­a’s “ener­gy cri­sis” appar­ent­ly served as a foun­da­tion for dis­graced Enron chair­man Ken­neth Lay’s piv­otal rec­om­men­da­tions to Vice-Pres­i­dent Dick Cheney’s ener­gy pol­i­cy task force.

“In April of 2001, Ken Lay hand­ed Dick Cheney a two-page mem­o­ran­dum rec­om­mend­ing nation­al ener­gy pol­i­cy changes. The memo con­tained Enron’s posi­tions on spe­cif­ic, rather tech­ni­cal issues, which were pre­sent­ed as a ‘fix’ for the Cal­i­for­nia cri­sis. (Enron brazen­ly advised the admin­is­tra­tion not to place price caps on ener­gy, which would be pre­cise­ly the request Cal­i­for­nia offi­cials made to the pres­i­dent, and which the Pres­i­dent and the Vice Pres­i­dent would just as brazen­ly deny until pub­lic pres­sure forced them to capit­u­late.)”

(Ibid.; p. 2.)

6. For­mer Bush (Senior) sec­re­tary of state James Bak­er presided over an advi­so­ry report that also appears to have been cen­tral to Cheney’s ener­gy direc­tives.

“On Octo­ber 6, 2002, a news­pa­per in the UK pub­lished a lit­tle known arti­cle about Mr. Cheney’s advis­ers. Accord­ing to Neil MacK­ay, an award-win­ning jour­nal­ist, writ­ing for Scot­land’s Sun­day Her­ald, Dick Cheney com­mis­sioned an ener­gy report from ex-Sec­re­tary of State James Bak­er III. The time of this ‘com­mis­sion’ is not report­ed, but since the mem­bers of the appoint­ed task force held three video­con­fer­ences and tele­con­fer­ences in Decem­ber, Jan­u­ary, and Feb­ru­ary 2000–2001, Cheney there­fore log­i­cal­ly con­tact­ed Bak­er some time pri­or to the Decem­ber 2000 meeting—during the pres­i­den­tial tran­si­tion peri­od.”

(Ibid.; p. 3.)

7. Bak­er’s law firm is the legal coun­sel for the Bin Laden-con­nect­ed Car­lyle Group. In addi­tion, the firm is rep­re­sent­ing Sau­di Prince Sul­tan in a tril­lion-dol­lar suit filed by the sur­vivors of the vic­tims of 9/11.

“James Bak­er was unique­ly sit­u­at­ed to ful­fill Cheney’s com­mis­sion, for among the many hats he wears, he is legal coun­sel to the Car­lyle Group, one of the nation’s largest defense invest­ment firms whose board con­sists of for­mer high lev­el gov­ern­ment offi­cials, includ­ing George Bush, Sr. Bak­er was also the ‘hired gun’ for George W. Bush’s cam­paign in Flori­da, along with Karl Rove. But among the hats he wears, none is more valu­able than his abil­i­ty to become invis­i­ble and leave no fin­ger­prints behind. James Bak­er courts the press and is hailed a states­man; he also serves as the hon­orary chair­man of the James Bak­er III Insti­tute for Pub­lic Pol­i­cy at Rice Uni­ver­si­ty, a think tank that was involved in aid­ing the George W. Bush pres­i­den­tial tran­si­tion teams.”

(Idem.)

8.

“Equal­ly intrigu­ing is the fact that Bak­er has ties with both the Bush­es and Ken Lay. Years ear­li­er, in 1993, after Bak­er stepped down from his stint as Sec­re­tary of State, he and Robert A. Mosbacher—Bush senior’s com­merce secretary—signed a joint con­sult­ing and invest­ing agree­ment with Enron. The two men began a lucra­tive career mak­ing joint glob­al invest­ments with Enron on nat­ur­al gas projects. Bak­er Botts LLC, James Bak­er’s law firm, flour­ished in its spe­cial­ty of inter­na­tion­al oil and gas coun­sel­ing.”

(Idem.)

9. Ken Lay was not the only ener­gy-indus­try high roller to par­tic­i­pate in the Bak­er task force.

“Since Bak­er walked in their cir­cles, when he set out to select an ener­gy team to advise the White House, he filled it with lead­ers of the oil, gas, and pow­er indus­tries. Three appointees stand out: Ken­neth Lay from Enron, who was work­ing on the Bush ener­gy Tran­si­tion team under Dick Cheney at the time; Chuck Wat­son, the then Chair­man and CEO of Hous­ton’s Dyn­e­gy Inc., and Dyn­e­gy’s Gen­er­al Coun­sel and Sec­re­tary, Ken­neth Ran­dolf. Both firms were deeply involved in ille­gal­ly manip­u­lat­ing the Cal­i­for­nia ener­gy mar­ket at the time and even­tu­al­ly faced crim­i­nal inves­ti­ga­tions.”

(Ibid.; pp. 3–4.)

10. The Cal­i­for­nia “ener­gy cri­sis” appears to have played a key part in the rec­om­men­da­tions of the Bak­er ener­gy advi­so­ry group.

“The Bak­er ener­gy task force pro­duced a report titled, Strate­gic Ener­gy Pol­i­cy Chal­lenges for the 21st Cen­tu­ry, dat­ed April 2001. There is no mis­tak­ing the fact that rea­son­able, detailed and impor­tant expert advice is met­ed out to the new pres­i­dent. How­ev­er, this amaz­ing 107-page report strikes a drum­beat for action that grabs the read­er as it pro­pels a pic­ture of a naked, ener­gy-scarce nation, sub­ject to ener­gy short­ages and price fluc­tu­a­tions, across its pages. Con­trast­ing the state of what is, against what should be, and mer­ci­ful­ly mak­ing pow­er­ful rec­om­men­da­tions that will ‘save our econ­o­my,’ it offers warn­ings such as: a sharp rise ‘in oil prices pre­ced­ed every Amer­i­can reces­sion since the late 1940’s.’ ”

(Ibid.; p. 4.)

11.

“The Cal­i­for­nia ener­gy cri­sis is raised again and again, along with the prophe­cy that Amer­i­ca can expect ‘more Cal­i­for­nia-like inci­dents’ in the future. There’s even a con­nec­tion made between the Cal­i­for­nia cri­sis and the Mid­dle East, which accord­ing to the report, ‘will remain the world’s base-load sup­pli­er and least expen­sive source of oil for the fore­see­able future.’ With that prophet­ic utter­ance, the stage is now set for a new actor, a new vil­lain, and a new ener­gy pol­i­cy. . . .”

(Idem.)

12. Although it is not cov­ered in detail in the broad­cast, the Bush ener­gy pol­i­cy also had pro­found for­eign pol­i­cy rec­om­men­da­tions, focus­ing on Iraq, among oth­er issues. The broad­cast reviews the dis­turb­ing obser­va­tions about the poten­tial use­ful­ness of “A New Pearl Har­bor” in a paper by the Bush-con­nect­ed Project for a New Amer­i­can Cen­tu­ry.

“ ‘The his­to­ry of the 20th Cen­tu­ry should have taught us that it is impor­tant to shape cir­cum­stances before crises emerge and to meet threats before they become dire.’ In fact, on pages 51 and 67 of the insti­tu­tion’s intel­lec­tu­al cen­ter­piece, Rebuild­ing Amer­i­ca’s Defens­es, the authors lament that the process of trans­form­ing the mil­i­tary would most like­ly be a long one, ‘absent some cat­a­stroph­ic and cat­alyz­ing event—like a new Pearl Har­bor.’ (How unfor­tu­nate for Amer­i­cans, they got their need­ed event on Sep­tem­ber 11, 2001.)”

(Ibid.; p. 5.)

13.

“One of the most strik­ing facts about the nation­al report is that it makes 110 ref­er­ences to Cal­i­for­ni­a’s ener­gy cri­sis, which was nine­ty-nine more than the Bak­er report makes. Clear­ly, some­one in the White House need­ed an impres­sive ener­gy cri­sis to tout. How unfor­tu­nate that the cri­sis cit­ed was fraud­u­lent­ly induced. Like the Bak­er report, the nation­al report states, ‘The Cal­i­for­nia expe­ri­ence demon­strates the crip­pling effect that elec­tric­i­ty short­ages and black outs can have on a state or region.’ Warn­ings abound: ‘Amer­i­ca in the year 2001 faces the most seri­ous ener­gy short­age since the oil embar­goes of the 1970’s.’ The 110 rep­e­ti­tions of the word ‘Cal­i­for­nia’ linked with words like ‘ener­gy cri­sis,’ and ‘ener­gy short­ages and price spikes,’ could turn the nation­al ener­gy report into an ad man’s prized primer.”

(Ibid.; p. 6.)

14. Revers­ing direc­tion, the author (s) of one of the pas­sages in the report reveals the he (or she) is aware of the true nature of Cal­i­for­ni­a’s man­u­fac­tured ener­gy cri­sis.

“Notwith­stand­ing its impor­tance as an exam­ple of what could hap­pen to oth­er states, the author of a pas­sage (at page 5–12) of the nation­al report sud­den­ly yields to an impulse to relate what real­ly hap­pened in Cal­i­for­nia. In doing so, he com­plete­ly con­tra­dicts at least 105 ref­er­ences to Cal­i­for­nia through­out the report. The sig­nif­i­cance of this con­tra­dic­to­ry entry into the Nation­al Ener­gy Pol­i­cy must not be under­es­ti­mat­ed.”

(Idem.)

15.

“In the process of revers­ing the care­ful­ly con­strued ‘Cal­i­for­nia expe­ri­ence,’ the author’s grasp exceeds his knowl­edge in that his under­stand­ing of the events in Cal­i­for­nia go beyond what he should have rea­son­ably known at the time of its writ­ing. For he wrote, ‘The risk that the Cal­i­for­nia expe­ri­ence will repeat itself is low, since oth­er states have not mod­eled their retail com­pe­ti­tion plans on Cal­i­for­ni­a’s plan.’ This is an astound­ing state­ment. If the Cal­i­for­nia cri­sis was caused by a sup­ply short­age as the author claims a line above this sen­tence, sure­ly oth­er states could suf­fer sim­i­lar short­ages. But no, the author is actu­al­ly mak­ing an admis­sion here: he is admit­ting the ener­gy cri­sis in Cal­i­for­nia can’t be repli­cat­ed in oth­er states because cer­tain mar­ket means do not exist in the oth­er states. How could the author know this? The writer of that sen­tence would have to be some­one inti­mate­ly involved in the Cal­i­for­nia sys­tem; know the real cause of the state’s cri­sis; and be famil­iar with all the oth­er state rules and mar­ket infra­struc­tures.”

(Idem.)

16. Ms. Yuri­ca dis­cuss­es yet anoth­er reveal­ing rever­sal of direc­tion by the author of the report.

“But our knowl­edge­able author is not done. In try­ing to ampli­fy what he just revealed, he tried to hide the true actors in the next sen­tence by mis­di­rect­ing the read­er away from the cul­prits to blame the state. This is a for­mu­la for inco­her­ence. Nonethe­less, the writer’s sen­tence found its way into the nation­al ener­gy report where it spoke for the Bush admin­is­tra­tion: “Cal­i­for­ni­a’s fail­ure to amend its rules, along with the flawed rules them­selves, some­how had an inde­pen­dent pow­er to ‘dri­ve up whole­sale prices,’ with­out an inter­ven­ing act­ing agent. The only sen­si­ble read­ing left to us is that the flawed rules allowed pow­er bro­kers to manip­u­late the sys­tem. But how could our author and his admin­is­tra­tion edi­tors know this to be true with­out being in col­lu­sion with the wrong­do­ers? If they were not in col­lu­sion they would have report­ed the crime. But if they remained silent when they had a duty to report or stop the com­mis­sion of a crime, they became acces­sories.”

(Ibid.; pp. 6–7.)

17.

“Con­tin­u­ing his unex­pect­ed analy­sis, the author tells us, ‘Actions such as forc­ing util­i­ties to pur­chase all their pow­er through volatile spot mar­kets, impos­ing a sin­gle-price auc­tion sys­tem, and bar­ring bilat­er­al con­tracts all con­tributed to the prob­lems that Cal­i­for­nia now faces.’ This is noth­ing more than the author, and through him the White House, attempt­ing to throw respon­si­bil­i­ty for any wrong­do­ing by ener­gy com­pa­nies in Cal­i­for­nia square­ly at the feet of the state.”

(Ibid.; p. 7.)

18. Philoso­pher George San­tayana stat­ed that, “Those who for­get the past are con­demned to repeat it.” Fore­shad­ow­ing the actions of George W. Bush’s ener­gy-indus­try cronies in Cal­i­for­nia, the petro­le­um indus­try, the Saud­is and George H.W. Bush’s CIA helped to desta­bi­lize Jim­my Carter’s Pres­i­den­cy.

“The sources we inter­viewed for this chap­ter say that the oil indus­try had a well thought out scheme to deceive the pres­i­dent and con­trol U.S. pol­i­cy in the Mid­dle East. The first part involved intel­li­gence fal­si­fi­ca­tion on a grand scale. This was no small-time Angle­ton Ves­sel forgery. This time, our sources insist, the pres­i­dent of the Unit­ed States was to have his ‘pants scared right off him.’ The CIA was used to pro­duce pho­ny oil data to show that the world’s two great­est oil pro­duc­ers, the Sovi­et Union and Sau­di Ara­bia, were run­ning out of oil. The Sovi­ets would be forced to fight the Unit­ed States for con­trol of Mid­dle East­ern oil.”

(The Secret War Against the Jews; by John Lof­tus and Mark Aarons; Copy­right 1994 by Mark Aarons; St. Mar­t­in’s Press; [SC] ISBN 0–312-15648–0; p. 332.)

19.

“It is hard to recall why he [Jim­my Carter] was so despised when he ws in office. Much of it has to do with the secret his­to­ry of oil pol­i­tics. Even dur­ing the 1976 elec­tion cam­paign, the oil com­pa­nies viewed the Demo­c­ra­t­ic can­di­date as Pub­lic Ene­my Num­ber One. Carter cer­tain­ly had some rad­i­cal ides about ener­gy pol­i­cy, which made the oil com­pa­nies fear­ful for the future and their prof­it lev­els.”

(Ibid.; p. 333.)

20.

“ ‘The whole pho­ny scheme—the oil short­ages, the pre­dic­tions about Sovi­et troops in the Mid­dle East, the Sau­di arms buildup—all of that crap start­ed com­ing out of the agency back in ’76. The CIA told their boss what he want­ed to hear, and in those days, the head of the CIA was an oil man.’ ”

(Ibid.; p. 334.)

21.

“Accord­ing to sev­er­al of our sources, the scheme to man­u­fac­ture pho­ny CIA esti­mates and push them on Carter began in the last days of Ger­ald Ford’s term. They claim that a cabal with­in the CIA real­ized that Carter would be the new pres­i­dent, pro­duced the first pho­ny report, and then prompt­ly gave it to Carter as soon as he won, know­ing how it would affect his view of the ener­gy cri­sis. It should be recalled that George Bush was the direc­tor of the CIA at the time the oil scam was put in place in 1976. There is some evi­dence to sug­gest that it was Bush him­self who passed the fake oil esti­mates to Carter. In the imme­di­ate after­math of Carter’s win, Bush trav­eled to Plains, Geor­gia, to brief the incom­ing pres­i­dent.”

(Ibid.; pp. 334–335.)

22.

“ ‘Don’t you get it?” asked one of our sources. ‘The gas short­age dur­ing the Carter admin­is­tra­tion was as pho­ny as the CIA’s pre­dic­tion about the Sovi­et oil short­age. The god damn Mid­dle East was swim­ming in oil dur­ing the Carter admin­is­tra­tion, but less and less of it ws shipped to Amer­i­ca. For chris­sakes, there was so much oil in South Amer­i­ca that they had to shut down refiner­ies I the Caribbean to keep it away from the U.S.”

(Ibid.; p. 353.)

23.

“Under the Repub­li­cans, lucra­tive arms fac­to­ries sprout­ed in what had pre­vi­ous­ly been rur­al demo­c­ra­t­ic states. The votes went where the jobs were. In the course of the Rea­gan-Bush admin­is­tra­tions, the defense bud­get was increased to a point where more mon­ey was spent on arms than in all the wars in U.S. his­to­ry com­bined. To accom­plish this mas­sive defense buildup, the Rea­gan-Bush admin­is­tra­tions bor­rowed three times more mon­ey than all U.S. pres­i­dents com­bined The largest debt in Amer­i­can his­to­ry was based on the faulty premise that the Sovi­et Union was going to attack the Mid­dle East.”

(Ibid.; p. 355.)

Discussion

14 comments for “FTR #420 The Destabilization of California Pt. 2”

  1. Is Schwazi tied in with the Haps­burg boy’s UNPO.... did he get Maria through the Dalai Lama gim­mick, or seek her for the Dalai Lama politi­ciza­tion gim­mick? Maybe you noticed how one of Schwaz­i’s first trips was to Tai­wan to thank his EEa­sia-Under­world alliance back­ers who are rid­ing pret­ty in Cal­i­for­nia now, as they did under Chica­go Mafia Peet Wil­son. Did you already cov­er Schwaz­i’s con­nec­tions to Fritz Com­pa­nies who pup­peteered Wal­mart for sev­er­al years, and whose HQ was in Ger­many and which is now tied with the Naz­i­fy­ing Cal Green Par­ty along with the Ger­man CIIS pro­fes­sor who played Bluebird/Ultra with Tim­o­thy Leary?
    Isn’t it like­ly that Pres Schwazi is the Haps­burg’s man in Sac­to? He was at one time try­ing to buy the state’s new green tech­nol­o­gy from Ger­man man­u­fac­tur­ers for a bloat­ed price.

    Posted by Blake | January 30, 2009, 11:44 pm
  2. Ah, ener­gy-mar­ket fraud: The Gen­tle­man’s choice for stick­er shock:

    Finan­cial Times
    Novem­ber 15, 2012 2:55 am
    JPMor­gan pow­er trad­ing rights restrict­ed

    By Tom Braith­waite in New York

    The US ener­gy reg­u­la­tor has banned JP Mor­gan Chase from trad­ing elec­tric­i­ty at mar­ket rates for six months, accus­ing the bank of sub­mit­ting false infor­ma­tion to a con­tin­u­ing inves­ti­ga­tion into alleged mar­ket manip­u­la­tion.

    JPMor­gan, which has had run-ins with reg­u­la­tors all year includ­ing over its out­sized loss­mak­ing deriv­a­tives trades in Lon­don, was hit by an order from the US Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion on Wednes­day evening relat­ed to its activ­i­ties in Cal­i­for­nia.

    The reg­u­la­tor has been new­ly zeal­ous in recent months in levy­ing large fines against mar­ket play­ers includ­ing Bar­clays.

    The order bars JPMor­gan from sell­ing elec­tric­i­ty at mar­ket rates in Cal­i­for­nia for six months from April 1 2013. How­ev­er, the bank will still be able to trade elec­tric­i­ty at prices deter­mined by coun­ter­par­ties and it can con­tin­ue to trade oth­er ener­gy prod­ucts and deriv­a­tives. In essence, the order lim­its the bank’s prof­its while allow­ing it to con­tin­ue oper­at­ing in pow­er mar­kets.

    Whole­sale elec­tric­i­ty has attract­ed height­ened reg­u­la­to­ry atten­tion since the Cal­i­for­nia ener­gy cri­sis of 2000-01, when Enron and oth­er traders were accused of rig­ging sup­plies and caus­ing black­outs. In the past year, Ferc has alleged that Bar­clays and Deutsche Bank manip­u­lat­ed elec­tric­i­ty mar­kets, and has com­pelled Con­stel­la­tion Ener­gy to pay $245m to set­tle anoth­er case.

    Last month Ferc pro­posed a fine of $435m and dis­gorge­ment of $34.9m for Bar­clays for vio­lat­ing the anti-manip­u­la­tion rule in the pow­er trad­ing mar­ket from late 2006 to 2008.
    ...

    Posted by Pterrafractyl | November 15, 2012, 9:17 am
  3. Oh no!!!! There’s a oil glut com­ing due to new refiner­ies open­ing up around the world. No wor­ries, though. The mar­ket is expect­ed to ‘cor­rect’ this prob­lem with a series of refin­ery shut­downs:

    Oil prod­uct glut com­ing as refiner­ies mush­room: IEA

    By Dmit­ry Zhdan­nikov and Christo­pher John­son

    LONDON | Wed Jun 12, 2013 5:41am EDT

    (Reuters) — The world is head­ing for a glut of refined prod­ucts as new Asian and Mid­dle East refiner­ies increase oil pro­cess­ing in a move like­ly to force less advanced com­peti­tors in devel­oped coun­tries to close, the West­’s ener­gy agency said on Wednes­day.

    The Inter­na­tion­al Ener­gy Agency said in its month­ly report it expect­ed 9.5 mil­lion bar­rels per day (bpd) of new crude dis­til­la­tion capac­i­ty, rep­re­sent­ing more than a 10th of glob­al demand, to come on stream in 2013–2018, sub­stan­tial­ly more than the fore­cast increase in crude pro­duc­tion capac­i­ty and glob­al demand growth.

    “While Europe’s eco­nom­ic woes are tak­ing a toll on demand, there are mount­ing signs that Chi­na’s oil use, like its econ­o­my, may have shift­ed to a low­er gear. Slow­er growth in demand than in runs could lead to prod­uct stock builds,” the IEA said.

    The agency said changes would be already felt from the third quar­ter of 2013 as glob­al refin­ery runs may rise by more than 2 mil­lion bpd on the back of increased pro­cess­ing by Chi­na, Sau­di Ara­bia and Venezuela.

    This spike in crude runs would exceed fore­cast prod­uct demand growth of 1.7 mil­lion bpd, the IEA said.

    It also added glob­al crude sup­ply could strug­gle to keep up with refin­ing demand because of sea­son­al main­te­nance to North Sea pro­duc­tion, Sudan’s strug­gle to resume pro­duc­tion, the annu­al hur­ri­cane sea­son in the U.S. Gulf and risks to Mid­dle East­ern out­put due to the Syr­i­an civ­il war.

    Short­er-than-expect­ed crude sup­ply and large refin­ing vol­umes would under­mine refin­ing mar­gins.

    “While that would nor­mal­ly prompt refin­ers to drop their through­puts, mar­ket par­tic­i­pants may not be equal­ly recep­tive to such price sig­nals. New refin­ing capac­i­ty would like­ly be the last to cut back on runs if refin­ing eco­nom­ics turned south,” the IEA said.

    “On the oth­er hand, old­er plants in mature mar­kets, sad­dled with com­par­a­tive­ly high costs, might feel the heat. That those plants should find it increas­ing­ly tough to com­pete is a wide­ly antic­i­pat­ed out­come of the cur­rent down­stream restruc­tur­ing,” the IEA added.

    ...

    Prob­lem solved.

    Posted by Pterrafractyl | June 14, 2013, 2:35 pm
  4. But, but, but they did noth­ing wrong!

    The Wall Street Jour­nal
    Updat­ed July 17, 2013, 3:19 p.m. ET

    J.P. Mor­gan, Ener­gy Reg­u­la­tor Near Record Set­tle­ment
    Bank Set to Pay Hun­dreds of Mil­lions of Dol­lars Over Alle­ga­tions of Elec­tric­i­ty-Mar­ket Manip­u­la­tion

    By DAN FITZPATRICK And RYAN TRACY

    J.P. Mor­gan Chase & Co. and U.S. ener­gy-mar­ket reg­u­la­tors are close to a set­tle­ment that could involve the largest pay­out in the his­to­ry of the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion, said peo­ple famil­iar with the con­ver­sa­tions.

    A deal isn’t final and could still fall apart. But the bank and the reg­u­la­tor, known by the acronym FERC, are exchang­ing drafts of an agree­ment that would resolve alle­ga­tions that the largest U.S. bank manip­u­lat­ed elec­tric­i­ty mar­kets in Cal­i­for­nia and the Mid­west, these peo­ple said.

    A final amount to be paid by J.P. Mor­gan was­n’t known, but pre­vi­ous dis­cus­sions involved a fig­ure that was close to $1 bil­lion, these peo­ple said.

    The con­ver­sa­tions high­light an increas­ing­ly aggres­sive stance tak­en by a lit­tle-known fed­er­al agency that over­sees trans­mis­sion lines, nat­ur­al-gas pipelines and the pow­er trad­ing mar­kets that set util­i­ty bills for mil­lions of busi­ness­es.

    On Tues­day FERC levied a record $435 mil­lion fine against British bank Bar­clays PLC over alle­ga­tions it manip­u­lat­ed Cal­i­for­nia ener­gy mar­kets from 2006 to 2008. FERC also asked for $18 mil­lion in fines from four for­mer traders and the return of $34.9 mil­lion in “unjust prof­its.” Bar­clays on Wednes­day said it would­n’t pay the fines and intend­ed to fight the mat­ter in court.

    J.P. Mor­gan has dis­put­ed FER­C’s alle­ga­tions and some exec­u­tives argued pri­vate­ly the bank should­n’t set­tle because it did noth­ing wrong, said peo­ple famil­iar with the bank’s con­ver­sa­tions with reg­u­la­tors. Blythe Mas­ters, who runs J.P. Mor­gan’s com­modi­ties unit, resist­ed an ear­li­er offer from FERC that involved ban­ning three of her traders from the com­modi­ties mar­kets, these peo­ple said. Her view was these employ­ees and the bank did noth­ing wrong, these peo­ple added.

    ...

    FERC noti­fied the New York bank in March that it intend­ed to rec­om­mend an enforce­ment action against its pow­er-trad­ing unit, J.P. Mor­gan Ven­tures Ener­gy Corp. The notice alleged the bank mis­rep­re­sent­ed the prices of elec­tric­i­ty con­tracts with Cal­i­for­nia and the Mid­west that result­ed in over­pay­ments and that Ms. Mas­ters and three oth­er traders had made false rep­re­sen­ta­tions under oath, accord­ing to a per­son famil­iar with the doc­u­ment.

    J.P. Mor­gan has said it dis­putes the alle­ga­tions and defend­ed its behav­ior aggres­sive­ly in a for­mal response to FERC that ran hun­dreds of pages long, said a per­son famil­iar with that doc­u­ment.

    In the course of its inves­ti­ga­tion, FERC stripped the bank of its abil­i­ty to sell pow­er from three South­ern Cal­i­for­nia pow­er plants where it had agree­ments to pro­vide fuel and sell the out­put. J.P. Mor­gan inher­it­ed the elec­tric­i­ty rights with its 2008 pur­chase of invest­ment bank Bear Stearns Cos. It recent­ly agreed to sell these rights to South­ern Cal­i­for­nia Edi­son.

    The accu­sa­tions against J.P. Mor­gan sur­faced in ear­ly 2011 when the Cal­i­for­nia Inde­pen­dent Sys­tem Oper­a­tor, which over­sees the dai­ly trad­ing that sets elec­tric­i­ty prices in the state, saw bid­ding strate­gies it believed allowed J.P. Mor­gan’s ener­gy-trad­ing unit to extract exces­sive prof­its from the mar­ket, accord­ing to reg­u­la­to­ry fil­ings that FERC has said describe the alle­ga­tions against J.P. Mor­gan.

    The fil­ings don’t men­tion J.P. Mor­gan, but they show that mar­ket mon­i­tors in Cal­i­for­nia and the Mid­west focused on the alleged manip­u­la­tion of “make-whole” pay­ments that elec­tric­i­ty providers are sup­posed to receive in the event that their rev­enue on a giv­en day does­n’t cov­er the fixed costs for start­ing up a pow­er plant.

    The fil­ings describe the strat­e­gy this way: traders would sub­mit a rel­a­tive­ly low bid to deliv­er elec­tric­i­ty in the “day-ahead” mar­ket, ensur­ing that sys­tem oper­a­tors would sched­ule their pow­er plant to turn on the fol­low­ing day. Then the traders would make an offer the next day to deliv­er elec­tric­i­ty from that same plant at a rel­a­tive­ly high price, caus­ing the sys­tem oper­a­tor to instead ask the pow­er plant to deliv­er sub­stan­tial­ly less elec­tric­i­ty than sched­uled.

    While the traders might lose mon­ey on bids to deliv­er pow­er at high or low prices, they would also be eli­gi­ble for a “make-whole” pay­ment because their pow­er plant had been sched­uled to deliv­er a sub­stan­tial amount of elec­tric­i­ty that was­n’t actu­al­ly need­ed. The “make-whole” pay­ment would cov­er any trad­ing loss­es and also gen­er­ate a prof­it, accord­ing to the fil­ings.

    ...

    The agen­cy’s cur­rent capa­bil­i­ties are more robust than at the time of the Cal­i­for­nia ener­gy cri­sis, in 2001, and the sub­se­quent col­lapse of big ener­gy trad­er Enron Corp. At the time, Con­gress lam­bast­ed the agency for lax enforce­ment. Fol­low­ing the ener­gy cri­sis, FERC moved to explic­it­ly pro­hib­it manip­u­la­tive behav­ior and it got author­i­ty from Con­gress to levy fines of up to $1 mil­lion per vio­la­tion, com­pared with $10,000 per vio­la­tion before the Cal­i­for­nia mar­ket melt­down.

    In a recent inter­view, Mr. Welling­hoff, who for­mer­ly was a con­sumer advo­cate for the state of Neva­da, said his goal was to levy fines against manip­u­la­tors that “hurt enough, so they don’t do it again.”

    Maybe JP Mor­gan felt it was jus­ti­fied rip­ping off the pub­lic using an ener­gy trad­ing firm that it acquired dur­ing the Bear Stearns col­lapse giv­en what a rip off that whole deal was? Not that it would revenge for the deal. Quite the oppo­site. Just busi­ness as usu­al.

    Posted by Pterrafractyl | July 17, 2013, 12:50 pm
  5. This is exact­ly the kind of bold reg­u­la­to­ry enforce­ment that makes cor­rupt banksters every­where shake in their boots. With glee:

    The New York Times
    JPMor­gan Exec­u­tive May Escape Penal­ty
    By JESSICA SILVER-GREENBERG
    July 18, 2013, 8:40 pm

    Even as the nation’s top ener­gy reg­u­la­tor is poised to extract a record set­tle­ment from JPMor­gan Chase over accu­sa­tions that it manip­u­lat­ed pow­er mar­kets, the agency is expect­ed to spare a top bank lieu­tenant who fed­er­al inves­ti­ga­tors ini­tial­ly con­tend­ed made “false and mis­lead­ing state­ments under oath,” accord­ing to peo­ple briefed on the mat­ter.

    Blythe Mas­ters, a sem­i­nal Wall Street fig­ure who is known for devel­op­ing exot­ic finan­cial instru­ments, emerged this spring at the cen­ter of an inves­ti­ga­tion by the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion into accu­sa­tions of ille­gal trad­ing in the Cal­i­for­nia and Michi­gan elec­tric­i­ty mar­kets.

    The reg­u­la­tor found that JPMor­gan designed trad­ing “schemes” that con­vert­ed “mon­ey-los­ing pow­er plants into pow­er­ful prof­it cen­ters,” a com­mis­sion doc­u­ment said.

    While the com­mis­sion and JPMor­gan are nego­ti­at­ing a set­tle­ment for about $500 mil­lion, the peo­ple briefed on the mat­ter said, Ms. Mas­ters is not expect­ed to face a sep­a­rate action. The move sig­nals a piv­ot for the agency, which has been increas­ing­ly flex­ing its enforce­ment mus­cle, accord­ing to the peo­ple briefed on the mat­ter, who spoke on the con­di­tion they not be named.

    Months ear­li­er, inves­ti­ga­tors planned to rec­om­mend that the reg­u­la­tor find Ms. Mas­ters, who holds a pow­er­ful posi­tion with­in JPMor­gan as the head of its com­modi­ties busi­ness, “indi­vid­u­al­ly liable.” But as the inves­ti­ga­tion pro­gressed, these peo­ple said, top ener­gy reg­u­la­to­ry offi­cials have been lean­ing toward not pur­su­ing any civ­il charges against Ms. Mas­ters.

    The deci­sion — which could change, accord­ing to the peo­ple briefed on the mat­ter — would mean that Ms. Mas­ters would escape the agency’s sweep­ing crack­down against big banks. After gain­ing enforce­ment author­i­ty because of a change in 2005 that allowed it to impose fines of $1 mil­lion a day for each vio­la­tion, the ener­gy reg­u­la­tor has tak­en a tougher stance with Wall Street.

    ...

    With­in Wall Street, Ms. Mas­ters is wide­ly con­sid­ered a pio­neer for her use of cred­it deriv­a­tives, the com­plex finan­cial prod­ucts that played a cen­tral role in the 2008 finan­cial cri­sis. Ris­ing through the ranks of JPMor­gan — she was the youngest man­ag­ing direc­tor at 28 — Ms. Mas­ters became one of the most pow­er­ful exec­u­tives on Wall Street, pro­pelled by a vision that the prod­ucts could rad­i­cal­ly remake the bank­ing indus­try.

    ...

    JPMor­gan has argued that its trad­ing was legal. In an ear­li­er state­ment, a bank spokes­woman said the “bid­ding strate­gies were in full com­pli­ance with applic­a­ble rules.”

    But the ener­gy inves­ti­ga­tors dis­agreed, the doc­u­ment shows. Duped by the manip­u­la­tion, the inves­ti­ga­tors said, author­i­ties in Cal­i­for­nia and Michi­gan gave rough­ly $83 mil­lion in “exces­sive” pay­ments to JPMor­gan.

    When JPMor­gan traders worked to sys­tem­i­cal­ly “cov­er up” the strat­e­gy, inves­ti­ga­tors ini­tial­ly found, Ms. Mas­ters aid­ed the obfus­ca­tion. Ms. Mas­ters “per­son­al­ly par­tic­i­pat­ed in JPMorgan’s efforts to block” the state author­i­ties “from under­stand­ing the rea­sons behind JPMorgan’s bid­ding schemes,” the doc­u­ment said.

    ...

    Posted by Pterrafractyl | July 19, 2013, 6:47 am
  6. Here’s an arti­cle about the ongo­ing drought cri­sis across the US South­west that rais­es a very chill­ing pos­si­bil­i­ty: The increas­ing­ly hands off nature of the pri­vate mar­ket for water sales is cre­at­ing the kind of sit­u­a­tion that is eeri­ly rem­i­nis­cent of Enron:

    In dry Cal­i­for­nia, water fetch­ing record prices
    In bone dry Cal­i­for­nia, water fetch­ing record prices as sell­ers cash in on drought
    Asso­ci­at­ed Press
    By Garance Burke, Asso­ci­at­ed Press Writer 7/2/2014

    SAN FRANCISCO (AP) — Through­out Cal­i­for­ni­a’s des­per­ate­ly dry Cen­tral Val­ley, those with water to spare are cash­ing in.

    As a third parched sum­mer forces farm­ers to fal­low fields and lay off work­ers, two water dis­tricts and a pair of landown­ers in the heart of the state’s farm­land are mak­ing mil­lions of dol­lars by auc­tion­ing off their pri­vate caches.

    Near­ly 40 oth­ers also are seek­ing to sell their sur­plus water this year, accord­ing to state and fed­er­al records.

    Econ­o­mists say it’s been decades since the water mar­ket has been this hot. In the last five years alone, the price has grown ten­fold to as much as $2,200 an acre-foot — enough to cov­er a foot­ball field with a foot of water.

    Unlike the pre­vi­ous drought in 2009, the state has been hands-off, let­ting the mar­ket set the price even though severe short­ages prompt­ed a statewide drought emer­gency dec­la­ra­tion this year.

    The price spike comes after repeat­ed calls from sci­en­tists that glob­al warm­ing will wors­en droughts and increase the cost of main­tain­ing Cal­i­for­ni­a’s strained water sup­ply sys­tems.

    Some water econ­o­mists have called for more reg­u­la­tions to keep aquifers from being deplet­ed and ensure the mar­ket is not sub­ject to manip­u­la­tion such as that seen in the ener­gy cri­sis of sum­mer 2001, when the state was besieged by rolling black­outs.

    “If you have a real­ly scarce nat­ur­al resource that the state’s econ­o­my depends on, it would be nice to have it run effi­cient­ly and trans­par­ent­ly,” said Richard Howitt, pro­fes­sor emer­i­tus at the Uni­ver­si­ty of Cal­i­for­nia, Davis.

    Pri­vate water sales are becom­ing more com­mon in states that have been hit by drought, includ­ing Texas and Col­orado.

    In Cal­i­for­nia, the sell­ers include those who hold claims on water that date back a cen­tu­ry, pri­vate firms who are extract­ing ground­wa­ter and landown­ers who stored water when it was plen­ti­ful in under­ground cav­erns known as water banks.

    “This year the mar­ket is unbe­liev­able,” said Thomas Gre­ci, the gen­er­al man­ag­er of the Madera Irri­ga­tion Dis­trict, which recent­ly made near­ly $7 mil­lion from sell­ing about 3,200 acre-feet. “And this is a way to pay our bills.”

    All of the dis­tric­t’s water went to farms; the city of San­ta Bar­bara, which has its own water short­ages, was out­bid.

    Local TV crews and jour­nal­ists flocked to the dis­tric­t’s office in Feb­ru­ary to watch as man­ag­er Mau­rice Etchechury unveiled bids enclosed in about 50 sealed envelopes before the cam­eras.

    ...

    Dur­ing the last drought, the state Depart­ment of Water Resources ran a drought water bank, which helped bro­ker deals between those who were short of water and those who had plen­ty. But sev­er­al envi­ron­men­tal groups sued, alleg­ing the state failed to com­ply with the Cal­i­for­nia Envi­ron­men­tal Qual­i­ty Act in approv­ing the sales, and won.

    This year, the state is stand­ing aside, say­ing buy­ers and sell­ers have not asked for the state’s help. “We think that buy­ers and sell­ers can nego­ti­ate their own deals bet­ter than the state,” said Nan­cy Quan, a super­vis­ing engi­neer with the depart­ment.

    Quan’s depart­ment, the U.S. Bureau of Recla­ma­tion and the State Water Resources Con­trol Board have tracked at least 38 sep­a­rate sales this year, but the agen­cies are not aware of all sales, nor do they keep track of the price of water sold, offi­cials said.

    The max­i­mum vol­ume that could change hands through the 38 trans­ac­tions is 730,323 acre-feet, which is about 25 per­cent of what the State Water Project has deliv­ered to farms and cities in an aver­age year in the last decade.

    That fig­ure still does­n’t include the many pri­vate water sales that do not require any use of gov­ern­ment-run pipes or canals, includ­ing the three chron­i­cled by the AP. It’s not clear how­ev­er how much of this water will be sold via auc­tions.

    Some of those in the best posi­tion to sell water this year have been able to store their excess sup­plies in under­ground banks, a tool wide­ly embraced in the West for mak­ing water sup­plies reli­able and mar­ketable. The area sur­round­ing Bak­ers­field is home to some of the coun­try’s largest water banks.

    The drought is so severe that aggres­sive pump­ing of the banked sup­plies may cause some wells to run dry by year’s end, said Eric Averett, gen­er­al man­ag­er the Rosedale Rio Bra­vo Dis­trict, locat­ed next to sev­er­al of the state’s largest under­ground caches.

    Far­ther north in the long, flat Cen­tral Val­ley, oth­ers are drilling new wells to sell off ground­wa­ter.

    ...

    “The max­i­mum vol­ume that could change hands through the 38 trans­ac­tions is 730,323 acre-feet, which is about 25 per­cent of what the State Water Project has deliv­ered to farms and cities in an aver­age year in the last decade”. 38 trans­ac­tions could trans­fer 25 per­cent of what the State Water Project deliv­ers annu­al­ly. That’s a rather huge chunk of a mar­ket a for an absolute­ly vital nat­ur­al resource to be oper­at­ing with less and less over­sight, espe­cial­ly when entire towns are com­pet­ing for that resource. So are rolling ‘blue­outs’ going to replace the rolling ‘black­outs’ of yes­ter­year in Cal­i­for­nia? Maybe, although the blue­outs won’t exact­ly be replac­ing the black­outs...

    Posted by Pterrafractyl | July 2, 2014, 9:17 am
  7. Here’s a sto­ry that’s so eeri­ly famil­iar to past sto­ries of this nature you have to won­der if it’s the same peo­ple writ­ing the script:

    A bru­tal win­ter weath­er sys­tem hit­ting much of the US brought a mix of crush­ing­ly low tem­per­a­tures and record high spot prices for elec­tric­i­ty jump to Texas over the week­end. Elec­tric­i­ty spot price spiked more than 10,000% on Mon­day, to $11,0000 per megawatt. Yes, elec­tric­i­ty prices jumped 100-fold on Mon­day in Texas, and that’s after spik­ing through­out the week­end, with no relief in expect­ed until the weath­er sys­tem pass­es:

    Reuters

    RPT-Texas elec­tric grid prices spike more than 10,000% amid out­ages

    By Reuters Staff
    Feb­ru­ary 15, 2021 8:25 AM
    Updat­ed

    (Repeats sto­ry with no changes to text)

    Feb 15 (Reuters) — The spot price of elec­tric­i­ty on the Texas pow­er grid spiked more than 10,000% on Mon­day amid bad win­ter weath­er and rolling out­ages among pow­er pro­duc­ers, accord­ing to data on the grid operator’s web­site.

    Real-time mar­ket prices on the pow­er grid oper­at­ed by the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT) have climbed as high as $11,000 per megawatt, accord­ing to ERCOT. A typ­i­cal price on the grid, which sup­plies most of the elec­tric­i­ty for Texas, is less than $100 per megawatt. (Report­ing By Tim McLaugh­lin)

    ————-

    “RPT-Texas elec­tric grid prices spike more than 10,000% amid out­ages” by Reuters Staff; Reuters; 02/15/2021

    So what caused this record 10,000% price spike? Well, in addi­tion to the low tem­per­a­tures increas­ing demand for heat­ing fuel, it sounds like a big part of the prob­lem is the freez­ing rain forc­ing the shut­down of wind tur­bines. That wind tur­bine, in turn, has forced elec­tric­i­ty sup­pli­ers to buy elec­tric­i­ty on the spot mar­ket. And this con­ver­gence of fac­tors has cre­at­ed a mul­ti-day-long record price spike. An extend­ed price spike that has ener­gy traders ref­er­enc­ing the Cal­i­for­nia pow­er cri­sis of 2000–2001.

    Recall how the Cal­i­for­nia pow­er cri­sis was heav­i­ly orches­trat­ed by the ener­gy indus­try and Bush admin­is­tra­tion and designed to fleece the pub­lic. It’s that kind of his­to­ry that should prompt us to ask whether or not the peo­ple of Texas are get­ting the ‘Cal­i­for­nia treat­ment’ by the ener­gy indus­try. After all, the alter­na­tive expla­na­tion is that the elec­tric­i­ty sec­tor sim­ply did­n’t fore­see what kind of short-term impact freez­ing rain could have on the elec­tric­i­ty mar­kets. Is that plau­si­ble? Are we expe­ri­ence an unfore­see­able event? Or a high­ly fore­see­able inevitabil­i­ty? Because if it’s the for­mer, a 10,000% price spike might be some­what under­stand­able. But if this is the lat­ter sce­nario, and this kind of cir­cum­stance was some­thing that would pre­dictably hap­pen peri­od­i­cal­ly, we have to then ask if the prepa­ra­tions tak­en in advance of this weath­er sys­tem were prepa­ra­tions to max­i­mal­ly exploit a record price spike. It’s not like it would be unprece­dent­ed:

    Bloomberg
    Green

    Big Freeze Threat­ens Texas With Black­outs as Mar­kets Gyrate

    * Traders com­pare sit­u­a­tion to the Cal­i­for­nia ener­gy cri­sis
    * Almost 800 dai­ly low tem­per­a­ture records set across U.S.

    By Nau­reen S Malik, Bri­an K Sul­li­van, and Bri­an Eck­house
    Feb­ru­ary 14, 2021, 12:46 AM EST
    Updat­ed on Feb­ru­ary 14, 2021, 4:30 PM EST

    The arc­tic freeze grip­ping the cen­tral U.S. is rais­ing the specter of pow­er out­ages in Texas and ratch­et­ing up pres­sure on ener­gy prices already trad­ing at unprece­dent­ed lev­els.

    In Texas, where tem­per­a­tures in Dal­las are fore­cast to be 3 degrees Fahren­heit Mon­day (minus 16 Cel­sius), the oper­a­tor of the state’s pow­er grid warned it may need to resort to rolling black­outs as surg­ing demand for heat strains the elec­tri­cal sys­tem. While out­ages may occur Sun­day, the risk is high­er on Mon­day and Tues­day, when offi­cials expect pow­er demand in Texas to reach a record high.

    “We could be in emer­gency oper­a­tions as ear­ly as tonight,” said Dan Woodfin, a senior direc­tor for the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, which runs the grid. “We would expect to be in emer­gency oper­a­tions tomor­row through at least Tues­day morn­ing.”

    About 800 dai­ly records for cold tem­per­a­tures have been set in the past week as Arc­tic air push­es all the way to the Gulf of Mex­i­co, send­ing gyra­tions through ener­gy mar­kets. Spot prices for elec­tric­i­ty in Texas are expect­ed to hit the grid’s cap of $9,000 per megawatt hour. Nat­ur­al gas rose to a record $600 per mil­lion British ther­mal units in Okla­homa. And as much as half a mil­lion bar­rels a day of oil out­put in West Texas may be impact­ed by well shut­downs that began on Thurs­day because of the extreme cold.

    “It is a pret­ty bru­tal air mass,” said Bob Oravec, senior branch fore­cast­er at the U.S. Weath­er Pre­dic­tion Cen­ter. “The cold air is entrenched across the mid­dle part of the coun­try. High tem­per­a­tures are amaz­ing­ly cold, some 50 degrees below aver­age.”

    Through ear­ly Sun­day, the cold­est spot in the U.S. was 25 miles east of Ely, Min­neso­ta, where read­ings fell to ‑50 degrees Fahren­heit. As of 7 a.m. New York time, 2,653 flights around the U.S. through Mon­day had been can­celed, the major­i­ty in Dal­las and Hous­ton, accord­ing to FlightAware, an air­line track­ing ser­vice.

    Tem­per­a­tures fell so far below fore­casts in parts of the cen­tral and west­ern U.S. that phys­i­cal gas prices soared from Cal­i­for­nia to the Rock­ies, with one hub in Cheyenne, Wyoming, reach­ing as high as $350 per mmB­tu, accord­ing to traders who asked not to be iden­ti­fied because the infor­ma­tion isn’t pub­lic.

    Heat­ing and pow­er plant fuel trad­ed for as much as $195 per mmB­tu in South­ern Cal­i­for­nia. If day-ahead elec­tric­i­ty prices are any indi­ca­tion and the weath­er fore­casts are even part­ly accu­rate, the run-up in ener­gy prices isn’t over.

    ...

    Frozen Tur­bines

    A mix of freez­ing tem­per­a­tures and pre­cip­i­ta­tion threat­ens to par­a­lyze wind farms in Texas. That would be dev­as­tat­ing for pow­er plants with con­tracts to pro­vide a cer­tain amount of elec­tric­i­ty at spe­cif­ic times if they need to instead buy it on the spot mar­ket to meet their oblig­a­tions. At the moment, that pow­er is exceed­ing­ly expen­sive.

    “When wind-tur­bine blades get cov­ered with ice, they need to be shut down,” said Joshua Rhodes, a research asso­ciate at The Uni­ver­si­ty of Texas at Austin who focus­es on ener­gy.

    About half of Texas’s wind tur­bines were inop­er­a­ble Sun­day morn­ing because of ice and cold. Yet those that are run­ning are crank­ing out more pow­er than fore­cast for this time of year, Woodfin, grid oper­a­tor Ercot’s senior direc­tor, said dur­ing a brief­ing Sun­day.

    Pow­er plants that are only par­tial­ly oper­at­ing could be pinched by high prices, too. Projects that com­mit to pro­vide 50 megawatts of ener­gy in a giv­en hour but only pro­duce 20 megawatts may need to buy the dif­fer­ence at the mar­ket price, said Lee Tay­lor, chief exec­u­tive offi­cer of RESure­ty, a clean-ener­gy ana­lyt­ics firm.

    Whole­sale pow­er for deliv­ery Sun­day trad­ed at any­where from $3,000 to $7,000 a megawatt-hour in some places, triple the records set in some places Sat­ur­day and a stag­ger­ing 2,672% increase from Fri­day at Texas’s West hub. Aver­age spot pow­er prices trad­ed around $1,500 per megawatt hour Sun­day after­noon, accord­ing to data com­piled by Bloomberg.

    “Spot prices are expect­ed to hit $9,000 on both Mon­day and Tues­day,” said Bri­an Laver­tu, a trad­er for Active Pow­er Invest­ments. “Pow­er is going to be wild through Tues­day.”

    Traders said they’ve nev­er seen elec­tric­i­ty trade on Texas’s grid for thou­sands of dol­lars for such a sus­tained amount of time. They drew com­par­isons between this week’s price surges to the records set on the Mid­west grid in 1998, and to the Cal­i­for­nia ener­gy cri­sis that sent pow­er prices sky­rock­et­ing and blacked out hun­dreds of thou­sands of homes and busi­ness­es two decades ago.

    Among the oth­er mar­kets mov­ing on the cold:

    * Gas in Chica­go hit $220 per mmB­tu, traders said.
    * Phys­i­cal gas was going for as much as $300 per mmB­tu at a Texas hub.
    * Okla­homa gas prices have swung any­where between $50 to the high of $600.
    * Spot gas prices across the east­ern U.S. remained sub­dued amid milder tem­per­a­tures, assessed at any­where from $4 per to $12 per mmB­tu on Fri­day, pric­ing data com­piled by Bloomberg show.

    ————

    “Big Freeze Threat­ens Texas With Black­outs as Mar­kets Gyrate” by Nau­reen S Malik, Bri­an K Sul­li­van, and Bri­an Eck­house; Bloomberg; 02/14/2021

    “Traders said they’ve nev­er seen elec­tric­i­ty trade on Texas’s grid for thou­sands of dol­lars for such a sus­tained amount of time. They drew com­par­isons between this week’s price surges to the records set on the Mid­west grid in 1998, and to the Cal­i­for­nia ener­gy cri­sis that sent pow­er prices sky­rock­et­ing and blacked out hun­dreds of thou­sands of homes and busi­ness­es two decades ago.

    Traders have seen Texas elec­tric­i­ty grid price spikes. But nev­er thou­sands at these prices for this peri­od of time. It’s so unprece­dent­ed it drew com­par­i­son to the Cal­i­for­nia ener­gy cri­sis. A com­par­i­son that’s also a pret­ty big warn­ing sign that some­thing foul is afoot.

    Also note that it sounds like prices could get even worse because around half of the wind tur­bines are still oper­at­ing, and gen­er­at­ing at lev­els above expec­ta­tions. How high is the price going to get if more of those tur­bines shut down? We’ll find out!

    ...
    A mix of freez­ing tem­per­a­tures and pre­cip­i­ta­tion threat­ens to par­a­lyze wind farms in Texas. That would be dev­as­tat­ing for pow­er plants with con­tracts to pro­vide a cer­tain amount of elec­tric­i­ty at spe­cif­ic times if they need to instead buy it on the spot mar­ket to meet their oblig­a­tions. At the moment, that pow­er is exceed­ing­ly expen­sive.

    “When wind-tur­bine blades get cov­ered with ice, they need to be shut down,” said Joshua Rhodes, a research asso­ciate at The Uni­ver­si­ty of Texas at Austin who focus­es on ener­gy.

    About half of Texas’s wind tur­bines were inop­er­a­ble Sun­day morn­ing because of ice and cold. Yet those that are run­ning are crank­ing out more pow­er than fore­cast for this time of year, Woodfin, grid oper­a­tor Ercot’s senior direc­tor, said dur­ing a brief­ing Sun­day.
    ...

    Keep in mind that if around half the wind tur­bines were still run­ning, that rais­es the ques­tion of whether or not we’re see­ing more tur­bines shut down than nec­es­sary, cre­at­ing an arti­fi­cial short­age. Now, you would assume that pow­er gen­er­a­tors aren’t going to be inter­est­ed in not run­ning tur­bines when they are con­trac­tu­al­ly oblig­at­ed to pay record high prices to make up the dif­fer­ence. But that’s why under­stand­ing the rela­tion­ships between the dif­fer­ent play­ers in this mar­ket is cru­cial to under­stand­ing what might have hap­pened here.

    Also note how the pre­dic­tion on Sun­day was that spot prices were expect­ed to his $9,000/megawatt on both Mon­day and Tues­day:

    ...
    “Spot prices are expect­ed to hit $9,000 on both Mon­day and Tues­day,” said Bri­an Laver­tu, a trad­er for Active Pow­er Invest­ments. “Pow­er is going to be wild through Tues­day.”
    ...

    And as we saw above, the spot prices actu­al­ly hit $11,000/megawatt on Mon­day. So this record price surge is exceed­ing the jad­ed expec­ta­tions of the ener­gy traders who were watch­ing with amaze­ment over the week­end.

    So, again, we have to ask: is this pure­ly just bad luck asso­ci­at­ed with bad weath­er? Or are we look­ing are some­thing more orga­nized and mali­cious? Some­one end­ed up mak­ing obscene amounts of mon­ey over the last few days at the expense of the Texas pub­lic. Who are these big win­ners, and what rela­tion­ship do they have to peo­ple who made the deci­sions that cre­at­ed this mar­ket dynam­ic? And as the fol­low­ing Hous­ton Chron­i­cle arti­cle from Novem­ber 2019 makes clear, we don’t get to know those details. Tex­as­’s elec­tric­i­ty mar­ket is designed by the indus­try and designed to be inten­tion­al­ly opaque and con­fus­ing to con­sumers. It’s also designed to facil­i­tate mar­ket manip­u­la­tion.

    Yes, the way the whole­sale elec­tric­i­ty mar­ket works, pow­er gen­er­a­tors are con­stant­ly bid­ding to pro­vide elec­tric­i­ty in 5–15 sec­ond inter­vals. In oth­er states, this bid­ding process is imme­di­ate­ly trans­par­ent. But in Texas, the bids are kept secret for 60 days and com­pa­nies that with­hold pow­er from the mar­ket are not pub­licly dis­closed, whether the hold back in pow­er was planned or unex­pect­ed. Final­ly, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT) that over­sees this mar­ket is run by the indus­try itself. In oth­er words, Tex­as­’s con­sumer elec­tric­i­ty mar­kets were designed for legal mar­ket manip­u­la­tion that remains hid­den by the pub­lic:

    Hous­ton Chron­i­cle

    Analy­sis: The murky and con­fus­ing Texas elec­tric­i­ty mar­ket

    L.M. Six­el, Staff writer
    Nov. 1, 2019
    Updat­ed: Nov. 1, 2019 4 a.m.

    A basic eco­nom­ic prin­ci­ple holds that a key to well-func­tion­ing and effi­cient free mar­kets is trans­paren­cy, a state of affairs that allows par­tic­i­pants to have the same access to infor­ma­tion to make deci­sions on what to buy and sell. It works in stock, oil, and cur­ren­cy mar­kets, where prices and oth­er essen­tial infor­ma­tion are avail­able to every­one.

    But in Texas, where elec­tric­i­ty dereg­u­la­tion was tout­ed as unleash­ing the pow­er of free enter­prise, pow­er mar­kets tend to be more like frost­ed glass than clear panes. The murk­i­ness extends from retail plans with con­fus­ing pric­ing and terms to whole­sale mar­kets, where bids are kept secret, to trans­mis­sion, where the biggest com­mer­cial and indus­tri­al pow­er users can game the sys­tem to push costs onto small busi­ness­es and house­holds.

    Tex­ans have paid for this lack of trans­paren­cy. For near­ly two decades, con­sumers liv­ing with­in the com­peiti­tive pow­er mar­kets of Texas — which cov­er about 85 per­cent of the state — have con­sis­tent­ly paid high­er prices for elec­tric­i­ty than those buy­ing elec­tric­i­ty from reg­u­lat­ed munic­i­pal util­i­ties and coop­er­a­tives, accord­ing to the Texas Coali­tion for Afford­able Pow­er, a group of cities that buy pow­er in the dereg­u­lat­ed mar­ket.

    On aver­age, Tex­ans who choose their elec­tric providers pay near­ly 9 per­cent more for elec­tric­i­ty than those in the reg­u­lat­ed mar­kets of cities such as as Austin and San Anto­nio, accord­ing to the coali­tion. For the aver­age Hous­ton cus­tomer, that has trans­lat­ed into an extra cost of near­ly $400 a year in each of the past 15 years.

    Call it the dereg­u­la­tion pre­mi­um.

    Pow­er to con­fuse

    The Texas pow­er mar­ket was dereg­u­lat­ed two decades ago at the urg­ing of big indus­tri­al users and pow­er com­pa­nies, ulti­mate­ly forc­ing mil­lions of Tex­ans to bone up on elec­tric­i­ty. In 2002, Texas reg­u­la­tors launched the retail elec­tric­i­ty shop­ping web­site known today as Pow­er to Choose with the goal of pro­vid­ing trans­paren­cy by allow­ing con­sumers to com­pare plans on price, amount of renew­able pow­er and cus­tomer ser­vice.

    But the shop­ping site became over­whelmed with offer­ings. Some com­pa­nies offerred more than 30 plans that were hard to dis­tin­guish from each oth­er. Sev­er­al retail elec­tric providers began offer­ing mul­ti-tiered elec­tric­i­ty plans with low teas­er rates designed to catch the atten­tion of shop­pers, only to have those who signed up learn too late that using one kilo­watt hour above a cer­tain thresh­old would send the adver­tised price soar­ing by as much as 10 times.

    Oth­er com­pa­nies offered “free nights and week­ends” plans that could cost con­sumers more because of much high­er week­day rates. One com­pa­ny offered a $600 bill cred­it for a two-year plan that would ulti­mate­ly cost cus­tomers twice as much as anoth­er plan offered by the same com­pa­ny.

    As a result, buy­ing elec­tric­i­ty became so con­fus­ing that con­sumers just gave up look­ing for bet­ter deals, under­min­ing what is sup­posed a key advan­tage of com­pet­i­tive mar­kets. Only about 16 per­cent of Cen­ter­Point Energy’s 2.4 mil­lion res­i­den­tial cus­tomers switched plans in 2018, even though research shows that switch­ers can save hun­dreds of dol­lars each year.

    “Retail elec­tric providers have fig­ured out how to make it com­pli­cat­ed,” said Ed Hirs, an ener­gy econ­o­mist at the Uni­ver­si­ty of Hous­ton.

    And they have in that endeav­or to the point that a cot­tage indus­try has emerged to help con­sumers sift through retail pow­er plans to find the best deals. But these bro­kers oper­ate in an opaque mar­ket with few rules. Only since Sep­tem­ber were the approx­i­mate­ly 1,000 retail elec­tric­i­ty bro­kers oper­at­ing in Texas required to reg­is­ter with the state by pro­vid­ing their names, address­es and con­tact infor­ma­tion.

    The bro­kers don’t have to dis­close more crit­i­cal infor­ma­tion, such as their own­er­ship or deals they make with retail elec­tric­i­ty com­pa­nies to steer clients to their plans.

    Pow­er Wiz­ard, one of the new­er bro­kers in Hous­ton area, claimed on its web­site to be com­plete­ly inde­pen­dent and “total­ly unbi­ased” with no con­nec­tions to retail elec­tric­i­ty providers. Pow­er Wiz­ard, how­ev­er, is owned by the Flori­da com­pa­ny Nex­tEra Ener­gy, which is also the par­ent of the Hous­ton retail elec­tric­i­ty provider Gexa, accord­ing to fil­ings with the Texas Sec­re­tary of State. In addi­tion, Gexa’s pres­i­dent is also CEO of Pow­er Wiz­ard.

    Pow­er Wiz­ard, which retract­ed its claim of inde­pen­dence after being ques­tioned by the Hous­ton Chron­i­cle, said it doesn’t give pref­er­en­tial treat­ment to Gexa plans.

    Trent Crow, a for­mer JP Mor­gan ener­gy trad­er and founder of Real Sim­ple Ener­gy, a web­site that charges con­u­mers $9 a month to find and man­age low-cost elec­tric­i­ty plans, said part of the busi­ness mod­el for the retail elec­tric­i­ty providers is to make things as com­pli­cat­ed as they can. That in turn makes it dif­fi­cult for cus­tomer to esti­mate poten­tial month­ly costs and eas­i­ly com­pare plans to com­peti­tors.

    “Peo­ple get con­fused and lose trust,” he said. “They are over­pay­ing but they can’t put their fin­ger on why.”

    Whole­sale com­plex­i­ty

    Whole­sale pow­er mar­kets are com­plex oper­a­tions in which gen­er­a­tors essen­tial­ly bid prices in 5 to 15 sec­ond inter­vals to sell pow­er into the grid. The state’s grid man­ag­er, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, accepts the bids, start­ing with the low­est first and work­ing its way up until it has enough pow­er to meet demand. Ulti­mate­ly, gen­er­a­tors who sell into the mar­ket receive the high­est aver­age price dur­ing a 15-minute peri­od.

    In oth­er states, the bid­ding is pub­lic and the pric­ing imme­di­ate­ly avail­able. Not in Texas, where the bids are kept secret for 60 days. In addi­tion, ERCOT doesn’t dis­close com­pa­nies that hold pow­er back from the mar­ket, whether unex­pect­ed or planned. Final­ly, ERCOT, a pri­vate orga­ni­za­tion over­seen by a board of direc­tors com­pris­ing rep­re­sen­ta­tives of pow­er com­pa­nies, is not sub­ject to the state’s open meet­ing and pub­lic records laws.

    These murky con­di­tions have made the mar­ket vul­ner­a­ble to manip­u­la­tion as an inci­dent in May demon­strat­ed. A two-minute data error, which showed 4,000 megawatts of pow­er sud­den­ly com­ing offline, sent prices soar­ing from $40 per megawatt hour to $9,000, the max­i­mum allowed by state rules, and result­ed in an esti­mat­ed wind­fall for pow­er com­pa­nies of $18 mil­lion and tens of mil­lions more from futures con­tracts priced high­er as a result.

    The cause of the price spike only became pub­lic because the Hous­ton mer­chant pow­er com­pa­ny Calpine dis­closed it was respon­si­ble for the data error. The con­sult­ing firm First Prin­ci­ples Eco­nom­ics of Hous­ton found 55 inci­dents of pow­er inex­plic­a­bly mov­ing on and off the mar­ket dur­ing a four-month peri­od this spring.

    It’s not pub­licly known which com­pa­nies were involved, or whether the mar­ket move­ments were acci­den­tal, erro­neous or inten­tion­al. But they like­ly increased whole­sale prices, accord­ing to First Prin­ci­ples, which ulti­mate­ly mean high­er retail prices.

    ...

    The May inci­dent involv­ing Calpine came to light only because of the Cal­i­for­nia-based com­pa­ny Grid­dy, which sells elec­tric­i­ty to retail cus­tomers at the same price as whole­sale spot mar­kets. When the com­pa­ny learned of the data error, it told its cus­tomers and promised rebates.

    But Grid­dy has had its own trans­paren­cy chal­lenges. Its fees are hid­den in fine print, includ­ing charges the com­pa­ny pass­es through from the Pub­lic Util­i­ty Com­mis­sion and ERCOT. Its adver­tised prices this sum­mer also didn’t include sur­charges paid to gen­er­a­tors dur­ing peri­ods of high demand.

    Final­ly, Grid­dy didn’t clear­ly dis­close the risks of whole­sale spot mar­kets, where prices can quick­ly soar. Many of its cus­tomers’ were stunned when their bills jumped by hun­dreds of dol­lars as pow­er demand reached record lev­els this sum­mer and whole­sale prices fol­lowed.

    “When you do some­thing nobody’s ever done before, you wind up learn­ing a lot of lessons along the way,” said Jere­my Zarowitz, vice pres­i­dent of mar­ket­ing and ana­lyt­ics for Grid­dy. “August was a bless­ing in the sense that it brought a lot of these things to light that might have oth­er­wise remained below the radar.”

    Cost shift­ing

    Big com­mer­cial and indus­tri­al elec­tric­i­ty users, mean­while, have oper­at­ed under the radar to cut trans­mis­sion costs, shift­ing them to res­i­den­tial and small busi­ness cus­tomers. Under state rules, com­mer­cial and indus­tri­al cus­tomers are assessed trans­mis­sion fees based on their pow­er con­sump­tion dur­ing four peak-demand peri­ods over the sum­mer — one each in June, July, August and Sep­tem­ber.

    Com­pa­nies that can iden­ti­fy those peak peri­ods — and anoth­er cot­tage indus­try of con­sul­tants has emerged to help them — can reduce or shut down pow­er dur­ing these brief peri­ods and low­er annu­al trans­mis­sion bills by tens, if not hun­dreds of thou­sands of dol­lars. Oth­er users must pick up those costs to main­tain and upgrade the trans­mis­sion sys­tem.

    There are no esti­mates of the over­all costs get­ting shift­ed to con­sumers and small busi­ness­es. But two years ago, the pow­er com­pa­ny NRG Ener­gy told the Pub­lic Util­i­ty Com­mis­sion that the cost allo­ca­tion sys­tem allows larg­er and more sophis­ti­cat­ed elec­tric­i­ty con­sumers to reduce their por­tion of trans­mis­sion costs at the expense of oth­er users.

    The Pub­lic Util­i­ty Com­mis­sion is con­sid­er­ing whether to change the sys­tem as part of the rate case for the Hous­ton trans­mis­sion and dis­tri­b­u­tion util­i­ty Cen­ter­Point Ener­gy.

    Since almost the begin­ning of elec­tri­fi­ca­tion more than a cen­tu­ry ago, polit­i­cal and busi­ness lead­ers and the pub­lic have debat­ed how to treat elec­tric­i­ty, whether it is com­mod­i­ty to be bought and sold, like cop­per, oil or soy­beans, or a pub­lic ser­vice, like roads or sew­ers. The elec­tric dereg­u­la­tion move­ment that gained momen­tum in the 1990s viewed pow­er as a com­mod­i­ty that could be allo­cat­ed effi­cient­ly and fair­ly by mar­kets.

    Near­ly two decades after the start of dereg­u­la­tion in Texas, many res­i­den­tial con­sumers still oper­ate under a mis­guid­ed assump­tion that get­ting elec­tric­i­ty reli­ably depends on which retail­er they choose. Pow­er, how­ev­er, is deliv­ered by util­i­ties, such as Cen­ter­Point, no mat­ter which retail­er is cho­sen. In the end, elec­tric­i­ty is the same no mat­ter which retail­er sells it; the only dif­fer­ence between com­pa­nies is price.

    “Too many Tex­ans are still over­pay­ing for pow­er,” said Fred Anders, founder of Texas Pow­er Guide in Hous­ton, a web­site that helps con­sumers find the low­est cost plans. “And very like­ly a dis­pro­por­tion­ate share of them are peo­ple who can least afford to over­pay and have less time and aware­ness to nav­i­gate the mine­field of gim­micks in the elec­tric­i­ty mar­ket.”

    ————-

    “Analy­sis: The murky and con­fus­ing Texas elec­tric­i­ty mar­ket” by L.M. Six­el; Hous­ton Chron­i­cal; 11/01/2019

    “But in Texas, where elec­tric­i­ty dereg­u­la­tion was tout­ed as unleash­ing the pow­er of free enter­prise, pow­er mar­kets tend to be more like frost­ed glass than clear panes. The murk­i­ness extends from retail plans with con­fus­ing pric­ing and terms to whole­sale mar­kets, where bids are kept secret, to trans­mis­sion, where the biggest com­mer­cial and indus­tri­al pow­er users can game the sys­tem to push costs onto small busi­ness­es and house­holds.”

    The dereg­u­lat­ed mar­ket was sup­posed to bring trans­paren­cy and low­er prices. Instead it made the mar­kets more opaque and more expen­sive. Sur­prise!

    And note that Texas has been car­ry­ing out this exper­i­ment in dereg­u­lat­ed mar­kets for two years now, so this isn’t an issue of work­ing the kinks out of the sys­tem. These prob­lems are fea­tures, with per­haps the biggest fea­ture being the abil­i­ty of pow­er gen­er­a­tors to keep their bids secret and even with­hold pow­er from the sys­tem for any rea­son. It’s the per­fect set up for exact­ly the kind of spot price spike we’ve seen:

    ...
    The Texas pow­er mar­ket was dereg­u­lat­ed two decades ago at the urg­ing of big indus­tri­al users and pow­er com­pa­nies, ulti­mate­ly forc­ing mil­lions of Tex­ans to bone up on elec­tric­i­ty. In 2002, Texas reg­u­la­tors launched the retail elec­tric­i­ty shop­ping web­site known today as Pow­er to Choose with the goal of pro­vid­ing trans­paren­cy by allow­ing con­sumers to com­pare plans on price, amount of renew­able pow­er and cus­tomer ser­vice.

    ...

    “Retail elec­tric providers have fig­ured out how to make it com­pli­cat­ed,” said Ed Hirs, an ener­gy econ­o­mist at the Uni­ver­si­ty of Hous­ton.

    And they have in that endeav­or to the point that a cot­tage indus­try has emerged to help con­sumers sift through retail pow­er plans to find the best deals. But these bro­kers oper­ate in an opaque mar­ket with few rules. Only since Sep­tem­ber were the approx­i­mate­ly 1,000 retail elec­tric­i­ty bro­kers oper­at­ing in Texas required to reg­is­ter with the state by pro­vid­ing their names, address­es and con­tact infor­ma­tion.

    The bro­kers don’t have to dis­close more crit­i­cal infor­ma­tion, such as their own­er­ship or deals they make with retail elec­tric­i­ty com­pa­nies to steer clients to their plans.

    ...

    Whole­sale pow­er mar­kets are com­plex oper­a­tions in which gen­er­a­tors essen­tial­ly bid prices in 5 to 15 sec­ond inter­vals to sell pow­er into the grid. The state’s grid man­ag­er, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, accepts the bids, start­ing with the low­est first and work­ing its way up until it has enough pow­er to meet demand. Ulti­mate­ly, gen­er­a­tors who sell into the mar­ket receive the high­est aver­age price dur­ing a 15-minute peri­od.

    In oth­er states, the bid­ding is pub­lic and the pric­ing imme­di­ate­ly avail­able. Not in Texas, where the bids are kept secret for 60 days. In addi­tion, ERCOT doesn’t dis­close com­pa­nies that hold pow­er back from the mar­ket, whether unex­pect­ed or planned. Final­ly, ERCOT, a pri­vate orga­ni­za­tion over­seen by a board of direc­tors com­pris­ing rep­re­sen­ta­tives of pow­er com­pa­nies, is not sub­ject to the state’s open meet­ing and pub­lic records laws.
    ...

    And this poten­tial for mar­ket manip­u­la­tion isn’t a hypo­thet­i­cal. Texas expe­ri­ence that back in May of 2019, when the spot prices jumped from $40 to $9,000 per megawatt as a result of a two minute data error that show 4,000 megawatts going offline, mak­ing the pow­er com­pa­nies an $18 mil­lion. But, more impor­tant­ly, mak­ing tens of mil­lions of dol­lars more from futures con­tracts. That’s anoth­er aspect this sto­ry: the abil­i­ty legal­ly manip­u­late the mar­ket cre­ates all sorts of pos­si­bil­i­ties for exploit­ing the finan­cial mar­kets tied to these prices. And this May 2019 inci­dent only came to light because a Cal­i­for­nia-based com­pa­ny, Grid­dy, saw the prob­lem and promised to rebate cus­tomers:

    ...
    These murky con­di­tions have made the mar­ket vul­ner­a­ble to manip­u­la­tion as an inci­dent in May demon­strat­ed. A two-minute data error, which showed 4,000 megawatts of pow­er sud­den­ly com­ing offline, sent prices soar­ing from $40 per megawatt hour to $9,000, the max­i­mum allowed by state rules, and result­ed in an esti­mat­ed wind­fall for pow­er com­pa­nies of $18 mil­lion and tens of mil­lions more from futures con­tracts priced high­er as a result.

    The cause of the price spike only became pub­lic because the Hous­ton mer­chant pow­er com­pa­ny Calpine dis­closed it was respon­si­ble for the data error. The con­sult­ing firm First Prin­ci­ples Eco­nom­ics of Hous­ton found 55 inci­dents of pow­er inex­plic­a­bly mov­ing on and off the mar­ket dur­ing a four-month peri­od this spring.

    It’s not pub­licly known which com­pa­nies were involved, or whether the mar­ket move­ments were acci­den­tal, erro­neous or inten­tion­al. But they like­ly increased whole­sale prices, accord­ing to First Prin­ci­ples, which ulti­mate­ly mean high­er retail prices.

    ...

    The May inci­dent involv­ing Calpine came to light only because of the Cal­i­for­nia-based com­pa­ny Grid­dy, which sells elec­tric­i­ty to retail cus­tomers at the same price as whole­sale spot mar­kets. When the com­pa­ny learned of the data error, it told its cus­tomers and promised rebates.
    ...

    So if Grid­dy had­n’t alert­ed the pub­lic to this sud­den spike, would any­one have informed the pub­lic it hap­pened at all? It rais­es the ques­tion of how often are these kinds of spikes hap­pen­ing with­out the pub­lic tak­ing notice? We don’t get to know. By design. But thanks to Grid­dy’s pub­lic dis­clo­sure, we can con­firm that the cur­rent price surge isn’t with­out prece­dent. The May 2019 price spike was a pow­er­ful prece­dent, that includes the prece­dent of all of the com­pa­nies involved get­ting away with it and remain­ing anony­mous to this day. The per­pe­tra­tors made mil­lions and got away with it. It had to be a pret­ty tempt­ing prece­dent for the indus­try to repeat.

    Also recall that this is all com­ing less than a year after the record spike in oil stor­age prices that tem­porar­i­ly cre­at­ed neg­a­tive oil prices in April of 2020 as the plumet­ing price of oil and a stor­age space crunch in Cush­ing, Okla­homa, cre­at­ed a his­toric drop in the price of oil where peo­ple were lit­er­al­ly being paid to access deliv­ery of free oil. We still don’t know what actu­al­ly hap­pened dur­ing that event and whether or not mar­ket manip­u­la­tion was tak­ing place.

    So we’ll see how much longer this cur­rent elec­tric­i­ty emer­gency goes and how high this record price surge ulti­mate­ly gets. But what we can pre­dict with con­fi­dence at this point is that Texas is going to see a lot more price surges like this going for­ward. It’s a fea­ture.

    Posted by Pterrafractyl | February 15, 2021, 4:29 pm
  8. We’re get­ting more details on the ongo­ing record 10,000% elec­tric­i­ty price surge and mas­sive pow­er out­ages inflict­ing Texas right as much of the US comes under the grip of a bru­tal cold weath­er front. Let’s just say the mys­tery of why prices surged so high and have remained that high for days is still a mys­tery, but it’s a dif­fer­ent kind of mys­tery:

    First, recall how the blame for this price surge was placed on freez­ing rain lock­ing up larg­er num­bers of wind-tur­bines. It was a some­what puz­zling expla­na­tion because we were told half the tur­bines were out of com­mis­sion, but the oth­er half were still oper­at­ing and actu­al­ly gen­er­at­ing elec­tric­i­ty at above expect­ed lev­els. Also recall how Tex­as­’s con­sumer elec­tric­i­ty mar­ket was basi­cal­ly set up by Tex­as­’s pow­er indus­try and was built to be opaque, con­fus­ing, and open to manip­u­la­tion, like the fact that pow­er sup­pli­ers can with­draw pow­er from the Texas pow­er mar­ket­place for what­ev­er rea­son and not have to pro­vide an expla­na­tion. So the big ques­tion fac­ing Texas now isn’t whether or not it should have expe­ri­enced a price surge. The bru­tal cold and mas­sive size of the weath­er pat­tern ensured prices were going to surge. But is a sus­tained mul­ti-day 100-fold price surge jus­ti­fied? If not, is this oppor­tunis­tic price goug­ing or some­thing worse and more orga­nized? Those are some of the ques­tions posed by ongo­ing pow­er cri­sis that could go on for days.

    But we are get­ting some answers as to the caus­es of the mas­sive short­age in avail­able pow­er. It turns out the wind tur­bines were get­ting unfair­ly blamed and Texas was see­ing pow­er with­drawn from across the spec­trum:

    We are now told the emer­gency was declared short­ly before 1 AM Mon­day after 30 gigawatts of pow­er had been removed from the sys­tem. Now, as we’ll see, the entire Texas wind­farm indus­try gen­er­ates 30 gigawatts of pow­er in the sum­mer when it can oper­ate at peak capac­i­ty, and gen­er­al­ly pro­duces less in the win­ter, so the grid clear­ly was­n’t rely­ing on a full 30 gigawatts of pow­er from wind. Plus, half the tur­bines are still run­ning and pro­duc­ing even more pow­er than nor­mal. So there’s no way that 30 gigawatt drop could be attrib­uted to wind alone. Instead, Texas expe­ri­enced a pull back in elec­tric­i­ty from nat­ur­al gas (pipes were freez­ing), coal plant (oper­a­tions were halt­ed), and even a nuclear pow­er gen­er­a­tor was tak­en offline.

    The nuclear pow­er plant issues were notable in that you had one of the gen­er­a­tors at the South Texas Nuclear Pow­er Sta­tion go offline due to cold-relat­ed issues but the oth­er reac­tor at the same plant stayed up. We’re told the feed­wa­ter sys­tem, a non-nuclear com­po­nent of the plant, in Unit 1 was impact­ed by the weath­er but there was nev­er any dan­ger. Keep in mind that the South Texas Nuclear Pow­er Sta­tion is part­ly owned by the cities of San Anto­nio and Austin, but the biggest share­hold­er is pri­vate ener­gy giant NRG Ener­gy. And NRG Ener­gy is involved in a lot more than just nuclear ener­gy. So when we have to ask ques­tions about whether or not Unit 1 was tak­en offline for valid rea­sons — and not an attempt to squeeze the mar­ket — we should keep in mind that we’re talk­ing about enti­ties that are so large their nuclear oper­a­tions are just one com­po­nent of a much ener­gy empire well posi­tioned to exploit record high prices.

    There’s anoth­er fac­tor in all of this: Texas is unusu­al in that its grid isn’t wide­ly con­nect­ed to sur­round­ing states. Keep in mind the warped nature of Tex­as­’s con­sumer ener­gy mar­kets that were seem­ing­ly designed by the ener­gy indus­try for the pur­pose of mak­ing the mar­kets less trans­par­ent and more con­fus­ing. Cut­ting Texas off from sur­round states’ ener­gy mar­kets may have been part of the price for set­ting up a sys­tem seem­ing­ly designed to fleece the pub­lic.

    Final­ly, it’s worth not­ing one of the oth­er aspects of Tex­as­’s bizarre elec­tric­i­ty mar­kets that’s now get­ting the blame for the wide­spread black­outs: The prices appar­ent­ly haven’t been allowed to surge high enough for long enough. That was the opin­ion of Tex­as­’s Pub­lic Util­i­ty Com­mis­sion, which observed that Tex­as­’s ener­gy prices were some­times well below the $9,000/megawatt hour state price cap even as black­outs were rolling across the state and blamed the non-capped-out prices for being the rea­son pow­er was being with­held from the gen­er­a­tors. The Pub­lic Util­i­ty Com­mis­sion is order­ing the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT) to ensure that prices reflect the severe pow­er short­age.

    Yes, you read that right. The Pub­lic Util­i­ty Com­mis­sion observed that the price of elec­tric­i­ty was­n’t always at the $9,000 per megawatt hour cap as the black­outs rolled on, some­times falling as low aw $1,200. And based on that, the Pub­lic Util­i­ty Com­mis­sion is order­ing ERCOT to keep the prices jacked up to the cap in order to incen­tive pow­er providers to keep pro­vid­ing that pow­er. In oth­er words, the Pub­lic Util­i­ty Com­mis­sion is basi­cal­ly com­ing out and admit­ting that Tex­as­’s pow­er gen­er­a­tors are with­hold­ing avail­able pro­duc­tion capac­i­ty! Only if the pro­duc­tion capac­i­ty is brought up to the max­i­mum allowed $9,000 megawatts per hour will those pow­er gen­er­a­tor sup­ply the nec­es­sary elec­tric­i­ty to stop the black­outs.

    Also recall how we already saw how ERCOT itself is basi­cal­ly run by the the pri­vate ener­gy indus­try. So the Texas Pub­lic Util­i­ty Com­mis­sion ordered its indus­try shill ener­gy reg­u­la­tor to shill hard­er.

    Ok, first, here’s an Ars Tech­ni­ca arti­cle that wind tur­bines can’t pos­si­bly be blamed for the black­outs. But what can be at least par­tial­ly blamed is the fact that Texas is very unusu­al in that its elec­tric­i­ty grid is not actu­al­ly inte­grat­ed with sur­round­ing states. In oth­er words, Tex­as­’s res­i­dent are a cap­tured mar­ket:

    Ars Tech­ni­ca

    Texas’ pow­er grid crum­ples under the cold
    Com­pe­ti­tion for nat­ur­al gas and frozen wind tur­bines are only some of the prob­lems.

    John Tim­mer — 2/15/2021, 1:59 PM

    Mon­day morn­ing, as a jet stream brought frigid air south to the cen­tral Unit­ed States, Texas res­i­dents found them­selves fac­ing rolling black­outs as the statewide grid strug­gled to meet demand amid a large short­fall in gen­er­at­ing capac­i­ty. As the day wore on, many saw these black­outs extend for ever longer peri­ods of the day, and grid author­i­ties are expect­ing prob­lems to extend into at least Tues­day. As of noon local time on Mon­day, the South­west Pow­er Pool, which serves areas to the north of Texas, also announced that demand was exceed­ing gen­er­at­ing capac­i­ty.

    The short­falls appear to be wide­spread, affect­ing every­thing from wind tur­bines to nuclear plants. One source of trou­ble may be an increased com­pe­ti­tion for nat­ur­al gas, which is com­mon­ly used for heat­ing in the Unit­ed States.

    Com­ing up short

    Texas is unusu­al in that almost the entire state is part of a sin­gle grid that lacks exten­sive inte­gra­tion with those of the sur­round­ing states. That grid is run by an orga­ni­za­tion called ERCOT, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, a non­prof­it con­trolled by the state leg­is­la­ture.

    Accord­ing to a state­ment released today by ERCOT, the grid entered a state of emer­gency short­ly after 1am on Mon­day, mean­ing it could no longer guar­an­tee enough pow­er gen­er­a­tion to meet cus­tomer demands. This is because rough­ly 30 gigawatts of gen­er­a­tion capac­i­ty has been forced offline.

    While some ear­ly reports indi­cat­ed that frozen wind tur­bines were caus­ing sig­nif­i­cant short­falls, 30GW is rough­ly equal to the entire state’s wind capac­i­ty if every tur­bine is pro­duc­ing all the pow­er it’s rat­ed for. Since wind in Texas gen­er­al­ly tends to pro­duce less dur­ing win­ter, there’s no way that the grid oper­a­tors would have planned for get­ting 30GW from wind gen­er­a­tion; in fact, a chart at ERCOT indi­cates that wind is pro­duc­ing sig­nif­i­cant­ly more than fore­cast.

    So while hav­ing Texas’ full wind-gen­er­at­ing capac­i­ty online would help, the prob­lems with meet­ing demand appear to lie else­where. An ERCOT direc­tor told Bloomberg that prob­lems were wide­spread across gen­er­at­ing sources, includ­ing coal, nat­ur­al gas, and even nuclear plants. In the past, severe cold has caused US sup­plies of nat­ur­al gas to be con­strained, as use in res­i­den­tial heat­ing com­petes with its use in gen­er­at­ing elec­tric­i­ty. But that does­n’t explain the short­falls in coal and nuclear, and the ERCOT exec­u­tive was­n’t will­ing to spec­u­late.

    With gen­er­a­tion fail­ing to meet demand, ERCOT was left with no oth­er option oth­er than to cut off cus­tomers’ access to pow­er. “About 10,500 MW of cus­tomer load was shed at the high­est point,” as the com­pa­ny put it. In a graph post­ed on ERCOT’s home­page, you can watch a sud­den plunge in demand occur­ring at the time the emer­gency start­ed, indi­cat­ing that many cus­tomers like­ly saw their elec­tric­i­ty cut off at this point. And at two points in the day since, demand expe­ri­enced an addi­tion­al plunge when it threat­ened to exceed sup­ply, indi­cat­ing fur­ther cuts.

    Note that the pro­ject­ed demand for lat­er in the day is far, far high­er than the expect­ed sup­ply, indi­cat­ing that Texas is in for a very dif­fi­cult evening.

    By around noon local time, sim­i­lar prob­lems had struck the South­west Pow­er Pool, which serves parts of 14 states to the north of Texas. A state­ment released on Twit­ter said that the orga­ni­za­tion had start­ed rely­ing on reserve ener­gy at 10am local time and ran out of that short­ly after­ward. (The com­pa­ny’s web­site appears to be down, though whether that’s due to pow­er issues or many peo­ple check­ing its sta­tus isn’t clear.) “This is an unprece­dent­ed event and marks the first time South­west Pow­er Pool has ever had to call for con­trolled inter­rup­tions of ser­vice,” said the com­pa­ny’s CEO.

    ...

    ———-

    “Texas’ pow­er grid crum­ples under the cold” by John Tim­mer; Ars Tech­ni­ca; Ars Tech­ni­ca; 02/15/2021

    Texas is unusu­al in that almost the entire state is part of a sin­gle grid that lacks exten­sive inte­gra­tion with those of the sur­round­ing states. That grid is run by an orga­ni­za­tion called ERCOT, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, a non­prof­it con­trolled by the state leg­is­la­ture.”

    Texas is an odd duck. It’s like the state is pre­emp­tive­ly prepar­ing to secede, start­ing with its ener­gy grid. And as a result, if Tex­as­’s ener­gy gen­er­a­tors have a real­ly bad day or week, the state goes dark. And you can’t blame that on wind:

    ...
    Accord­ing to a state­ment released today by ERCOT, the grid entered a state of emer­gency short­ly after 1am on Mon­day, mean­ing it could no longer guar­an­tee enough pow­er gen­er­a­tion to meet cus­tomer demands. This is because rough­ly 30 gigawatts of gen­er­a­tion capac­i­ty has been forced offline.

    While some ear­ly reports indi­cat­ed that frozen wind tur­bines were caus­ing sig­nif­i­cant short­falls, 30GW is rough­ly equal to the entire state’s wind capac­i­ty if every tur­bine is pro­duc­ing all the pow­er it’s rat­ed for. Since wind in Texas gen­er­al­ly tends to pro­duce less dur­ing win­ter, there’s no way that the grid oper­a­tors would have planned for get­ting 30GW from wind gen­er­a­tion; in fact, a chart at ERCOT indi­cates that wind is pro­duc­ing sig­nif­i­cant­ly more than fore­cast.

    So while hav­ing Texas’ full wind-gen­er­at­ing capac­i­ty online would help, the prob­lems with meet­ing demand appear to lie else­where. An ERCOT direc­tor told Bloomberg that prob­lems were wide­spread across gen­er­at­ing sources, includ­ing coal, nat­ur­al gas, and even nuclear plants. In the past, severe cold has caused US sup­plies of nat­ur­al gas to be con­strained, as use in res­i­den­tial heat­ing com­petes with its use in gen­er­at­ing elec­tric­i­ty. But that does­n’t explain the short­falls in coal and nuclear, and the ERCOT exec­u­tive was­n’t will­ing to spec­u­late.
    ...

    Now here’s a Hous­ton Chron­i­cle piece that gives us more details on what exact­ly took down one of the two nuclear reac­tors at the South Texas Nuclear Pow­er Sta­tion. It also gives us an idea of how the state of Texas is plan­ning on respond­ing to the emer­gency: by ensur­ing that elec­tric­i­ty prices state as high as pos­si­ble for as long as pos­si­ble in order to incen­tivize pow­er gen­er­a­tors to sell what they’re hold­ing back:

    Hous­ton Chron­i­cle

    Grid man­ag­er directs util­i­ties to restore pow­er to 400,000 in Texas

    Mar­cy de Luna, Aman­da Drane
    Feb. 16, 2021
    Updat­ed: Feb. 16, 2021 2:33 p.m.

    The state’s grid man­ag­er said late Tues­day morn­ing that it direct­ed util­i­ties to restore pow­er to 400,000 homes in Texas as the pow­er sit­u­a­tion appears to be improv­ing.

    It remains unclear when enough gen­er­a­tion will be avail­able to end the out­ages that have rolled across Texas since ear­ly Mon­day. The grid man­ag­er, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas said it expects to bring addi­tion­al wind and solar gen­er­a­tion online today, The coun­cil also expects some nat­ur­al-gas-fired pow­er plants to come back into oper­a­tion.

    “The amount (of pow­er) we restore will depend on how much gen­er­a­tion is actu­al­ly able to come online,” the coun­cil said in a Tweet.

    The restora­tion of pow­er comes as the state grid strug­gles to recov­er from severe win­ter weath­er that knocked more pow­er gen­er­a­tors offline Tues­day morn­ing, when tem­per­a­tures fell into the teens. ERCOT required addi­tion­al out­ages to low­er pow­er con­sump­tion by about 18,500 megawatts.

    Some 4.2 mil­lion Tex­ans were still with­out pow­er ear­ly Tues­day after­noon, accord­ing to the out­age track­ing web­site PowerOutage.US. In Hous­ton, about 1.3 mil­lion were with­out pow­er, down from about 1.4 mil­lion Tues­day morn­ing, accord­ing to the Hous­ton util­i­ty Cen­ter­Point Ener­gy.

    “The num­ber of con­trolled out­ages we have to do remains high,” said Dan Woodfin, ERCOT’s senior direc­tor of sys­tem oper­a­tions. “We are opti­mistic that we will be able to reduce the num­ber through­out the day.

    Cen­ter­Point said enough pow­er was avail­able ear­ly Tues­day morn­ing that it was able to resume rotat­ing black­outs to pro­vide relief to cus­tomers whose pow­er was out most of all of Mon­day. The Hous­ton util­i­ty said it had to end the rota­tion when ERCOT ordered addi­tion­al cuts in pow­er con­sump­tion lat­er Tues­day morn­ing, but hopes to resume rolling out­ages this after­noon.

    “We are ready to go back to that process today as soon as we get a lit­tle more relief from ERCOT and the state,” said Ken­ny Mer­ca­do, exec­u­tive vice pres­i­dent at Cen­ter­Point.

    About 1.4 mil­lion cus­tomers in the Hous­ton area were still with­out pow­er late Tues­day morn­ing, accord­ing to Cen­ter­Point.

    Mer­ca­do said the util­i­ty’s trans­mis­sion sys­tem is oper­at­ing nor­mal­ly and is just wait­ing for more pow­er to deliv­er. He expects the out­ages to lessen, but cau­tioned the end is not here yet.

    ...

    Despite the opti­mism, sup­plies remain short. Elec­tric­i­ty was trad­ing at or near the the state cap of $9,000 per megawatt hour Tues­day morn­ing,

    One of the two reac­tors of the South Texas Nuclear Pow­er Sta­tion in Matagor­da Coun­ty, knock­ing out about half of its 2,700 megawatts of gen­er­at­ing capac­i­ty. On Mon­day, Unit 1 went offline cold weath­er-relat­ed issues in the plant’s feed­wa­ter sys­tem, said Vic­ki Row­land, lead of inter­nal com­mu­ni­ca­tions at STP Nuclear Oper­at­ing Com­pa­ny.

    The feed­wa­ter sys­tem is a non-nuclear com­po­nent of the plant, said Row­land. The nuclear side, she said) is safe and secured.”

    Unit 2 con­tin­ues to oper­ate nor­mal­ly, pro­vid­ing more than 1,300 megawatts of elec­tric­i­ty, accord­ing to Row­land. Crews are work­ing to prompt­ly return Unit 1 to the grid, said Row­land.

    The Pub­lic Util­i­ty Com­mis­sion, mean­while, ordered ERCOT to mod­i­fy its pric­ing mod­el to reflect the severe short­age of pow­er. On Mon­day, even as black­outs rolled across the state, pow­er was trad­ing in whole­sale pow­er mar­kets far below the $9,000 per megawatt hour cap — as low as $1,200.

    Andrew Bar­low, a spokesman for the PUC, said the rel­a­tive­ly low prices could have meant that avail­able pow­er was not mak­ing it to the grid, despite the short­ages.

    “When the ERCOT dis­patch sys­tem sees prices that are not at the $9,000 scarci­ty cap, it is pro­grammed to ‘think’ that there isn’t scarci­ty in the mar­ket and that some pow­er should be held in reserve instead of releas­ing it to pow­er the grid,” said Andrew Bar­low, direc­tor of exter­nal affairs at PUC. “The Com­mis­sion­ers’ order fixed that.”

    Gen­er­a­tors were pro­vid­ing about 43,500 megawatts of pow­er, with a reserve of 2,300 megawatts, less than two-thirds the pow­er sup­plied before the rolling black­outs start­ed Mon­day morn­ing, accord­ing to ERCOT’s web­site. Pow­er was trad­ing at the cap Tues­day after­noon.

    ERCOT said Mon­day said some 34,000 megawatts of gen­er­at­ing capac­i­ty — more than one-third of the sys­tem’s total capac­i­ty — was forced offline by the win­ter weath­er. ERCOT said Mon­day evening that pow­er was restored to 500,000 cus­tomers, although at that time, but has not updat­ed the sta­tus of restora­tion efforts since.

    —————-

    “Grid man­ag­er directs util­i­ties to restore pow­er to 400,000 in Texas” by Mar­cy de Luna and Aman­da Drane; Hous­ton Chron­i­cle; 02/16/2021

    “Andrew Bar­low, a spokesman for the PUC, said the rel­a­tive­ly low prices could have meant that avail­able pow­er was not mak­ing it to the grid, despite the short­ages.

    In the words of the Pub­lic Util­i­ty Com­mis­sion’s own spokesman, there is avail­able pow­er in the sys­tem but it’s not mak­ing it to the grid because prices aren’t always being main­tained at the max­i­mum $9,000 megawatt/hour price. That’s the rea­son for the black­out. The rea­son isn’t that the pow­er capac­i­ty does­n’t exist. The com­pa­nies aren’t pro­vid­ing it at less-than-record prices and the Pub­lic Util­i­ty Com­mis­sion is going to order ERCOT to ensure those record high prices are paid:

    ...
    “The Pub­lic Util­i­ty Com­mis­sion, mean­while, ordered ERCOT to mod­i­fy its pric­ing mod­el to reflect the severe short­age of pow­er. On Mon­day, even as black­outs rolled across the state, pow­er was trad­ing in whole­sale pow­er mar­kets far below the $9,000 per megawatt hour cap — as low as $1,200.”

    ...

    When the ERCOT dis­patch sys­tem sees prices that are not at the $9,000 scarci­ty cap, it is pro­grammed to ‘think’ that there isn’t scarci­ty in the mar­ket and that some pow­er should be held in reserve instead of releas­ing it to pow­er the grid,” said Andrew Bar­low, direc­tor of exter­nal affairs at PUC. “The Com­mis­sion­ers’ order fixed that.”

    Gen­er­a­tors were pro­vid­ing about 43,500 megawatts of pow­er, with a reserve of 2,300 megawatts, less than two-thirds the pow­er sup­plied before the rolling black­outs start­ed Mon­day morn­ing, accord­ing to ERCOT’s web­site. Pow­er was trad­ing at the cap Tues­day after­noon.
    ...

    So with that admis­sion in mind, how are we to inter­pret inci­dents like the tak­ing one of the two nuclear gen­er­a­tors offline at the South Texas Nuclear Pow­er Sta­tion:

    ...
    One of the two reac­tors of the South Texas Nuclear Pow­er Sta­tion in Matagor­da Coun­ty, knock­ing out about half of its 2,700 megawatts of gen­er­at­ing capac­i­ty. On Mon­day, Unit 1 went offline cold weath­er-relat­ed issues in the plant’s feed­wa­ter sys­tem, said Vic­ki Row­land, lead of inter­nal com­mu­ni­ca­tions at STP Nuclear Oper­at­ing Com­pa­ny.

    The feed­wa­ter sys­tem is a non-nuclear com­po­nent of the plant, said Row­land. The nuclear side, she said) is safe and secured.”

    Unit 2 con­tin­ues to oper­ate nor­mal­ly, pro­vid­ing more than 1,300 megawatts of elec­tric­i­ty, accord­ing to Row­land. Crews are work­ing to prompt­ly return Unit 1 to the grid, said Row­land.
    ...

    We’re told there was nev­er a dan­ger. So we have to ask: did they take down the plant because prices weren’t high enough?

    Grant­ed, safe­ty real­ly should be a top pri­or­i­ty at a nuclear plant, just as it should be the top pri­or­i­ty for coal and nat­ur­al gas and every oth­er form of elec­tric­i­ty pro­duc­tion. And extreme weath­er is obvi­ous­ly the kind of sit­u­a­tion that can lead to legit­i­mate shut­downs over safe­ty con­cerns. But that’s simul­ta­ne­ous­ly what makes an extreme weath­er event like this a remark­able oppor­tu­ni­ty for the ener­gy indus­try in Texas. Because weath­er events are some of the few things poten­tial­ly large enough to impact the entire pow­er gen­er­at­ing mar­ket in Texas at the same time and we already know that Tex­as­’s elec­tric­i­ty mar­ket has been crit­i­cized for being vul­ner­a­ble to manip­u­la­tion from pow­er gen­er­a­tors with­hold ener­gy from the sys­tem and squeez­ing the mar­ket. That makes extreme weath­er a real oppor­tu­ni­ty for Tex­as­’s ener­gy indus­try. All they need to pull it off is coop­er­a­tion. As long as every­one pulls back sup­plies from the mar­ket at the same time, the prices go wild and every­one wins. Think about it: the pro­duc­tion capac­i­ty dropped by about 1/3 and prices spikes 100-fold. Texas built for itself the kind of ener­gy mar­kets that actu­al­ly strong­ly incen­tivize the entire indus­try to col­lude.

    So we’re going to see who ulti­mate­ly ends up tak­ing the blame for this unfold­ing dis­as­ter in Texas. Wind took the brunt of the ini­tial blame, but that sto­ry isn’t hold­ing up. Some­one else is going to take the blame and, based on the state­ments from the Pub­lic Util­i­ty Com­mis­sion, it looks like ERCOT might take the blame...for not jack­ing prices up enough. But if we’re look­ing at an instance of seri­ous­ly wide­spread indus­try col­lu­sion to with­hold pow­er from the grid, keep in mind that it would be the kind of mega-scan­dal that Amer­i­ca has rou­tine­ly proven utter­ly inca­pable of seri­ous­ly deal­ing with. So if this real­ly is a case of a mas­sive wide­spread and dead­ly indus­try-wide act of col­lu­sion, def­i­nite­ly expect wind take the blame in the end. That’s real­ly the best we can do.

    Posted by Pterrafractyl | February 16, 2021, 5:38 pm
  9. With the mas­sive win­ter storm con­tin­u­ing to inflict mas­sive and dead­ly black­outs across Texas at the same time the state elec­tri­cal grid expe­ri­ences record high price surges, here’s anoth­er look at the how the Texas elec­tri­cal grid was specif­i­cal­ly designed to allow the pow­er gen­er­a­tors to cre­ate mas­sive price surges with legal impuni­ty. The arti­cle is about the May 2019 price surge where, in a mat­ter of min­utes, the price for a megawatt hour of elec­tric­i­ty jumped from $40 to $9,000. The price surge only last­ed a few min­utes but that was long enough for the pow­er providers to make an extra $18,000,000 in direct prof­its and tens of mil­lions of dol­lars more from futures con­tracts. The inci­dent turned out to be a per­fect exam­ple of how Tex­as­’s ener­gy mar­kets were designed to be del­i­cate. In this case, the inci­dent was trig­gered when a pow­er provider from Cal­i­for­nia, Calpine, acci­den­tal­ly sent infor­ma­tion into the state’s grid man­ag­er that erro­neous­ly showed around 4,000 megawatts of gen­er­a­tion capac­i­ty com­ing offline. That erro­neous data, sent by an out-of-state provider, broke Tex­as­’s elec­tric­i­ty mar­ket­place. That’s all that was required.

    So how to what were the con­se­quences of this mar­ket break­down that was induced by a sin­gle out-of-state oper­a­tor? Well, with­in a few hours of the inci­dent, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT) announced that it was NOT going to retroac­tive­ly cor­rect the prices and the oper­a­tors could keep their mil­lions of ill-got­ten gains. It’s pret­ty scan­dalous, but not as scan­dalous ERCOT’s jus­ti­fi­ca­tion for the deci­sion: ERCOT rea­soned that because it receives erro­neous infor­ma­tion from pow­er gen­er­a­tors so fre­quent­ly, once a day on aver­age, there’s no way it can cor­rect the prices paid when­ev­er these kinds of inci­dents hap­pen because that would cause mar­ket insta­bil­i­ty and price uncer­tain­ty. Yes, ERCOT rea­soned that it can’t do any­thing to cor­rect mar­ket manip­u­la­tion from incor­rect data because this ‘acci­den­tal’ manip­u­la­tion is so fre­quent that address­ing it would cause mar­ket insta­bil­i­ty. Take a moment and think about that.

    We also learn that that $9,000/megawatt hour max­i­mum price cap is actu­al­ly 9‑times what it was when Texas start­ed this dereg­u­lat­ed elec­tric­i­ty mar­ket­place 20 years ago. Orig­i­nal­ly, the cap was $1000/megawatt hour, but the Texas pub­lic util­i­ty com­mis­sion raised the cap to $3,000 in 2012, $5,000 1n 2013 and $7,000 in 2014. The most recent adjust­ment in 2015 took the cap to $9,000. So over the last 8 years, Texas raised the max­i­mum cap on the elec­tric­i­ty prices by 900%. It’s a fun fact worth keep­ing in mind when read­ing about the 10,000% price surge that just took place a cou­ple days ago and a reminder that, again, Texas designed its sys­tem to allow for mas­sive price surges. When the head of the Texas Pub­lic Util­i­ty Com­mis­sion just blamed the black­outs on the fact that ERCOT was­n’t always allow­ing the prices to spike all the way up to the $9,000/megawatt hour cap, that’s a big clue of how the sys­tem is intend­ed to work. It was designed to have a 100-fold price surge when put under stress. What’s hap­pen­ing in Texas today is what was sup­posed to hap­pen.

    But it gets worse. They even have a “small fish” rule that says pow­er gen­er­a­tors who con­trol less than 5% of the mar­ket share are free to sud­den­ly with­hold pow­er from the mar­ket­place for any rea­son at all, the idea being that if they have less than 5% of the mar­ket they can’t impact the prices in any mean­ing­ful way. But as that May 2019 inci­dent makes clear, the mar­ket is actu­al­ly wild­ly frag­ile and a play­er with as lit­tle as 5% of the mar­ket share can induce wild price spikes at will. In 2019, there were 400 oper­a­tors who fell under this exemp­tion. 400 oper­a­tors legal­ly free to do what­ev­er they want to manip­u­late prices.

    So small oper­a­tors can legal­ly work to manip­u­late the mar­kets, but what about the big oper­a­tors? Well, they are basi­cal­ly absolved of respon­si­bil­i­ty too, albeit on a case-by-case basis. This was a result of Texas dis­cov­er­ing short­ly after they set up the mar­ket­place 20 years ago that, yes, manip­u­la­tion was ram­pant and large oper­a­tors were jack­ing up prices by with­hold­ing pow­er from the mar­kets. in 20017, TXU, a sub­sidiary of Vis­tra Ener­gy, was fined $210 mil­lion in penal­ties for these prac­tices (lat­er reduced to $15 mil­lion, the max­i­mum allowed in Texas). As part of its set­tle­ment, TXU got new pro­tec­tions from future alle­ga­tions of mar­ket manip­u­la­tion. After that, oth­er com­pa­nies soon sought sim­i­lar deals and now some of the biggest pow­er gen­er­a­tors in the state are legal­ly pro­tect­ed from alle­ga­tions of mar­ket manip­u­la­tion. You read that cor­rect­ly: Texas respond­ed to ram­pant manip­u­la­tion by giv­ing the largest offend­ers legal pro­tec­tions against future charges for doing exact­ly the same thing.

    Oh, and it also turns out that Texas is the only state with a dereg­u­lat­ed elec­tric­i­ty mar­ket in which gen­er­a­tors are not paid for keep­ing gen­er­a­tion capac­i­ty in reserve to meet peak demand. The Pub­lic Util­i­ty Com­mis­sion also increased the amount pro­duc­ers could charge on high-demand days in 2019. Plus, under a state law passed in 2011, con­sumers, indus­tri­al users and retail elec­tric­i­ty providers have no stand­ing to inter­vene in nego­ti­a­tions involv­ing poten­tial mar­ket manip­u­la­tion. Only the gen­er­a­tor, the inde­pen­dent mar­ket mon­i­tor and the Pub­lic Util­i­ty Com­mis­sion can get involved in these dis­putes.

    So between the “small fish” rule and the “big fish” legal arrange­ments, Texas basi­cal­ly gave its pow­er indus­try the pow­er to with­hold pow­er from the mar­kets in order to jack up prices with legal impunity...at the same time it raised the max­i­mum cap in the prices Texas con­sumers could pay by 900% while doing noth­ing to ensure ade­quate capac­i­ty is there for high-demand days. Texas lit­er­al­ly incen­tivized its pow­er indus­try to with­hold pow­er dur­ing emer­gen­cies:

    Hous­ton Chron­i­cle

    A May price spike shows vul­ner­a­bil­i­ty of pow­er mar­ket to manip­u­la­tion — and cost to con­sumers

    L.M. Six­el,
    Staff writer
    July 26, 2019
    Updat­ed: Aug. 2, 2019 2:37 p.m.

    The error was inad­ver­tent, an unknow­ing mis­take by an IT work­er, and was cor­rect­ed in three min­utes. But with­in those moments, the price of elec­tric­i­ty on Texas’ whole­sale mar­ket soared from about $40 a megawatt hour to $9,000.

    Calpine, one of the nation’s biggest pow­er com­pa­nies, last week claimed respon­si­bil­i­ty for the price spike, admit­ting the data it sent to the state’s grid man­ag­er erro­neous­ly showed some 4,000 megawatts of gen­er­a­tion — enough to pow­er about 800,000 Texas homes — com­ing offline dur­ing a late May after­noon with tem­per­a­tures in the 90s. The Hous­ton com­pa­ny has called on the grid man­ag­er, the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, to reprice the trans­ac­tions and order refunds to whole­sale cus­tomers.

    The episode, which gen­er­at­ed an imme­di­ate wind­fall of $18 mil­lion for pow­er com­pa­nies and tens of mil­lions more from futures con­tracts priced high­er as a result, illus­trates how vul­ner­a­ble the elec­tric­i­ty mar­ket in Texas is to manip­u­la­tion. It also shows how bad data, whether by acci­dent or design, finds its way into the con­trol sys­tems of ERCOT and dri­ves whole­sale pow­er price high­er.

    The Calpine inci­dent is far from iso­lat­ed and unusu­al only in that the details have become pub­lic. Pow­er com­pa­nies have exploit­ed weak­ness­es in the design of Texas’ dereg­u­lat­ed mar­ket almost from the day it began oper­at­ing in 2002 and often done so with few con­se­quences, reap­ing wind­falls that have cost con­sumers, traders, indus­tri­al cus­tomers and retail pow­er com­pa­nies hun­dreds of mil­lions of dol­lars, accord­ing to court records, reg­u­la­to­ry fil­ings, mar­ket reports and inter­views with ana­lysts, com­mod­i­ty traders and oth­er experts.

    In four months between March and June alone, the con­sult­ing firm First Prin­ci­ples Eco­nom­ics of Hous­ton found 55 inci­dents of pow­er inex­plic­a­bly mov­ing on and off the mar­ket, like­ly boost­ing prices and rais­ing red flags about the integri­ty and over­sight of data that con­trols the flow and cost of elec­tric­i­ty in Texas. In a recent fil­ing with the Pub­lic Util­i­ty Com­mis­sion, ERCOT said it receives inac­cu­rate pro­duc­tion data from gen­er­a­tors as fre­quent­ly as once a day.

    Law­mak­ers and reg­u­la­tors, mean­while, have done lit­tle to hard­en the sys­tem against manip­u­la­tion and, in some ways, pro­vid­ed incen­tives for com­pa­nies to game the mar­ket. When it finds irreg­u­lar­i­ties that push prices arti­fi­cial­ly high, ERCOT rarely reprices trans­ac­tions and orders pow­er com­pa­nies to give up the gains. With­in an hour after dis­cov­er­ing Calpine’s error in May, for exam­ple, ERCOT said it would allow gen­er­a­tors to pock­et the mon­ey.

    In addi­tion, when reg­u­la­tors have tak­en action against poten­tial mar­ket manip­u­la­tion, they have reached set­tle­ments with large pow­er pro­duc­ers that essen­tial­ly allow com­pa­nies to manip­u­late prices, as long as they don’t do it too much, reg­u­la­to­ry doc­u­ments show. They also have grant­ed small pow­er pro­duc­ers immu­ni­ty from manip­u­la­tion charges on the the­o­ry that small com­pa­nies don’t con­trol enough sup­ply to influ­ence mar­kets — even though small amounts of pow­er can have dra­mat­ic effects on prices when sup­plies are tight.

    Even small shifts in the mar­ket can add up. In 2013, irreg­u­lar mar­ket move­ments by a small play­er boost­ed whole­sale elec­tric­i­ty prices by less than $1 per megawatt hour, accord­ing to an esti­mate by the state’s inde­pen­dent mar­ket mon­i­tor. But those move­ments increased the cost of elec­tric­i­ty in Texas by as much as $330 mil­lion or about $10 per house­hold, said Ed Hirs, ener­gy econ­o­mist at the Uni­ver­si­ty of Hous­ton.

    “A dol­lar here, a dol­lar there, it doesn’t seem to mat­ter to ERCOT,” said Hirs. “No one holds them account­able.”

    ...

    At the begin­ning

    The Texas whole­sale mar­ket is com­pli­cat­ed and opaque, dif­fer­ing from oth­er states in two major ways. In most states with dereg­u­lat­ed pow­er mar­kets, bids sub­mit­ted by gen­er­a­tors is pub­lic. Sec­ond, the gen­er­a­tion data that grid man­agers rely on to secure and price pow­er comes through inde­pen­dent third par­ties.

    In Texas, bid­ding is con­duct­ed in pri­vate and data comes from the gen­er­a­tors them­selves. Based on that data, ERCOT secures pow­er to meet demand in 5 to 15 sec­ond inter­vals, start­ing with the low­est bids and work­ing up until it has enough. The high­est bid it accepts becomes the price paid to all com­pa­nies. That means pro­duc­ers with­draw­ing or with­hold­ing sup­plies from the mar­ket for even a few sec­onds can cre­ate arti­fi­cial short­ages to dri­ve prices high­er, accord­ing to ener­gy ana­lysts.;

    Two decades ago, indus­tri­al pow­er buy­ers, backed by the soon-to-be dis­graced Enron, lob­bied the Tex as Leg­is­la­ture to break up util­i­ties that gen­er­at­ed, dis­trib­uted and sold elec­tric­i­ty and cre­ate com­pet­i­tive mar­kets in pow­er gen­er­a­tion and retail sales, leav­ing dis­tri­b­u­tion as a reg­u­lat­ed monop­oly. The indus­try called it dereg­u­la­tion, but the new mar­kets came with a new set of com­plex rules.

    Almost imme­di­ate­ly, Texas leg­is­la­tors, reg­u­la­tors and con­sumer watch­dogs raised con­cerns that the sys­tem could be manip­u­lat­ed. It didn’t take long before Texas reg­u­la­tors start­ed to spot pric­ing shenani­gans. The Pub­lic Util­i­ty Com­mis­sion launched an inves­ti­ga­tion in 2002 into com­pa­nies sched­ul­ing more pow­er than they would deliv­er as a way to cre­ate arti­fi­cial con­ges­tion on trans­mis­sion lines, which increas­es prices. Four gen­er­a­tors were required by the com­mis­sion to return $10.5 mil­lion in ill-gained prof­its.

    After that inci­dent, the com­mis­sion detailed to law­mak­ers how pow­er com­pa­nies could game the mar­ket. In addi­tion to cre­at­ing arti­fi­cial con­ges­tion, gen­er­a­tors could mis­rep­re­sent pro­duc­tion sched­ules and employ “hock­ey stick bid­ding,” in which a gen­er­a­tor bids a small por­tion of its pow­er at an unusu­al­ly high price. If the grid man­ag­er accepts all avail­able bids, then the most expen­sive one — the tip of the hock­ey stick blade— estab­lish­es the mar­ket clear­ing price.

    Texas Com­mer­cial Ener­gy of Plano was one of the first retail elec­tric providers in Texas in 2002. It was in bank­rupt­cy the fol­low­ing year when prices soared to $990 per megawatt hour — just $10 shy of the then-$1,000 price cap — forc­ing the com­pa­ny to buy expen­sive pow­er to ful­fill its con­tracts, accord­ing to a fed­er­al law­suit the com­pa­ny filed against sev­er­al gen­er­a­tors and ERCOT.

    Texas Com­mer­cial blamed the price spike in Feb­ru­ary 2003 on a gen­er­a­tor that made a 1 megawatt “hock­ey stick bid” of $990 per megawatt hour. The gen­er­a­tor, which was not iden­ti­fied, offered the rest of its pow­er for $200 or less a megawatt. The sin­gle high bid, how­ev­er, meant that sev­en hours of pow­er over two days was sold at $990 per megawatt hour.

    The Pub­lic Util­i­ty Com­mis­sion inves­ti­gat­ed and deter­mined that hock­ey stick bid­ding had increased the cost of pow­er in Texas two to three times dur­ing that two-day stretch and added $17 mil­lion to the bills of con­sumers and busi­ness­es. The staff rec­om­mend­ed changes so the top bid­der could no longer set the mar­ket price, but was opposed by gen­er­a­tors.

    Bul­let-proof

    The com­mis­sion launched anoth­er inquiry after the inde­pen­dent mar­ket mon­i­tor, Potomac Eco­nom­ics of Fair­fax, Va., hired in 2006, found evi­dence that pow­er com­pa­nies were with­hold­ing gen­er­a­tion from the mar­ket.

    The fol­low­ing year, com­mis­sion staff report­ed that TXU, now a sub­sidiary of Vis­tra Ener­gy, abused its mar­ket pow­er by keep­ing elec­tric­i­ty off the mar­ket, dri­ving up prices by near­ly 16 per­cent and cost­ing $70 mil­lion. TXU raked in near­ly $20 mil­lion in addi­tion­al prof­its, accord­ing to the com­mis­sion, which rec­om­mend­ed TXU pay $210 mil­lion in penal­ties and resti­tu­tion. An admin­is­tra­tive law judge reduced the penal­ty to $15 mil­lion, the max­i­mum allowed in Texas,

    TXU set­tled the case with­out admit­ting wrong­do­ing and emerged from the episode with new pro­tec­tions from future alle­ga­tions of mar­ket manip­u­la­tion. The com­pa­ny agreed in 2007 to a “vol­un­tary mit­i­ga­tion plan,” which, in exchange for meet­ing cer­tain unspec­i­fied con­di­tions, pro­vid­ed an absolute defense against alle­ga­tions of mar­ket-pow­er abuse. Oth­er com­pa­nies soon sought sim­i­lar deals, and today some of the state’s biggest gen­er­a­tors are pro­tect­ed from alle­ga­tions of arti­fi­cial­ly inflat­ing prices through strate­gies that make sup­plies appear tighter than they are.

    Calpine first ini­ti­at­ed a mit­i­ga­tion plan in 2013 which has been expand­ed and remains in effect today. The agree­ment allows the com­pa­ny to sell up to 10 per­cent of its capac­i­ty for $500 per megawatt hour and sell anoth­er 5 per­cent at $9,000 per megawatt hour, the high­est price per­mit­ted in Texas. The deal cov­ers about 700 megawatts of pow­er sales for Calpine.

    NRG, the biggest sell­er of elec­tric­i­ty in Texas, is allowed to sell up to 3 per­cent of its capac­i­ty from each nat­ur­al gas gen­er­at­ing unit at $9,000 per megawatt hour. The plan also per­mits NRG to sell anoth­er por­tion of its nat­ur­al gas and coal out­put for what­ev­er price is greater: $500 per megawatt hour or 50 times the nat­ur­al gas price. The deal cov­ers about 500 megawatts of NRG pow­er sales.

    Nei­ther Calpine or NRG would com­ment on their mit­i­ga­tion plans.

    To crit­ics, the plans pro­vide a way to dri­ve prices high­er with the approval of reg­u­la­tors. When reg­u­la­tors agree to these kind of deals, they are effec­tive­ly say­ing they don’t have the resources to deter­mine whether price spikes are legit­i­mate, said Robert McCul­lough, an Ore­gon ener­gy ana­lyst who fol­lows dereg­u­la­tion issues.

    “It’s like telling a bank rob­ber you can rob a bank but take only $100,000,” he said.

    Small fry

    If reg­u­la­tors con­sid­er com­pa­nies’ gen­er­a­tion capac­i­ty too small to con­trol the mar­ket, those gen­er­a­tors have an iron-clad defense against manip­u­la­tion charges. But that pro­tec­tion can cost Texas con­sumers because small play­ers still have enor­mous pric­ing pow­er, accord­ing to the inde­pen­dent mar­ket mon­i­tor

    The mon­i­tor report­ed that in 2013 it observed that French-owned GDF Suez, now known as Engie, struc­tured its bids to keep pow­er off the mar­ket and dri­ve up prices. That year, the aver­age whole­sale elec­tric­i­ty price climbed 19 per­cent.

    But GDF Suez escaped scruti­ny because the com­pa­ny, under Texas reg­u­la­tions, was con­sid­ered a “small fish,” con­trol­ling less than 5 per­cent of total gen­er­a­tion capac­i­ty in the ERCOT sys­tem and by rule unable to exer­cise mar­ket pow­er. The small fish des­ig­na­tion meant that GDF Suez, with near­ly 4,000 megawatts and 4.85 per­cent of the mar­ket, had “an absolute defense” against alle­ga­tions of with­hold­ing pow­er to manip­u­late the mar­ket.

    But the mar­ket mon­i­tor in its annu­al report rea­soned that a com­pa­ny with 4,000 megawatts could dri­ve prices to the then-cap of $5,000 per megawatt hour by with­hold­ing pow­er. On Sept. 3, 2013, for exam­ple, GDF Suez noti­fied ERCOT that some of its sup­ply was no longer avail­able, caus­ing prices to jump to $4,900 per megawatt, accord­ing to a fed­er­al law­suit filed by trad­ing firm Aspire Com­modi­ties.

    Aspire alleged it lost hun­dreds of thou­sands of dol­lars because of GDF Suez. Aspire sought dam­ages under the fed­er­al Com­mod­i­ty Exchange Act, but its suit was dis­missed because the alleged mis­con­duct took place in the ERCOT sys­tem, which is not fed­er­al­ly reg­u­lat­ed. The deci­sion was upheld on appeal and ERCOT’s small fish rule pre­vailed. Today, Texas has more than 400 pow­er gen­er­a­tors that are con­sid­ered small fish. accord­ing to Pub­lic Util­i­ty Com­mis­sion records.

    ...

    Back to May

    The Pub­lic Util­i­ty Com­mis­sion unan­i­mous­ly reject­ed a request in 2014 to elim­i­nate the “small fish swim free” rule, argu­ing the com­pet­i­tive mar­ket keeps any one small gen­er­a­tor from dom­i­nat­ing. But, with sum­mer pow­er reserves at record lows, the issue resur­faced at the com­mis­sion board meet­ing last month when com­mis­sion­ers ques­tioned whether the small fish rule is still good idea.

    “I actu­al­ly believe the whole thing should be elim­i­nat­ed,” said PUC chair­man DeAnn Walk­er.

    When Texas dereg­u­lat­ed the elec­tric­i­ty mar­ket two decades ago, elec­tric­i­ty prices were capped at $1,000 per megawatt hour. After intense lob­by­ing from gen­er­a­tors that said they need­ed more incen­tives to build new gen­er­a­tion, the com­mis­sion raised the cap to $3,000 in 2012, $5,000 1n 2013 and $7,000 in 2014. The most recent adjust­ment in 2015 took the cap to $9,000.

    Texas is the only dereg­u­lat­ed state in which gen­er­a­tors are not paid for keep­ing gen­er­a­tion capac­i­ty in reserve to meet peak demand. The only way they can make mon­ey is by sell­ing pow­er, which puts pres­sure on reg­u­la­tors to ensure com­pa­nies earn suf­fi­cient prof­its so they will par­tic­i­pate in the mar­ket.

    Ear­li­er this year the com­mis­sion increased a price sup­ple­ment that allows gen­er­a­tors to earn more on high demand days. The lat­est increase — with anoth­er planned for spring — is expect­ed to increase whole­sale elec­tric­i­ty costs by as much as $4 bil­lion a year, accord­ing to an esti­mate by Chica­go-based pow­er gen­er­a­tor Exelon, which sought the increase along with Calpine and NRG.

    On the after­noon of May 30, the tem­per­a­ture was a bit high­er than nor­mal, but not hot enough to cause capac­i­ty prob­lems. In Texas, prices change every 15 min­utes based on cal­cu­la­tions made every five or so sec­onds that mea­sure avail­able sup­ply, demand and offer­ing prices. In the 15-minute inter­val before the prices spiked, elec­tric­i­ty was sell­ing for about $40 a megawatt hour.

    But dur­ing the 15 min­utes in which prices sky­rock­et­ed to $9,000, every gen­er­a­tor in the mar­ket was paid about $1,400 per megawatt hour. Prices then dipped to $29 per megawatt hour.

    Less than one hour after the pric­ing error, ERCOT said it inves­ti­gat­ed the inci­dent and deter­mined it would not cor­rect the prices. That deci­sion meant gen­er­a­tors could keep the mon­ey.

    ERCOT said in a reg­u­la­to­ry fil­ing last week that it can’t get into the prac­tice of adjust­ing prices because it receives incor­rect infor­ma­tion from gen­er­a­tors as often as once a day. Mak­ing price cor­rec­tions on that scale, accord­ing to ERCOT, would cause mar­ket insta­bil­i­ty and increase price uncer­tain­ty.

    Cus­tomers have lit­tle recourse. Under a state law passed in 2011, con­sumers, indus­tri­al users and retail elec­tric­i­ty providers have no stand­ing to inter­vene in nego­ti­a­tions involv­ing poten­tial mar­ket manip­u­la­tion. The par­ties are lim­it­ed to the gen­er­a­tor, the inde­pen­dent mar­ket mon­i­tor and the Pub­lic Util­i­ty Com­mis­sion. It’s left to reg­u­la­tors to deter­mine if the out­come is in the pub­lic inter­est.

    This has added to a lack of account­abil­i­ty from gen­er­a­tors and reg­u­la­tors, said Tim Morstad, asso­ciate state direc­tor of the senior cit­i­zen advo­ca­cy group AARP Texas, which inter­venes in elec­tric­i­ty cas­es on behalf of con­sumers. Ever since Texas adopt­ed a com­pet­i­tive mar­ket, reg­u­la­tors have said con­sumers need to be heard, Morstad said. But when con­sumers don’t have a say in how mar­ket rules are enforced, they are left only to choose an elec­tric provider.

    “It doesn’t mat­ter who you’re with,” said Morstad. “If the mar­ket is get­ting manip­u­lat­ed at the whole­sale lev­el, every­one is get­ting ripped off — except the one that did the fun­ny busi­ness.”

    ————-

    “A May price spike shows vul­ner­a­bil­i­ty of pow­er mar­ket to manip­u­la­tion — and cost to con­sumers” by L.M. Six­el; Hous­ton Chron­i­cle; 07/26/2019.

    “The Calpine inci­dent is far from iso­lat­ed and unusu­al only in that the details have become pub­lic. Pow­er com­pa­nies have exploit­ed weak­ness­es in the design of Texas’ dereg­u­lat­ed mar­ket almost from the day it began oper­at­ing in 2002 and often done so with few con­se­quences, reap­ing wind­falls that have cost con­sumers, traders, indus­tri­al cus­tomers and retail pow­er com­pa­nies hun­dreds of mil­lions of dol­lars, accord­ing to court records, reg­u­la­to­ry fil­ings, mar­ket reports and inter­views with ana­lysts, com­mod­i­ty traders and oth­er experts.

    That’s the big take­away mes­sage from this May 2019 Calpine inci­dent: it was unusu­al only in that the details have become pub­lic. What tran­spired was entire­ly typ­i­cal and rou­tine­ly done with­out con­se­quence. Seem­ing­ly with the bless­ing of ERCOT and the Pub­lic Util­i­ty Com­mis­sion. When Calpine’s erro­neous data brake the mar­ket, ERCOT said won’t rec­ti­fy the sit­u­a­tion because such inci­dents hap­pen once a day on aver­age:

    ...
    On the after­noon of May 30, the tem­per­a­ture was a bit high­er than nor­mal, but not hot enough to cause capac­i­ty prob­lems. In Texas, prices change every 15 min­utes based on cal­cu­la­tions made every five or so sec­onds that mea­sure avail­able sup­ply, demand and offer­ing prices. In the 15-minute inter­val before the prices spiked, elec­tric­i­ty was sell­ing for about $40 a megawatt hour.

    But dur­ing the 15 min­utes in which prices sky­rock­et­ed to $9,000, every gen­er­a­tor in the mar­ket was paid about $1,400 per megawatt hour. Prices then dipped to $29 per megawatt hour.

    Less than one hour after the pric­ing error, ERCOT said it inves­ti­gat­ed the inci­dent and deter­mined it would not cor­rect the prices. That deci­sion meant gen­er­a­tors could keep the mon­ey.

    ERCOT said in a reg­u­la­to­ry fil­ing last week that it can’t get into the prac­tice of adjust­ing prices because it receives incor­rect infor­ma­tion from gen­er­a­tors as often as once a day. Mak­ing price cor­rec­tions on that scale, accord­ing to ERCOT, would cause mar­ket insta­bil­i­ty and increase price uncer­tain­ty.
    ...

    And yes, the infor­ma­tion that the elec­tric­i­ty mar­ket­place relies on is exclu­sive­ly pro­vid­ed by the gen­er­a­tors them­selves. In 5–15 sec­ond inter­vals. So with­hold­ing pow­er for just a few sec­onds can have a dra­mat­ic impact on the prices. It’s brit­tle by design:

    ...
    The Texas whole­sale mar­ket is com­pli­cat­ed and opaque, dif­fer­ing from oth­er states in two major ways. In most states with dereg­u­lat­ed pow­er mar­kets, bids sub­mit­ted by gen­er­a­tors is pub­lic. Sec­ond, the gen­er­a­tion data that grid man­agers rely on to secure and price pow­er comes through inde­pen­dent third par­ties.

    In Texas, bid­ding is con­duct­ed in pri­vate and data comes from the gen­er­a­tors them­selves. Based on that data, ERCOT secures pow­er to meet demand in 5 to 15 sec­ond inter­vals, start­ing with the low­est bids and work­ing up until it has enough. The high­est bid it accepts becomes the price paid to all com­pa­nies. That means pro­duc­ers with­draw­ing or with­hold­ing sup­plies from the mar­ket for even a few sec­onds can cre­ate arti­fi­cial short­ages to dri­ve prices high­er, accord­ing to ener­gy ana­lysts.
    ...

    And then there’s the legal pro­tec­tions. Pro­tec­tions against future accu­sa­tions of mar­ket manip­u­la­tions giv­en as part of the set­tle­ments for large offend­ers. It’s like Texas was ask­ing them to please offend in the future:

    ...
    Bul­let-proof

    The com­mis­sion launched anoth­er inquiry after the inde­pen­dent mar­ket mon­i­tor, Potomac Eco­nom­ics of Fair­fax, Va., hired in 2006, found evi­dence that pow­er com­pa­nies were with­hold­ing gen­er­a­tion from the mar­ket.

    The fol­low­ing year, com­mis­sion staff report­ed that TXU, now a sub­sidiary of Vis­tra Ener­gy, abused its mar­ket pow­er by keep­ing elec­tric­i­ty off the mar­ket, dri­ving up prices by near­ly 16 per­cent and cost­ing $70 mil­lion. TXU raked in near­ly $20 mil­lion in addi­tion­al prof­its, accord­ing to the com­mis­sion, which rec­om­mend­ed TXU pay $210 mil­lion in penal­ties and resti­tu­tion. An admin­is­tra­tive law judge reduced the penal­ty to $15 mil­lion, the max­i­mum allowed in Texas,

    TXU set­tled the case with­out admit­ting wrong­do­ing and emerged from the episode with new pro­tec­tions from future alle­ga­tions of mar­ket manip­u­la­tion. The com­pa­ny agreed in 2007 to a “vol­un­tary mit­i­ga­tion plan,” which, in exchange for meet­ing cer­tain unspec­i­fied con­di­tions, pro­vid­ed an absolute defense against alle­ga­tions of mar­ket-pow­er abuse. Oth­er com­pa­nies soon sought sim­i­lar deals, and today some of the state’s biggest gen­er­a­tors are pro­tect­ed from alle­ga­tions of arti­fi­cial­ly inflat­ing prices through strate­gies that make sup­plies appear tighter than they are.

    ...

    To crit­ics, the plans pro­vide a way to dri­ve prices high­er with the approval of reg­u­la­tors. When reg­u­la­tors agree to these kind of deals, they are effec­tive­ly say­ing they don’t have the resources to deter­mine whether price spikes are legit­i­mate, said Robert McCul­lough, an Ore­gon ener­gy ana­lyst who fol­lows dereg­u­la­tion issues.

    “It’s like telling a bank rob­ber you can rob a bank but take only $100,000,” he said.
    ...

    And the “small fry” can do what­ev­er they want to manip­u­late prices, under the premise that they can’t actu­al­ly impact the market...despite empir­i­cal evi­dence that a sin­gle small oper­a­tor, GDF Suez, appeared to sin­gle-hand­ed­ly cause the prices to spice to $4,900 per megawatt hour in 2013:

    ...
    Small fry

    If reg­u­la­tors con­sid­er com­pa­nies’ gen­er­a­tion capac­i­ty too small to con­trol the mar­ket, those gen­er­a­tors have an iron-clad defense against manip­u­la­tion charges. But that pro­tec­tion can cost Texas con­sumers because small play­ers still have enor­mous pric­ing pow­er, accord­ing to the inde­pen­dent mar­ket mon­i­tor

    The mon­i­tor report­ed that in 2013 it observed that French-owned GDF Suez, now known as Engie, struc­tured its bids to keep pow­er off the mar­ket and dri­ve up prices. That year, the aver­age whole­sale elec­tric­i­ty price climbed 19 per­cent.

    But GDF Suez escaped scruti­ny because the com­pa­ny, under Texas reg­u­la­tions, was con­sid­ered a “small fish,” con­trol­ling less than 5 per­cent of total gen­er­a­tion capac­i­ty in the ERCOT sys­tem and by rule unable to exer­cise mar­ket pow­er. The small fish des­ig­na­tion meant that GDF Suez, with near­ly 4,000 megawatts and 4.85 per­cent of the mar­ket, had “an absolute defense” against alle­ga­tions of with­hold­ing pow­er to manip­u­late the mar­ket.

    But the mar­ket mon­i­tor in its annu­al report rea­soned that a com­pa­ny with 4,000 megawatts could dri­ve prices to the then-cap of $5,000 per megawatt hour by with­hold­ing pow­er. On Sept. 3, 2013, for exam­ple, GDF Suez noti­fied ERCOT that some of its sup­ply was no longer avail­able, caus­ing prices to jump to $4,900 per megawatt, accord­ing to a fed­er­al law­suit filed by trad­ing firm Aspire Com­modi­ties.

    Aspire alleged it lost hun­dreds of thou­sands of dol­lars because of GDF Suez. Aspire sought dam­ages under the fed­er­al Com­mod­i­ty Exchange Act, but its suit was dis­missed because the alleged mis­con­duct took place in the ERCOT sys­tem, which is not fed­er­al­ly reg­u­lat­ed. The deci­sion was upheld on appeal and ERCOT’s small fish rule pre­vailed. Today, Texas has more than 400 pow­er gen­er­a­tors that are con­sid­ered small fish. accord­ing to Pub­lic Util­i­ty Com­mis­sion records.
    ...

    And yet the small­est of the “small fry” in this sit­u­a­tion — the con­sumers, legal­ly have no stand­ing to inter­vene in these price nego­ti­a­tions thanks to a state law passed in 2011:

    ...
    Cus­tomers have lit­tle recourse. Under a state law passed in 2011, con­sumers, indus­tri­al users and retail elec­tric­i­ty providers have no stand­ing to inter­vene in nego­ti­a­tions involv­ing poten­tial mar­ket manip­u­la­tion. The par­ties are lim­it­ed to the gen­er­a­tor, the inde­pen­dent mar­ket mon­i­tor and the Pub­lic Util­i­ty Com­mis­sion. It’s left to reg­u­la­tors to deter­mine if the out­come is in the pub­lic inter­est.
    ...

    And one year after that state law was passed, Texas began ratch­et­ing up the max­i­mum prices gen­er­a­tors could charge, going from $1000 per megawatt hour in 2011 to $9000 today:

    ...
    When Texas dereg­u­lat­ed the elec­tric­i­ty mar­ket two decades ago, elec­tric­i­ty prices were capped at $1,000 per megawatt hour. After intense lob­by­ing from gen­er­a­tors that said they need­ed more incen­tives to build new gen­er­a­tion, the com­mis­sion raised the cap to $3,000 in 2012, $5,000 1n 2013 and $7,000 in 2014. The most recent adjust­ment in 2015 took the cap to $9,000.
    ...

    Final­ly, it turns out that Texas is the ONLY dereg­u­lat­ed state in which gen­er­a­tors are not paid for keep­ing gen­er­a­tion capac­i­ty in reserve to meet peak demand AND they passed a rule in 2019 that allows gen­er­a­tors to earn even more on high demand days. Again, this sys­tem was designed to break:

    ...
    Texas is the only dereg­u­lat­ed state in which gen­er­a­tors are not paid for keep­ing gen­er­a­tion capac­i­ty in reserve to meet peak demand. The only way they can make mon­ey is by sell­ing pow­er, which puts pres­sure on reg­u­la­tors to ensure com­pa­nies earn suf­fi­cient prof­its so they will par­tic­i­pate in the mar­ket.

    Ear­li­er this year the com­mis­sion increased a price sup­ple­ment that allows gen­er­a­tors to earn more on high demand days. The lat­est increase — with anoth­er planned for spring — is expect­ed to increase whole­sale elec­tric­i­ty costs by as much as $4 bil­lion a year, accord­ing to an esti­mate by Chica­go-based pow­er gen­er­a­tor Exelon, which sought the increase along with Calpine and NRG.
    ...

    So when we look at Tex­as­’s clusterf*ck of elec­tri­cal grid, those ear­ly accu­sa­tions that frozen wind­mills caused the black­outs do sort of hold water. One real­ly can kind of blame the rel­a­tive­ly small loss of pow­er from the frozen wind­mills on the price spikes and black­outs. Just as one could blame gas, coal, nuclear, or any oth­er com­po­nent of the Texas elec­tric­i­ty mar­ket­place that was­n’t ful­ly oper­a­tional when this storm hit because that’s how frag­ile the Texas ener­gy mar­kets real­ly are. Any ‘small fish’ (or ‘big fish’) can break it. With legal impuni­ty. By design. The sys­tem is work­ing as intend­ed.

    Posted by Pterrafractyl | February 17, 2021, 5:25 pm
  10. lots of mov­ing parts as the com­mons are dismantled/demolished on pur­pose and replaced with monopolies.The gov­er­na­tor in Kali­for­nia let ENRON off the hook....The largest nuclear facil­i­ty in the US was in Water­ford Connecticut...20 years ago two boil­ers were shut down due to water­side corrosion....no water testing...on steamships the engi­neers test the water daily...Texas nuke plant was tak­ing untreat­ed water out of the Col­orado riv­er and dump­ing it in the boil­ers with pumps and lines not insu­lat­ed at all! Frag­ile? oh yes frag­ile on the reg­u­la­to­ry as well as phys­i­cal struc­ture end...I built off the grid 20 years ago , solar/propane/firewood. cost more to set up but it paid off faster every time the prices of water or pow­er went up!

    Posted by lou e | February 18, 2021, 9:44 am
  11. The light at the end of the tun­nel has yet to be turned on for the peo­ple of Texas suf­fer­ing in the dark as the freez­ing black­outs roil­ing the state con­tin­ue with no clear end in site. But we are get­ting a bet­ter idea of how Texas is going to move for­ward from this dis­as­ter by look­ing back at how Texas dealt with the last time this hap­pened.

    Yes, for all the attempts to spin this as an unprece­dent­ed event, this kind of vicious win­ter storm is actu­al­ly a high­ly prece­dent­ed and pre­dictable event for Texas. That was take from Ed Hirs, an ener­gy fel­low at the Uni­ver­si­ty of Hous­ton, who points out in the arti­cle below that Texas is known for hav­ing a real­ly nasty win­ter every 8 to 10 years. It’s not exact­ly clock­work, but it’s pre­dictable. And it was exact­ly 10 years ago when we saw Texas suf­fer from the exact same cas­cade of sys­temic fail­ures. Quite sim­ply, Texas in 2011 was like Texas today: com­plete­ly unpre­pared for a nas­ti­er-than-aver­age win­ter result­ing in days of black­outs.

    So what did Texas rec­om­mend after that 2011 win­ter weath­er dis­as­ter? All of the things they’re rec­om­mend­ing once against today that nev­er hap­pened like weath­er­iz­ing the infra­struc­ture and incen­tiviz­ing pro­duc­ers to have extra reserve capac­i­ty. A long list of rec­om­men­da­tions were made but they were only rec­om­men­da­tions. Noth­ing was man­dat­ed so noth­ing changed.

    But that’s not to say­ing noth­ing changed between 2011 and 2021. Don’t for­get that when Texas cre­at­ed this dereg­u­lat­ed mar­ket­place 20 years ago, it had a $1,000/megawatt hour cap on the prices gen­er­a­tors could charge. But in 2012, they raised the cap to $3,000, $5,000 in 2013, $7,000 in 2015 and $9,000 in 2015. So the Texas ‘reg­u­la­tors’ did actu­al­ly take steps to pre­pare for the next dis­as­ter. They pre­pared for the same black­out dis­as­ter to pre­dictably hap­pen again when the next nasty win­ter storm hits but with a much high­er price to con­sumers.

    And what about con­cerns that Texas set up their sys­tem to give pow­er gen­er­a­tors the abil­i­ty to with­hold pow­er from the mar­ket­place dur­ing times of high demand in order to gen­er­ate price spike with legal impuni­ty and the obvi­ous pos­si­bil­i­ty that gen­er­a­tors have been with­hold­ing pow­er dur­ing the cur­rent cri­sis in order to keep rates high? Recall how the head of the Texas Pub­lic Util­i­ty Com­mis­sion actu­al­ly blamed the ini­tial rolling black­outs on the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT) NOT allow­ing prices to stay near the $9,000 cap for sus­tained peri­ods, result­ing in gen­er­a­tors hold­ing back pow­er from the mar­ket, which is an implic­it­ly admis­sion that gen­er­a­tors were with­hold­ing pow­er to jack up prices. Will any of that be inves­ti­gat­ed?

    Well, here’s a hint: ERCOT CEO Bill Mag­ness was asked about the pos­si­bil­i­ty that pow­er gen­er­a­tors who pur­chase nat­ur­al gas on the whole­sale mar­ket had a prof­it motive to stop buy­ing nat­ur­al gas and instead just shut down after the price of nat­ur­al gas kept climb­ing. Keep in mind that Tex­as­’s elec­tric­i­ty mar­ket is run on bids for just 5–15 sec­onds of pow­er gen­er­a­tion so prices are extreme­ly short-term and high­ly volatile dur­ing times of stress, which could make buy­ing expen­sive nat­ur­al gas a dicey propo­si­tion if the plan is to resell it while retail prices are still ele­vat­ed. Mag­ness respond­ed to the ques­tion by assert­ing that, “We can’t spec­u­late on people’s moti­va­tions in that way.” In oth­er words, the idea that pow­er gen­er­a­tors were inten­tion­al­ly with­hold­ing sup­plies from the mar­ket is offi­cial­ly an unthink­able idea for the reg­u­la­to­ry body that’s going to be inves­ti­gat­ing this mess, despite Texas design­ing their sys­tem specif­i­cal­ly to allow gen­er­a­tors to with­hold sup­plies with legal impuni­ty and despite a long his­to­ry of pow­er gen­er­a­tors engag­ing in exact­ly that behav­ior. Also keep in mind that when the Texas Pub­lic Util­i­ty Com­mis­sion blamed the black­outs on ERCOT NOT allow­ing prices to stay at the $9,000 cap for sus­tained peri­ods in order to incen­tivize gen­er­a­tors to sell into the sys­tem, pow­er gen­er­a­tors shut­ting down nat­ur­al gas-pow­ered elec­tri­cal plants would be con­sis­tent with that sce­nario, which also rais­es the ques­tion of whether or not nat­ur­al gas price manip­u­la­tion could be play­ing a role here. But, of course, that’s not actu­al­ly going to be inves­ti­gat­ed because noth­ing is going to be inves­ti­gat­ed:

    Asso­ci­at­ed Press

    EXPLAINER: Why the pow­er grid failed in Texas and beyond

    By DAVID KOENIG and MICHAEL LIEDTKE
    Wed Feb 17, 2021 16:49:52 CST

    DALLAS (AP) — The pow­er out­ages tor­ment­ing Texas in unchar­ac­ter­is­ti­cal­ly Arc­tic tem­per­a­tures are expos­ing weak­ness­es in an elec­tric­i­ty sys­tem designed when the weather’s sea­son­al shifts were more con­sis­tent and pre­dictable — con­di­tions that most experts believe no longer exist.

    This isn’t just hap­pen­ing in Texas, of course. Util­i­ties from Min­neso­ta to Mis­sis­sip­pi have imposed rolling black­outs to ease the strain on elec­tri­cal grids buck­ling under high demand dur­ing the past few days. And pow­er out­ages have become a rite of sum­mer and autumn in Cal­i­for­nia, part­ly to reduce the chances of dead­ly wild­fires.

    But the fact more than 3 mil­lion bone-chilled Tex­ans have lost their elec­tric­i­ty in a state that takes pride in its ener­gy inde­pen­dence under­scores the grav­i­ty of a prob­lem that is occur­ring in the U.S. with increas­ing fre­quen­cy.

    WHAT HAPPENED IN TEXAS?
    *
    Plung­ing tem­per­a­tures caused Tex­ans to turn up their heaters, includ­ing many inef­fi­cient elec­tric ones. Demand spiked to lev­els nor­mal­ly seen only on the hottest sum­mer days, when mil­lions of air con­di­tion­ers run at full tilt.

    The state has a gen­er­at­ing capac­i­ty of about 67,000 megawatts in the win­ter com­pared with a peak capac­i­ty of about 86,000 megawatts in the sum­mer. The gap between the win­ter and sum­mer sup­ply reflects pow­er plants going offline for main­te­nance dur­ing months when demand typ­i­cal­ly is less intense and there’s not as much ener­gy com­ing from wind and solar sources.

    But plan­ning for this win­ter didn’t imag­ine tem­per­a­tures cold enough to freeze nat­ur­al gas sup­ply lines and stop wind tur­bines from spin­ning. By Wednes­day, 46,000 megawatts of pow­er were offline statewide — 28,000 from nat­ur­al gas, coal and nuclear plants and 18,000 from wind and solar, accord­ing to the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, which oper­ates the state’s pow­er grid.

    “Every one of our sources of pow­er sup­ply under­per­formed,” Daniel Cohan, an asso­ciate pro­fes­sor of civ­il and envi­ron­men­tal engi­neer­ing at Rice Uni­ver­si­ty in Hous­ton, tweet­ed. “Every one of them is vul­ner­a­ble to extreme weath­er and cli­mate events in dif­fer­ent ways. None of them were ade­quate­ly weath­er­ized or pre­pared for a full realm of weath­er and con­di­tions.”

    The stag­ger­ing imbal­ance between Texas’ ener­gy sup­ply and demand also caused prices to sky­rock­et from rough­ly $20 per megawatt hour to $9,000 per megawatt hour in the state’s free­wheel­ing whole­sale pow­er mar­ket.

    That raised ques­tions whether some pow­er gen­er­a­tors who buy in the whole­sale mar­ket may have had a prof­it motive to avoid buy­ing more nat­ur­al gas and sim­ply shut down instead.

    “We can’t spec­u­late on people’s moti­va­tions in that way,” said Bill Mag­ness, CEO of ERCOT. He added he had been told by gen­er­a­tors that they were doing every­thing pos­si­ble to pro­vide pow­er.

    WHY WASN’T THE STATE PREPARED?

    Gas-fired plants and wind tur­bines can be pro­tect­ed against win­ter weath­er — it’s done rou­tine­ly in cold­er, north­ern states. The issue arose in Texas after a 2011 freeze that also led to pow­er-plant shut­downs and black­outs. A nation­al elec­tric-indus­try group devel­oped win­ter­i­za­tion guide­lines for oper­a­tors to fol­low, but they are strict­ly vol­un­tary and also require expen­sive invest­ments in equip­ment and oth­er nec­es­sary mea­sures.

    An ERCOT offi­cial, Dan Woodfin, said plant upgrades after 2011 lim­it­ed shut­downs dur­ing a sim­i­lar cold snap in 2018, but this week’s weath­er was “more extreme.”

    Ed Hirs, an ener­gy fel­low at the Uni­ver­si­ty of Hous­ton, reject­ed ERCOT’s claim that this week’s freeze was unfore­see­able.

    “That’s non­sense,” he said. “Every eight to 10 years we have real­ly bad win­ters. This is not a sur­prise.”

    In Cal­i­for­nia, reg­u­la­tors last week ordered the state’s three major util­i­ties to increase their pow­er sup­ply and poten­tial­ly make plant improve­ments to avoid anoth­er sup­ply short­age like the one that cropped up in Cal­i­for­nia six months ago and result­ed in rolling black­outs affect­ing about 500,000 peo­ple for a few hours at a time.

    “One big dif­fer­ence is that lead­er­ship in Cal­i­for­nia rec­og­nizes that cli­mate change is hap­pen­ing, but that doesn’t seem to be the case in Texas,” said Sev­erin Boren­stein, a pro­fes­sor of busi­ness admin­is­tra­tion and pub­lic pol­i­cy at the Uni­ver­si­ty of Cal­i­for­nia, Berke­ley who has been study­ing pow­er sup­ply issues for more than 20 years.

    WHY THE NEED FOR ROLLING BLACKOUTS?

    Grid oper­a­tors say rolling black­outs are a last resort when pow­er demand over­whelms sup­ply and threat­ens to cre­ate a wider col­lapse of the whole pow­er sys­tem.

    Usu­al­ly, util­i­ties black out cer­tain blocks or zones before cut­ting off pow­er to anoth­er area, then anoth­er. Often areas with hos­pi­tals, fire sta­tions, water-treat­ment plants and oth­er key facil­i­ties are spared.

    By rolling the black­outs, no neigh­bor­hoods are sup­posed to go an unfair­ly long peri­od of time with­out pow­er, but that was not always the case this week in Texas. Some areas nev­er lost pow­er, while oth­ers were blacked out for 12 hours or longer as tem­per­a­tures dipped into the sin­gle dig­its.

    WHEN DO THEY OCCUR?

    Rolling black­outs are usu­al­ly trig­gered when reserves fall below a cer­tain lev­el. In Texas, as in Cal­i­for­nia last August, grid oper­a­tors tell util­i­ties to reduce load on the entire sys­tem, and it is up to the util­i­ties to decide how to do that.

    In Texas this week, grid oper­a­tors and util­i­ties knew about the dire weath­er fore­cast for at least a week. Last week­end they issued appeals for pow­er con­ser­va­tion, and ERCOT tweet­ed that res­i­dents should “unplug the fan­cy new appli­ances you bought dur­ing the pan­dem­ic and only used once.”

    The light­heart­ed attempts at humor were lost on res­i­dents, few if any of whom were told in advance when their homes would lose pow­er. Once the out­ages start­ed, some util­i­ties were unable to pro­vide infor­ma­tion about how long they might last.

    WHAT CAN BE DONE TO REDUCE ROLLING BLACKOUTS?

    Start with the obvi­ous steps: When pow­er com­pa­nies or grid oper­a­tors warn about trou­ble com­ing, turn down your ther­mo­stat and avoid using major appli­ances. Of course, those steps are some­times eas­i­er said than done, espe­cial­ly dur­ing record-break­ing tem­per­a­tures.

    ...

    Experts also say more fun­da­men­tal — and cost­ly — changes must be made. Gen­er­a­tors must insu­late pipelines and oth­er equip­ment. Invest­ments in elec­tric­i­ty stor­age and dis­tri­b­u­tion would help. Tougher build­ing codes would make homes in places like Texas bet­ter insu­lat­ed against the cold.

    Texas, which has a grid large­ly dis­con­nect­ed from oth­ers to avoid fed­er­al reg­u­la­tion, may have to rethink the go-it-alone strat­e­gy. There could be pres­sure for the state to require pow­er gen­er­a­tors to keep more plants in reserve for times of peak demand, a step it has so far resist­ed.

    “The sys­tem as we built it is not per­form­ing to the stan­dards we would like to see,” said Joshua Rhodes, an ener­gy researcher at the Uni­ver­si­ty of Texas in Austin. “We need to do a bet­ter job. If that involves pay­ing more for ener­gy to have more reli­a­bil­i­ty, that’s a con­ver­sa­tion we’re going to have to have.”

    ————

    “EXPLAINER: Why the pow­er grid failed in Texas and beyond” by DAVID KOENIG and MICHAEL LIEDTKE; Asso­ci­at­ed Press; 02/17/2021

    ““Every one of our sources of pow­er sup­ply under­per­formed,” Daniel Cohan, an asso­ciate pro­fes­sor of civ­il and envi­ron­men­tal engi­neer­ing at Rice Uni­ver­si­ty in Hous­ton, tweet­ed. “Every one of them is vul­ner­a­ble to extreme weath­er and cli­mate events in dif­fer­ent ways. None of them were ade­quate­ly weath­er­ized or pre­pared for a full realm of weath­er and con­di­tions.””

    Every sin­gle one of Tex­as­’s sources of pow­er under­per­formed. A true sys­tem-wide fail­ure. Dur­ing the sum­mer, the grid has 86,000 megawatts capac­i­ty, drop­ping to 67,000 in the win­ter as solar and wind become less effi­cient. So 21,000 megawatts are nor­mal­ly miss­ing dur­ing the win­ter, most­ly com­ing from solar and wind going offline. But for this event, 46,000 megawatts was miss­ing mean­ing an extra 25,000 megawatts went away. And when we look at the com­po­si­tion of the miss­ing megawatts, we find only 18,000 miss­ing from solar and wind but 28,000 miss­ing from nat­ur­al gas, coal, and nuclear plants, Based on those num­bers, it seems like solar and wind are the least cul­pa­ble fac­tors here:

    ...
    The state has a gen­er­at­ing capac­i­ty of about 67,000 megawatts in the win­ter com­pared with a peak capac­i­ty of about 86,000 megawatts in the sum­mer. The gap between the win­ter and sum­mer sup­ply reflects pow­er plants going offline for main­te­nance dur­ing months when demand typ­i­cal­ly is less intense and there’s not as much ener­gy com­ing from wind and solar sources.

    But plan­ning for this win­ter didn’t imag­ine tem­per­a­tures cold enough to freeze nat­ur­al gas sup­ply lines and stop wind tur­bines from spin­ning. By Wednes­day, 46,000 megawatts of pow­er were offline statewide — 28,000 from nat­ur­al gas, coal and nuclear plants and 18,000 from wind and solar, accord­ing to the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, which oper­ates the state’s pow­er grid.
    ...

    And we can’t say the state was­n’t warned. This exact dis­as­ter hap­pened 10 years ago. Util­i­ties even had a warn­ing about this week’s nasty weath­er last week. The cur­rent dis­as­ter is right on sched­ule:

    ...
    WHY WASN’T THE STATE PREPARED?

    Gas-fired plants and wind tur­bines can be pro­tect­ed against win­ter weath­er — it’s done rou­tine­ly in cold­er, north­ern states. The issue arose in Texas after a 2011 freeze that also led to pow­er-plant shut­downs and black­outs. A nation­al elec­tric-indus­try group devel­oped win­ter­i­za­tion guide­lines for oper­a­tors to fol­low, but they are strict­ly vol­un­tary and also require expen­sive invest­ments in equip­ment and oth­er nec­es­sary mea­sures.

    An ERCOT offi­cial, Dan Woodfin, said plant upgrades after 2011 lim­it­ed shut­downs dur­ing a sim­i­lar cold snap in 2018, but this week’s weath­er was “more extreme.”

    Ed Hirs, an ener­gy fel­low at the Uni­ver­si­ty of Hous­ton, reject­ed ERCOT’s claim that this week’s freeze was unfore­see­able.

    “That’s non­sense,” he said. “Every eight to 10 years we have real­ly bad win­ters. This is not a sur­prise.”

    ...

    Rolling black­outs are usu­al­ly trig­gered when reserves fall below a cer­tain lev­el. In Texas, as in Cal­i­for­nia last August, grid oper­a­tors tell util­i­ties to reduce load on the entire sys­tem, and it is up to the util­i­ties to decide how to do that.

    In Texas this week, grid oper­a­tors and util­i­ties knew about the dire weath­er fore­cast for at least a week. Last week­end they issued appeals for pow­er con­ser­va­tion, and ERCOT tweet­ed that res­i­dents should “unplug the fan­cy new appli­ances you bought dur­ing the pan­dem­ic and only used once.”

    ...

    Texas, which has a grid large­ly dis­con­nect­ed from oth­ers to avoid fed­er­al reg­u­la­tion, may have to rethink the go-it-alone strat­e­gy. There could be pres­sure for the state to require pow­er gen­er­a­tors to keep more plants in reserve for times of peak demand, a step it has so far resist­ed.
    ...

    But when faced with the ques­tion of whether or not pow­er gen­er­a­tors may have actu­al­ly pulled out of the mar­ket right in the mid­dle of these rolling black­outs, we’re told that it’s unthink­able. ERCOT can’t bring itself to spec­u­late that the prof­it motive may have been the dri­ving fac­tor here:

    ...
    The stag­ger­ing imbal­ance between Texas’ ener­gy sup­ply and demand also caused prices to sky­rock­et from rough­ly $20 per megawatt hour to $9,000 per megawatt hour in the state’s free­wheel­ing whole­sale pow­er mar­ket.

    That raised ques­tions whether some pow­er gen­er­a­tors who buy in the whole­sale mar­ket may have had a prof­it motive to avoid buy­ing more nat­ur­al gas and sim­ply shut down instead.

    “We can’t spec­u­late on people’s moti­va­tions in that way,” said Bill Mag­ness, CEO of ERCOT. He added he had been told by gen­er­a­tors that they were doing every­thing pos­si­ble to pro­vide pow­er.
    ...

    And that refusal by ERCOT to spec­u­late on the moti­va­tions of pow­er gen­er­a­tors rais­es the obvi­ous ques­tion: so what moti­va­tion do the mem­bers of ERCOT actu­al­ly have to keep Tex­as­’s elec­tri­cal grid up and run­ning? It’s a rather cru­cial ques­tion giv­en that dis­as­ters of this nature have proven to be wild­ly prof­itable dis­as­ters for the ener­gy indus­try. Here’s a par­tial answer: 5 of the 15 ERCOT board mem­bers don’t actu­al­ly live in Texas. So for at least a third of the ERCOT board, the Texas grid can go down for­ev­er and they’ll be large­ly fine. Oh, and it turns out three of those 15 mem­bers were also mem­bers back in 2011 when ERCOT stud­ied the last win­ter dis­as­ter. Also, cur­rent CEO Bill Mag­ness, who refus­es to spec­u­late on the motives of the pow­er gen­er­a­tors, just hap­pened to be ERCOT’s Vice Pres­i­dent, Gen­er­al Coun­sel and Cor­po­rate Sec­re­tary in 2011. So 5 of the ERCOT board mem­bers don’t actu­al­ly live in Texas and anoth­er 3, plus CEO Bill Mag­ness, were in charge the last time this hap­pened and did noth­ing about it. It not exact­ly a mod­el of lead­er­ship:

    KXAN

    5 ERCOT board mem­bers don’t live in Texas, one from Cana­da

    by: Jody Barr
    Post­ed: Feb 18, 2021 / 06:35 AM CST
    Updat­ed: Feb 18, 2021 / 08:41 AM CST

    AUSTIN (KXAN) — The non­prof­it man­ag­ing 26 mil­lion Tex­ans’ access to elec­tric­i­ty vot­ed to hand one-third of its deci­sion-mak­ing pow­er to five peo­ple who do not call Texas home. The Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, known as ERCOT, man­ages about 90% of the state’s elec­tric load, accord­ing to the orga­ni­za­tion.

    As mil­lions of Tex­ans are still with­out pow­er, Texas law­mak­ers and the gov­er­nor are demand­ing answers after ERCOT acti­vat­ed the state’s Ener­gy Emer­gency Alerts. The first alert hap­pened at 12:17 a.m. Mon­day. A lev­el two alert went out 55 min­utes lat­er, ask­ing peo­ple to con­serve ener­gy or they’d face “rotat­ing out­ages.”

    Just 13 min­utes lat­er, at 1:25 a.m., ERCOT acti­vat­ed its third-lev­el EEA, and Tex­ans start­ed to lose pow­er in what was sup­posed to be rotat­ing pow­er loss­es.

    For mil­lions of Tex­ans, those out­ages nev­er rotat­ed as pow­er was inten­tion­al­ly cut to homes across the state and has still not been restored.

    ERCOT’s For­eign Lead­er­ship

    Just last week, the ERCOT board elect­ed its newest lead­ers: Sal­ly Tal­berg and Peter Cram­ton. Nei­ther call Texas home and both are “Unaf­fil­i­at­ed Direc­tors.”

    Tal­berg lives in Michi­gan and was a Michi­gan Pub­lic Ser­vice Com­mis­sion­er up until her term end­ed on Dec. 31, 2020, accord­ing to that agency’s web­site. While Tal­berg was serv­ing her term in Michi­gan, the ERCOT Nom­i­nat­ing Com­mit­tee vot­ed to give Tal­berg one of its four unaf­fil­i­at­ed spots on the gov­ern­ing board. Talberg’s ERCOT term start­ed Jan. 1, 2021.

    An unaf­fil­i­at­ed board mem­ber does not have ties to Texas ener­gy enti­ties or mar­kets.

    In the Feb. 9, 2021 elec­tion that hand­ed Tal­berg the chair, Cram­ton was elect­ed as ERCOT’s vice chair­man. Cram­ton is an eco­nom­ics pro­fes­sor at the Uni­ver­si­ty of Mary­land and the Uni­ver­si­ty of Cologne, Ger­many, but his pro­fes­sion­al social media account shows his loca­tion as Del Mar, Cal­i­for­nia.

    ERCOT’s gov­erned by a 15-mem­ber board at the moment with a 16th board posi­tion remain­ing vacant as of Feb­ru­ary 2021. That 16th spot is also an unaf­fil­i­at­ed direc­tor.

    A KXAN analy­sis of ERCOT’s board revealed a total of five mem­bers do not live in Texas. Along with Tel­berg and Cram­ton, board mem­bers Vanes­sa Ane­set­ti-Par­ra, Ter­ry Bul­ger and Ray­mond Hep­per do not appear to live in the Lone Star State.

    Anesetti-Parra’s pro­fes­sion­al social media account shows her loca­tion as Cana­da, Bulger’s ERCOT biog­ra­phy lists his home as Wheaton, Illi­nois and a Uni­ver­si­ty of Penn­syl­va­nia law school biog­ra­phy shows Hep­per calls Maine home.

    The ERCOT bylaws make these out-of-state appoint­ments legal. Noth­ing in the bylaws requires unaf­fil­i­at­ed direc­tors to live in Texas. In fact, the bylaws only state “Res­i­dence in the State of Texas pre­ferred.”

    “That is def­i­nite­ly a prob­lem,” Rep. Matt Schae­fer, R‑Tyler, told KXAN’s sis­ter sta­tion KETK in a Feb. 17 inter­view. “We have to look at the lead­er­ship and we have to look at the func­tion and we have to look at how we’re set­ting poli­cies that allow us to use the resources that we have. It would be like if you lived in a gro­cery store and you were starv­ing to death, it would only be by your own choice. We live in a state with the most abun­dant ener­gy sources on the plan­et. There’s no rea­son we should be starv­ing for ener­gy,” Schae­fer said.

    ERCOT held a vir­tu­al press con­fer­ence on Feb. 17 as 2.7 mil­lion Tex­ans con­tin­ued to sit in homes with tem­per­a­tures well below freez­ing across the state. ERCOT Chief Exec­u­tive Offi­cer Bill Mag­ness field­ed ques­tions sub­mit­ted by media out­lets, which were read to Mag­ness by an ERCOT spokes­woman.

    “How can you best serve Tex­ans with a board chair that lives in anoth­er state,” a ques­tion sub­mit­ted by a reporter asked of Mag­ness.

    “Right now, the way that we can best serve Tex­ans is to focus on get­ting gen­er­a­tion and load and bal­ance in work­ing with our con­trol room oper­a­tors and oth­er staff with the gen­er­a­tors to get pow­er back on for every­one. That’s the pri­or­i­ty right now. I think if folks want to look at how ERCOT is run and who runs it, obvi­ous­ly it’s part of the inves­ti­ga­tion of what we’re doing in the future, all those things are on the table. But I think there was no impact of the chair of the ERCOT board of direc­tors,” Mag­ness respond­ed.

    ...

    2011 ERCOT Fed­er­al Inquiry

    Just 10 years and two weeks ago, 3.2 mil­lion Tex­ans were in the same ener­gy cri­sis as 2.7 mil­lion find them­selves in now. A win­ter storm ripped across Ari­zona, New Mex­i­co and Texas and ERCOT did then what it did this week: cut pow­er to mil­lions of homes.

    Between Feb. 2–4, 2011, a total of 4.4 mil­lion peo­ple in Texas and New Mex­i­co lost pow­er, accord­ing to an August 2011 report pub­lished by the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion, or FERC.

    The 357-page FERC report detailed nine sep­a­rate find­ings that showed exact­ly what hap­pened inside ERCOT’s pow­er grid that left mil­lions with­out pow­er for so long.

    2011 FEDERAL ENERGY REGULATORY COMMISSION REPORT ON OUTAGES AND CURTAILMENTS

    “Gen­er­a­tors were gen­er­al­ly reac­tive as opposed to being proac­tive in their approach to win­ter­i­za­tion and pre­pared­ness. The sin­gle largest prob­lem dur­ing the cold weath­er event was the freez­ing of instru­men­ta­tion and equip­ment. Many gen­er­a­tors failed to ade­quate­ly pre­pare for win­ter, includ­ing the fol­low­ing: failed or inad­e­quate heat traces, miss­ing or inad­e­quate wind breaks, inad­e­quate insu­la­tion and lag­ging (met­al cov­er­ing for insu­la­tion), fail­ure to have or to main­tain heat­ing ele­ments and heat lamps in instru­ment cab­i­nets, fail­ure to train oper­a­tors and main­te­nance per­son­nel on win­ter prepa­ra­tions, lack of fuel switch­ing train­ing and drills, and fail­ure to ensure ade­quate fuel.

    Com­bin­ing forced out­ages with sched­uled out­ages, approx­i­mate­ly one-third of the total ERCOT fleet was unavail­able at the low­est point of the event. These exten­sive gen­er­a­tor fail­ures over­whelmed ERCOT’s reserves, which even­tu­al­ly dropped below the lev­el of safe oper­a­tion. Had ERCOT not act­ed prompt­ly to shed load, it would very like­ly have suf­fered wide­spread, uncon­trolled black­outs through­out the entire ERCOT Inter­con­nec­tion.”
    FERC report

    The report also ques­tioned deci­sions con­cern­ing acti­vat­ing ener­gy reserves as the fore­casts showed what was com­ing toward Texas.

    How­ev­er, the mas­sive amount of gen­er­a­tor fail­ures that were expe­ri­enced rais­es the ques­tion whether it would have been help­ful to increase reserve lev­els going into the event. This action would have brought more units online ear­li­er, might have pre­vent­ed some of the freez­ing prob­lems the gen­er­a­tors expe­ri­enced, and could have exposed oper­a­tional prob­lems in time to imple­ment cor­rec­tions before the units were need­ed to meet cus­tomer demand,” the report stat­ed.

    A KXAN analy­sis of Inter­nal Rev­enue Ser­vice 990 fil­ings shows three cur­rent ERCOT board mem­bers were also part of the board in 2011. Nick Fehren­bach, Clifton Karnei and Kevin Gre­sham were all three list­ed on ERCOT’s 2011 IRS fil­ing.

    Fehren­bach is list­ed as “Util­i­ty Man­age­ment” on the City of Dal­las’ web­site. Karnei is the Vice Pres­i­dent and Gen­er­al Man­ag­er of the Bra­zos Elec­tric Pow­er Coop­er­a­tive and Gresham’s ERCOT biog­ra­phy shows he’s the Vice Pres­i­dent, Gov­ern­ment Rela­tions & Exter­nal Affairs for RWE Renew­ables Amer­i­c­as LLC, which lists an address in Austin.

    The 2011 IRS fil­ing also shows cur­rent CEO Bill Mag­ness as ERCOT’s Vice Pres­i­dent, Gen­er­al Coun­sel and Cor­po­rate Sec­re­tary.

    We want­ed to ask all four what steps they took fol­low­ing the 2011 fed­er­al report to make sure anoth­er sit­u­a­tion like that nev­er hap­pened again.

    We asked each of three board mem­bers and Mag­ness for inter­views. As of this report, none of the ERCOT offi­cials agreed to be inter­viewed. Fehren­bach respond­ed to an email sent to his City of Dal­las address writ­ing, “I am not avail­able for an inter­view,” and referred KXAN to ERCOT’s media rela­tions office.

    The report also list­ed 26 sep­a­rate steps enti­ties with­in ERCOT’s pow­er grid could take to make sure an mass elec­tric­i­ty fail­ure didn’t hap­pen again.

    “It (the report) also presents rec­om­men­da­tions that the task force believes, if imple­ment­ed, could sig­nif­i­cant­ly con­tribute to pre­vent­ing a recur­rence of the rolling black­outs and nat­ur­al gas cur­tail­ments expe­ri­enced in the South­west dur­ing the Feb­ru­ary 2011 cold weath­er event,” the 2011 FERC report stat­ed under a head­ing titled ‘Key Find­ings and Rec­om­men­da­tions.”

    There were 2.7 mil­lion Tex­ans with­out pow­er on Feb. 17, 2021 more than two days after ERCOT acti­vat­ed its lev­el three Ener­gy Emer­gency Alert.

    ————-

    “5 ERCOT board mem­bers don’t live in Texas, one from Cana­da” by Jody Barr; KXAN; 02/18/2021

    A KXAN analy­sis of ERCOT’s board revealed a total of five mem­bers do not live in Texas. Along with Tel­berg and Cram­ton, board mem­bers Vanes­sa Ane­set­ti-Par­ra, Ter­ry Bul­ger and Ray­mond Hep­per do not appear to live in the Lone Star State.”

    A third of the ERCOT does­n’t actu­al­ly live in the state. It’s the kind of set up one might expect from a sys­tem designed by and for the indus­try. So at least those 5 out-of-state mem­bers are pre­sum­ably com­fy in well-heat­ed res­i­dents right now.

    And three of the ERCOT mem­bers, plus the CEO Bill Mag­ness, were part of the 2011 ERCOT team that dealt with the last time this hap­pened. It does­n’t bode well for the integri­ty of any upcom­ing inves­ti­ga­tion into what prepa­ra­tions did or did­n’t hap­pen:

    ...
    Anesetti-Parra’s pro­fes­sion­al social media account shows her loca­tion as Cana­da, Bulger’s ERCOT biog­ra­phy lists his home as Wheaton, Illi­nois and a Uni­ver­si­ty of Penn­syl­va­nia law school biog­ra­phy shows Hep­per calls Maine home.

    The ERCOT bylaws make these out-of-state appoint­ments legal. Noth­ing in the bylaws requires unaf­fil­i­at­ed direc­tors to live in Texas. In fact, the bylaws only state “Res­i­dence in the State of Texas pre­ferred.”

    ...

    A KXAN analy­sis of Inter­nal Rev­enue Ser­vice 990 fil­ings shows three cur­rent ERCOT board mem­bers were also part of the board in 2011. Nick Fehren­bach, Clifton Karnei and Kevin Gre­sham were all three list­ed on ERCOT’s 2011 IRS fil­ing.

    Fehren­bach is list­ed as “Util­i­ty Man­age­ment” on the City of Dal­las’ web­site. Karnei is the Vice Pres­i­dent and Gen­er­al Man­ag­er of the Bra­zos Elec­tric Pow­er Coop­er­a­tive and Gresham’s ERCOT biog­ra­phy shows he’s the Vice Pres­i­dent, Gov­ern­ment Rela­tions & Exter­nal Affairs for RWE Renew­ables Amer­i­c­as LLC, which lists an address in Austin.

    The 2011 IRS fil­ing also shows cur­rent CEO Bill Mag­ness as ERCOT’s Vice Pres­i­dent, Gen­er­al Coun­sel and Cor­po­rate Sec­re­tary.

    ...

    In the plus side, at least we can say those long-stand­ing 4 board mem­bers are going to have expe­ri­ence with these kinds of inves­ti­ga­tions. Of course, that is going to be expe­ri­ence doing noth­ing oth­er than mak­ing rec­om­men­da­tions that the indus­try just ignores. Rec­om­men­da­tions like actu­al­ly prepar­ing the infra­struc­ture for these high­ly pre­dictable weath­er pat­terns. About once a decade this is going to hap­pen. It’s not a mys­tery:

    ...
    2011 ERCOT Fed­er­al Inquiry

    Just 10 years and two weeks ago, 3.2 mil­lion Tex­ans were in the same ener­gy cri­sis as 2.7 mil­lion find them­selves in now. A win­ter storm ripped across Ari­zona, New Mex­i­co and Texas and ERCOT did then what it did this week: cut pow­er to mil­lions of homes.

    Between Feb. 2–4, 2011, a total of 4.4 mil­lion peo­ple in Texas and New Mex­i­co lost pow­er, accord­ing to an August 2011 report pub­lished by the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion, or FERC.

    The 357-page FERC report detailed nine sep­a­rate find­ings that showed exact­ly what hap­pened inside ERCOT’s pow­er grid that left mil­lions with­out pow­er for so long.

    2011 FEDERAL ENERGY REGULATORY COMMISSION REPORT ON OUTAGES AND CURTAILMENTS

    “Gen­er­a­tors were gen­er­al­ly reac­tive as opposed to being proac­tive in their approach to win­ter­i­za­tion and pre­pared­ness. The sin­gle largest prob­lem dur­ing the cold weath­er event was the freez­ing of instru­men­ta­tion and equip­ment. Many gen­er­a­tors failed to ade­quate­ly pre­pare for win­ter, includ­ing the fol­low­ing: failed or inad­e­quate heat traces, miss­ing or inad­e­quate wind breaks, inad­e­quate insu­la­tion and lag­ging (met­al cov­er­ing for insu­la­tion), fail­ure to have or to main­tain heat­ing ele­ments and heat lamps in instru­ment cab­i­nets, fail­ure to train oper­a­tors and main­te­nance per­son­nel on win­ter prepa­ra­tions, lack of fuel switch­ing train­ing and drills, and fail­ure to ensure ade­quate fuel.

    Com­bin­ing forced out­ages with sched­uled out­ages, approx­i­mate­ly one-third of the total ERCOT fleet was unavail­able at the low­est point of the event. These exten­sive gen­er­a­tor fail­ures over­whelmed ERCOT’s reserves, which even­tu­al­ly dropped below the lev­el of safe oper­a­tion. Had ERCOT not act­ed prompt­ly to shed load, it would very like­ly have suf­fered wide­spread, uncon­trolled black­outs through­out the entire ERCOT Inter­con­nec­tion.”
    FERC report

    The report also ques­tioned deci­sions con­cern­ing acti­vat­ing ener­gy reserves as the fore­casts showed what was com­ing toward Texas.

    How­ev­er, the mas­sive amount of gen­er­a­tor fail­ures that were expe­ri­enced rais­es the ques­tion whether it would have been help­ful to increase reserve lev­els going into the event. This action would have brought more units online ear­li­er, might have pre­vent­ed some of the freez­ing prob­lems the gen­er­a­tors expe­ri­enced, and could have exposed oper­a­tional prob­lems in time to imple­ment cor­rec­tions before the units were need­ed to meet cus­tomer demand,” the report stat­ed.
    ...

    Also keep in mind that with cli­mate change, we can also pre­dict with con­fi­dence that future win­ter weath­er dis­as­ters will be pre­dictably even worse than what Texas has expe­ri­enced in the past. In oth­er words, we can rea­son­ably pre­dict that Texas is prob­a­bly going to have increas­ing­ly unpre­dictable win­ter weath­er that still pre­dictably hits even more fre­quent­ly. Oh, and don’t for­get that the grow­ing inten­si­ty of Tex­as­’s sum­mers from cli­mate change make the prospects of the grid being over­loaded that much more like­ly, even with the high­er sum­mer gen­er­at­ing capac­i­ty. This isn’t just a pre­lude to more lethal win­ters.

    And just as peri­od­ic weath­er dis­as­ters are some­thing we can rea­son­ably pre­dict for Texas, joke inves­ti­ga­tions and cov­er-ups of the result­ing weath­er dis­as­ter is some­thing we can empir­i­cal­ly pre­dict too. We don’t know how exact­ly this inves­ti­ga­tion will be under­mined and ignored. But this is Texas. The rec­om­men­da­tions will ulti­mate­ly be under­mined by the indus­try and large­ly ignored one way or anoth­er.

    So what does the future hold for Tex­as­’s elec­tri­cal grid? We can’t pre­dict that exact­ly. Except that it will be dis­as­trous. And incred­i­bly prof­itable. We can be pret­ty con­fi­dent of that.

    Posted by Pterrafractyl | February 18, 2021, 6:03 pm
  12. The lights are steadi­ly com­ing back on and stay­ing on in Texas as the state’s elec­tri­cal grid belat­ed­ly picks itself back up after col­laps­ing dur­ing the extreme cold of the last week. And as we prob­a­bly should have expect­ed, the more we learn about the cause of the sys­tem-wide fail­ures the more it looks like the ini­tial blame thrown at frozen wind tur­bines was not just unfair­ly mis­char­ac­ter­iz­ing the per­for­mance of wind dur­ing the storm — wind did just fine — but it was also obscur­ing the biggest cul­prit the black­outs: nat­ur­al gas, by far the largest com­po­nent of Tex­as­’s ener­gy reliance that pro­vides near­ly half of Tex­as­’s ener­gy needs. Nat­ur­al gas pro­duc­tion ground to a halt as wells froze up. Nat­ur­al gas trans­porta­tion broke down as the pipes proved unable to sus­tain the pres­sures required for nat­ur­al gas-based elec­tric­i­ty plants. And the nat­ur­al gas stor­age sys­tem proved to be slow to respond and inad­e­quate in capac­i­ty. The full spec­trum of the nat­ur­al gas indus­try failed.

    But as we’ll see in the sec­ond arti­cle below, it sounds like there was poten­tial­ly a far more dis­as­trous self-rein­forc­ing dynam­ic that could have been at work here: the nat­ur­al gas sys­tems rely on a steady stream of new­ly pro­duced gas from the nat­ur­al gas wells, but those wells are pow­ered by elec­tric­i­ty. So if the elec­tri­cal grid comes under enough strain to trig­ger rolling black­outs, it’s pos­si­ble the elec­tric­i­ty was cut off from the nat­ur­al gas-pro­duc­ing wells, cut­ting off sup­ply to the nat­ur­al-gas pow­ered elec­tric­i­ty plants. It sounds like that may be part of what hap­pened here, which is utter mad­ness. We can’t con­firm that yet, because so lit­tle is actu­al­ly known about what pre­cise­ly hap­pened. But these are impor­tant ques­tions to ask at this point because, if it real­ly is the case that the nat­ur­al gas short­age was exac­er­bat­ed by wells los­ing elec­tric­i­ty, we can be con­fi­dent that the indus­try and Texas reg­u­la­tors will do every­thing in their pow­er to cov­er this up.

    So giv­en that we aren’t just deal­ing with a sys­tem-wide fail­ure but also an obscene­ly prof­itable mar­ket-fail­ure that trig­gered record price spikes, if we were to search for bad actors in this mess who may have been active­ly work­ing to cre­ate a mas­sive ener­gy sup­ply short­age in order to induce those price spikes, we should prob­a­bly take a very close look at the sec­tor that failed in the biggest man­ner and that was unam­bigu­ous­ly nat­ur­al gas:

    Talk­ing Points Memo
    Cafe

    What So Many Of The Mis­lead­ing Nar­ra­tives About Texas Miss
    The state is fac­ing more than an elec­tric­i­ty cri­sis.

    By Daniel Cohan
    Feb­ru­ary 18, 2021 4:06 p.m.

    This arti­cle is part of TPM Cafe, TPM’s home for opin­ion and news analy­sis.

    As the Texas black­outs stretch into their third day, mis­lead­ing nar­ra­tives about what went wrong have spread far and wide. One par­tic­u­lar­ly per­ni­cious one you may have heard is that wind and solar are to blame for the out­ages.

    But what so many of these asser­tions lack is a fun­da­men­tal under­stand­ing of Texas’ elec­tric pow­er sup­ply, and its mutu­al vul­ner­a­bil­i­ties with the state’s gas sys­tems. We’re fac­ing an ener­gy sys­tems cri­sis here in Texas, not just an elec­tric­i­ty cri­sis.

    To under­stand why, we can begin by look­ing at how the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT) — which oper­ates our elec­tri­cal grid — gen­er­at­ed pow­er on aver­age last year. Near­ly half of it came from nat­ur­al gas. Wind sur­passed coal for the first time. And four nuclear units and a bit of solar and hydropow­er sup­plied the rest.

    That sup­ply pro­vides pow­er for most but not all of the state. The grid is con­tained with­in Texas, with very lit­tle trans­mis­sion link­ing to the rest of the coun­try or Mex­i­co. So what hap­pens in Texas stays in Texas.

    The grid can oper­ate just fine with very high lev­els of wind — over 50 per­cent at times. With solar pow­er also vari­able and nuclear pow­er usu­al­ly fixed, coal and gas plants flex their out­put to sat­is­fy remain­ing demand that itself varies with time.

    ERCOT knows that those aver­age con­di­tions don’t hap­pen all the time. So before each sea­son, it issues a resource ade­qua­cy assess­ment to be sure the lights stay on when demand peaks. This winter’s plan expect­ed “oper­a­tional resources” (most­ly gas, plus coal, nuclear and hydro) to pro­vide 67 GW of pow­er. Since it’s not always windy or sun­ny, ERCOT guessti­mat­ed just over 6 GW would come from wind and solar com­bined.

    In a “nor­mal” win­ter, oper­a­tional resources could have sat­is­fied peak demand, even with­out any help from wind or solar. Aside from the peak, wind and solar avert emis­sions while sav­ing cost­lier fos­sil fuels for when we’ll need them most.

    ERCOT real­ized not every win­ter is typ­i­cal, so it planned for sev­er­al what-if sce­nar­ios and asso­ci­at­ed risks. (All of their esti­mates are pub­licly avail­able.)

    Those sce­nar­ios dis­play the typ­i­cal temp­ta­tion to refight the last bat­tle. In this case, that meant plan­ning for a repeat of the 2011 freeze that last caused rolling black­outs. Those last­ed just hours, not days, and weren’t near­ly as wide­spread.

    Even so, ERCOT didn’t do too bad­ly pre­dict­ing peak demand — 67 GW in its extreme sce­nario. We don’t know how high the actu­al peak would have been with­out these rolling black­outs, but per­haps around 5 GW high­er, with some con­ser­va­tion by indus­tri­al con­sumers.

    Sched­uled main­te­nance played a role too, as plants tune up for sum­mer peaks. Why so much of that main­te­nance con­tin­ued amid week-ahead fore­casts of an Arc­tic blast deserves a clos­er look.

    But ERCOT’s biggest miss came in prepar­ing for out­ages at what it thought were “firm” resources — gas, coal, and nuclear. Those out­ages topped 30 GW, more than dou­ble ERCOT’s worst-case sce­nario. Just one of those gigawatts came from a tem­po­rary out­age at a nuclear unit. Most of the rest came from gas.

    That doesn’t nec­es­sar­i­ly mean a lot of indi­vid­ual gas pow­er plants broke down. Most out­ages came because deliv­ery sys­tems failed to sup­ply gas to those plants at the con­sis­tent pres­sures that they need.

    These fail­ures high­light the unique vul­ner­a­bil­i­ties of rely­ing so heav­i­ly on nat­ur­al gas for pow­er. Only gas elec­tric­i­ty relies on a con­tin­u­ous sup­ply of a fos­sil fuel deliv­ered from hun­dreds of miles away. And that fuel is also need­ed for heat. So when an Arc­tic blast dri­ves up demand and dri­ves down sup­ply of heat and elec­tric­i­ty at the same time, pow­er plants lan­guish in line while homes and hos­pi­tals get the heat­ing fuel they need.

    That makes these black­outs an ener­gy sys­tems cri­sis, not just a pow­er cri­sis. Every one of our pow­er sources under­per­formed. Every one of them has unique vul­ner­a­bil­i­ties that are exac­er­bat­ed by extreme events. None of them pre­pared ade­quate­ly for extreme cold.

    But our pow­er sys­tem isn’t just fail­ing us in the moment. It’s too cost­ly year-round, not just in dol­lars but in its impacts on our air, cli­mate, and health. Texas coal plants emit more car­bon diox­ide, sul­fur diox­ide and nitro­gen oxides than in any oth­er state, at a cost of hun­dreds of lives per year, our research has shown. The Texas Com­mis­sion on Envi­ron­men­tal Qual­i­ty has allowed some of those coal plants to avoid installing sul­fur diox­ide scrub­bers, which have been required at all new plants since the ear­ly 1980s. Its Region­al Haze Plan pro­pos­es to do zero about it.

    We should be think­ing of our elec­tric­i­ty sup­ply as a team, or a port­fo­lio of resources. We need that team to col­lec­tive­ly be afford­able, reli­able, resilient, and clean. No sin­gle play­er can do it alone. We don’t nec­es­sar­i­ly need all play­ers — we can phase out coal with time. But we do need a bal­anced mix. If we buy into the false nar­ra­tives of this cri­sis, we won’t add enough clean sources fast enough to bal­ance the fos­sil-heavy port­fo­lio of today.

    We need inves­ti­ga­tions into what has become the worst win­ter black­outs in Texas his­to­ry, not just uncom­fort­able but dead­ly for too many of my fel­low Tex­ans. We need to look at sys­temic fail­ures across ener­gy sys­tems, sup­ply and demand, and the ener­gy-water nexus too. Every one of our sources of pow­er sup­ply under­per­formed. Every one of them is vul­ner­a­ble to extreme weath­er and cli­mate events in dif­fer­ent ways. None of them were ade­quate­ly weath­er­ized or pre­pared for a full realm of weath­er and con­di­tions.

    We also need to real­ize that this par­tic­u­lar event, an Arc­tic blast stronger than any in more than three decades, is rare. Cli­mate sci­ence is uncer­tain on the future of extreme freeze events, but on aver­age our win­ters are get­ting warmer. Hous­ton gets five times few­er freez­ing nights than in the 1970s. That means that our next extreme events are more like­ly to come in the form of heat waves, droughts, hur­ri­canes, and floods, all made worse by cli­mate change.

    So what­ev­er we do to improve our ener­gy sys­tems to pre­pare for the next freeze, we should pri­or­i­tize mea­sures that add resilience, afford­abil­i­ty, and envi­ron­men­tal sus­tain­abil­i­ty across a spec­trum of typ­i­cal and not so typ­i­cal con­di­tions.

    ...

    ———–

    “What So Many Of The Mis­lead­ing Nar­ra­tives About Texas Miss” by Daniel Cohan; Talk­ing Points Memo; 02/18/2021

    But ERCOT’s biggest miss came in prepar­ing for out­ages at what it thought were “firm” resources — gas, coal, and nuclear. Those out­ages topped 30 GW, more than dou­ble ERCOT’s worst-case sce­nario. Just one of those gigawatts came from a tem­po­rary out­age at a nuclear unit. Most of the rest came from gas.”

    Yes, for all the blame placed on wind and solar, ERCOT actu­al­ly did a good job of pre­dict­ing how much to expect from those ener­gy sources head­ing into this win­ter weath­er event. Where ERCOT failed was in pre­dict­ing the fail­ures of the “firm” sources of gas, coal, and nuclear. And of those “firm” sources, it was nat­ur­al gas that was least firm. But it was­n’t because nat­ur­al gas-pow­ered elec­tric­i­ty gen­er­a­tors broke down. The nat­ur­al gas pow­er plants shut down because they lost their sup­ply of nat­ur­al gas and that steady sup­ply is cru­cial to how Tex­as­’s pow­er grid oper­ates:

    ...
    That doesn’t nec­es­sar­i­ly mean a lot of indi­vid­ual gas pow­er plants broke down. Most out­ages came because deliv­ery sys­tems failed to sup­ply gas to those plants at the con­sis­tent pres­sures that they need.

    These fail­ures high­light the unique vul­ner­a­bil­i­ties of rely­ing so heav­i­ly on nat­ur­al gas for pow­er. Only gas elec­tric­i­ty relies on a con­tin­u­ous sup­ply of a fos­sil fuel deliv­ered from hun­dreds of miles away. And that fuel is also need­ed for heat. So when an Arc­tic blast dri­ves up demand and dri­ves down sup­ply of heat and elec­tric­i­ty at the same time, pow­er plants lan­guish in line while homes and hos­pi­tals get the heat­ing fuel they need.
    ...

    So if a loss of nat­ur­al gas sup­plies as at the core of the loss of gas-pow­ered elec­tric­i­ty, what caused the drop in sup­plies? Part of it undoubt­ed­ly had to do with the equip­ment at wells freez­ing up in some cas­es. But the fol­low­ing
    arti­cle rais­es anoth­er wild sce­nario that, in the wake of the cur­rent dis­as­ter, actu­al­ly sounds plau­si­ble: when the wells lost elec­tri­cal pow­er from the grid they stopped pro­duc­ing the gas need­ed to sup­ply the gas-pow­ered elec­tri­cal plants, forc­ing even more black­outs and more shut down wells. Did that actu­al­ly hap­pen?:

    Sci­en­tif­ic Amer­i­can

    Mas­sive Pow­er Fail­ure Could Final­ly Cause Texas to Con­nect with the Nation’s Pow­er Grids

    Ener­gy from neigh­bor­ing states could have helped Tex­ans sur­vive their extreme win­ter storm

    By Robin Lloyd on
    Feb­ru­ary 19, 2021

    Elec­tri­cal out­ages affect­ing some four mil­lion Tex­ans over the past week are rais­ing tough ques­tions about the state’s pow­er sys­tem, which oper­ates some­what like a rogue nation with­in the U.S. The win­ter storm that broke the grid may prove to be the event that forces the state to reform its grid man­age­ment prac­tices to bet­ter antic­i­pate extreme weath­er events and also to end its iso­la­tion and con­nect to oth­er mul­ti­state pow­er grids around the coun­try. So says Jim Rossi, a Van­der­bilt Uni­ver­si­ty legal schol­ar who stud­ies the struc­ture of ener­gy mar­kets and is an expert on the ten­sion between state and fed­er­al pow­ers over U.S. ener­gy util­i­ties.

    Texas is rich in fos­sil fuels, renew­able pow­er and polit­i­cal pow­er, so for many decades it has run its own pow­er grid, free­ing it from fed­er­al over­sight. The Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT), a non­prof­it cor­po­ra­tion, man­ages the net­work of elec­tri­cal sup­pli­ers, called the Texas Inter­con­nec­tion, which serves 90 per­cent of the state. ERCOT and Texas have resist­ed invi­ta­tions and out­right appeals to con­nect with the nation’s two oth­er pow­er grids: the East­ern Con­nec­tion, which links sup­pli­ers and cus­tomers east of the Rock­ies, and the West­ern Con­nec­tion, which links pow­er west of the Rock­ies.

    Sci­en­tif­ic Amer­i­can spoke with Rossi to learn more about Texas’s long­stand­ing intran­si­gence and why Tex­ans may soon see fit to start mak­ing con­nec­tions with out-of-state grids—in part because Texas might even prof­it from the move.

    What do you see as the pri­ma­ry fac­tors behind the fail­ure this week of Texas’s pow­er grid?

    The most obvi­ous fac­tor, of course, is the extreme weath­er con­di­tions. That said, this was not an unpre­dictable event. Util­i­ties through­out the coun­try are in a posi­tion nowa­days where they can fore­see and plan for these kinds of events. And util­i­ties have a duty to pro­vide reli­able ser­vice to their cus­tomers, and cus­tomers expect this reli­a­bil­i­ty even dur­ing a win­ter storm.

    Some ana­lysts say that the actions of ERCOT paved the way for a black­out dis­as­ter like this by main­tain­ing the grid’s iso­la­tion from inter­state pow­er pools and even the nation’s two oth­er mas­sive grids. Do you agree?

    To a degree, yes. I think anoth­er way we might under­stand it is: What price are Tex­ans will­ing to pay to keep the Texas Inter­con­nec­tion grid inde­pen­dent? Maybe for some Tex­ans that is more than what they’ve gone through already. For oth­ers there is going to be a back­lash.

    There is some truth to the idea that if Texas had a [smooth] con­nec­tion to the whole­sale elec­tric­i­ty mar­ket, and thus could buy and sell pow­er to util­i­ties out­side of Texas, that the impact of extreme weath­er events would not be as sig­nif­i­cant. You can look at El Paso and Beau­mont, cities [near Texas’s bor­ders] that are not part of ERCOT and instead have con­nect­ed their pow­er grid with those in oth­er states. The storm’s impact on those cities’ elec­tri­cal pow­er was rel­a­tive­ly min­i­mal. That said, Texas would be con­nect­ing to the South­west Pow­er Pool, which includes some states that also were affect­ed by this storm and expe­ri­enced rolling brownouts, such as Kansas, Nebras­ka and the Dako­tas.

    What fac­tors have enabled iso­la­tion­ist ener­gy poli­cies in Texas to per­sist over the years?

    The state has a long­stand­ing his­to­ry of polit­i­cal inde­pen­dence, with pow­er­ful play­ers such as Lyn­don John­son, Sam Rae­burn, George Bush and Rick Per­ry. The state exerts a sig­nif­i­cant polit­i­cal influ­ence in the nation. It’s our country’s largest ener­gy-pro­duc­ing state. And the state con­sumes a lot of ener­gy, includ­ing a great deal of nat­ur­al gas. All that allows the state to oper­ate very inde­pen­dent­ly.

    Could the pow­er fail­ures in Texas over the past week pro­voke any sig­nif­i­cant change in how the state man­ages its grid in the near future? Could this event rep­re­sent a turn­ing point?

    I think it can and like­ly will. We’re like­ly to see reform on two fronts. The first one is that it’s in the inter­est of Texas to reform ERCOT. It might come in the shape of reforms on gov­er­nance and account­abil­i­ty. We’ve already seen Texas Gov­er­nor Greg Abbott call for such reforms. And reforms relat­ed to reli­a­bil­i­ty of ser­vice, win­ter­i­za­tion of the grid and main­tain­ing reserve mar­gins for pow­er gen­er­a­tors.

    The sec­ond front is relat­ed to plan­ning and adap­ta­tion to extreme weath­er. The cur­rent pow­er fail­ure in Texas is the snow-and-ice ver­sion of a hur­ri­cane in the North­east or South­east. How­ev­er, the sit­u­a­tion in Texas is some­what worse. A hur­ri­cane does not usu­al­ly affect an entire state, where­as the pow­er loss in Texas is affect­ing every coun­ty. So, adap­ta­tion to extreme weath­er would involve bet­ter prepar­ing the state’s pow­er sys­tem for both win­ter and sum­mer events.

    Oil and gas trans­mis­sion, pow­er trans­ac­tions and oth­er aspects of the nation’s two oth­er grids are reg­u­lat­ed by an inde­pen­dent agency called the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion (FERC). Do you see a role for FERC in the future of Texas’s pow­er grid?

    It’s not beyond FERC’s pow­er to inter­vene. And FERC has allud­ed to its will­ing­ness to assert juris­dic­tion over inter­state whole­sale sales of ener­gy in some of its pre­vi­ous orders relat­ed to the Texas grid. So I think there’s an issue of how long can Texas remain iso­lat­ed?

    Why is Texas not sub­ject to FERC reg­u­la­tions?

    The Texas Inter­con­nec­tion was start­ed after the Fed­er­al Pow­er Act of 1935. The Texas Inter­con­nec­tion was designed to expand and inter­con­nect Texas grid to help with rur­al elec­tri­fi­ca­tion. It was bot­tom-up effort. What came of that was Texas want­ed to retain inde­pen­dence from fed­er­al juris­dic­tion over oper­a­tion of its grid. I think the way that worked out both in terms of his­to­ry and pol­i­tics was Texas didn’t allow for syn­chro­nous flow of ener­gy out­side the state. It kept the flow of pow­er intrastate. It’s not just a big ener­gy con­sump­tion state but also a huge ener­gy pro­duc­tion state. It’s able then to have more con­trol over the way the grid oper­ates and remain inde­pen­dent from the fed­er­al ener­gy mar­ket. In the 1970s, ERCOT was cre­at­ed to more for­mal­ly man­age and oper­ate the Texas grid.

    In some ways that has let Texas be a real­ly inter­est­ing exper­i­ment in oper­a­tion of elec­tric­i­ty mar­kets. Some say it’s a utopia. It con­trols both whole­sale and retail sales of pow­er, with­out fed­er­al reg­u­la­to­ry over­sight. That has been praised because Texas doesn’t have to wor­ry about any ten­sion between fed­er­al and state juris­dic­tions. Some blame that ten­sion for the pow­er sys­tem fail­ures in Cal­i­for­nia with its mar­ket poli­cies. But in Texas you’ve got one reg­u­la­tor, one per­son that you can point fin­ger at. In some ways you can see that as a more effec­tive approach.

    Some com­men­ta­tors have sug­gest­ed that Texas’s grow­ing share of renew­able ener­gy sources, such as wind and solar pow­er, under­lies this past week’s grid fail­ure, but oth­ers have quick­ly point­ed out that renew­ables are not the dom­i­nant pow­er source in the state. What is your per­spec­tive?

    I agree that the renew­ables claim is fac­tu­al­ly bogus. In the win­ter­time, renew­ables com­prise about 8 per­cent of the ener­gy in the ERCOT-man­aged grid, and that’s pri­mar­i­ly from wind sources. It’s true that some wind tur­bines are frozen or were frozen. But the fail­ure this week has been pri­mar­i­ly a fail­ure in nat­ur­al gas gen­er­a­tion. There are a bunch of rea­sons. First of all, Texas is heav­i­ly depen­dent on nat­ur­al gas. It’s a big nat­ur­al gas pro­duc­tion state as well as con­sump­tion state, but it doesn’t need a lot of stor­age for the nat­ur­al gas, because pro­duc­tion facil­i­ties are in-state. In many oth­er states, nat­ur­al gas is import­ed from Penn­syl­va­nia, Texas or oth­er states and stored in tanks for lat­er use. Most of Texas is very depen­dent on real-time pro­duc­tion of gas. And the gas pro­duc­tion infra­struc­ture, as well as the elec­tric pow­er infra­struc­ture, has been hob­bled by freez­ing. Also, the state’s gas pro­duc­tion requires elec­tric­i­ty sup­plied by the state’s grid for its oper­a­tions. So when you shut down the grid, you shut down gas pro­duc­tion, and it becomes a house of cards. Heavy depen­dence on nat­ur­al gas, along with the lack of nat­ur­al gas stor­age, has real­ly put the state in a dif­fi­cult posi­tion here.

    ...

    ———–

    “Mas­sive Pow­er Fail­ure Could Final­ly Cause Texas to Con­nect with the Nation’s Pow­er Grids” by Robin Lloyd; Sci­en­tif­ic Amer­i­can; 02/19/2021

    “I agree that the renew­ables claim is fac­tu­al­ly bogus. In the win­ter­time, renew­ables com­prise about 8 per­cent of the ener­gy in the ERCOT-man­aged grid, and that’s pri­mar­i­ly from wind sources. It’s true that some wind tur­bines are frozen or were frozen. But the fail­ure this week has been pri­mar­i­ly a fail­ure in nat­ur­al gas gen­er­a­tion. There are a bunch of rea­sons. First of all, Texas is heav­i­ly depen­dent on nat­ur­al gas. It’s a big nat­ur­al gas pro­duc­tion state as well as con­sump­tion state, but it doesn’t need a lot of stor­age for the nat­ur­al gas, because pro­duc­tion facil­i­ties are in-state. In many oth­er states, nat­ur­al gas is import­ed from Penn­syl­va­nia, Texas or oth­er states and stored in tanks for lat­er use. Most of Texas is very depen­dent on real-time pro­duc­tion of gas. And the gas pro­duc­tion infra­struc­ture, as well as the elec­tric pow­er infra­struc­ture, has been hob­bled by freez­ing. Also, the state’s gas pro­duc­tion requires elec­tric­i­ty sup­plied by the state’s grid for its oper­a­tions. So when you shut down the grid, you shut down gas pro­duc­tion, and it becomes a house of cards. Heavy depen­dence on nat­ur­al gas, along with the lack of nat­ur­al gas stor­age, has real­ly put the state in a dif­fi­cult posi­tion here.

    Tex­as­’s elec­tri­cal grid is over­whelm­ing­ly reliant on real-time nat­ur­al gas and that gas pro­duc­tion requires elec­tric­i­ty from the state grid. Texas built itself an ener­gy Catch-22. At least it did if those rolling black­outs were hit­ting gas pro­duc­ers. And that’s why one of the big ques­tions inves­ti­ga­tors need to be ask­ing is whether or not those black­outs were hit­ting gas pro­duc­ers and whether or not the pow­er oper­a­tors con­trol­ling those black­outs real­ized this and did any­thing to mit­i­gate this sit­u­a­tion. In oth­er words, if Texas real­ly did cre­ate a self-induced mas­sive elec­tric­i­ty short­age by cut­ting off pow­er to its real-time nat­ur­al gas sources, did it even real­ize it was doing this? Is this a new stu­pid dynam­ic in Tex­as­’s ener­gy infra­struc­ture that we’re only seem­ing­ly learn­ing about now? Or was this a known poten­tial cas­cad­ing dis­as­ter that oper­a­tors would only induce at the last minute? And did they real­ize they were cut­ting off nat­ur­al gas pro­duc­tion when they trig­gered these black­outs?

    And there’s still the ques­tion of stored gas. Was that avail­able when the gas pro­duc­ers shut down? Not real­ly, because Texas does­n’t have much nat­ur­al gas stor­age capac­i­ty. Why? Because it has so much real-time pro­duc­tion capac­i­ty. So Texas sim­ply does­n’t have an option oth­er than to keep those gas pro­duc­tion wells run­ning. There’s no back up:

    The Texas Tri­bune

    Texas large­ly relies on nat­ur­al gas for pow­er. It wasn’t ready for the extreme cold.

    Texas large­ly relies on nat­ur­al gas — espe­cial­ly dur­ing times of high demand — to pow­er the state. Experts say nat­ur­al gas infra­struc­ture, from pump­ing it out of the ground to the plants in city cen­ters, was unpre­pared for the plung­ing tem­per­a­tures brought by the win­ter storm.

    by Erin Dou­glas Feb. 16, 20215 PM

    Fail­ures across Texas’ nat­ur­al gas oper­a­tions and sup­ply chains due to extreme tem­per­a­tures are the most sig­nif­i­cant cause of the pow­er cri­sis that has left mil­lions of Tex­ans with­out heat and elec­tric­i­ty dur­ing the win­ter storm sweep­ing the U.S.

    From frozen nat­ur­al gas wells to frozen wind tur­bines, all sources of pow­er gen­er­a­tion have faced dif­fi­cul­ties dur­ing the win­ter storm. But Tex­ans large­ly rely on nat­ur­al gas for pow­er and heat gen­er­a­tion, espe­cial­ly dur­ing peak usage, experts said.

    Offi­cials for the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, which man­ages most of Texas’ grid, said the pri­ma­ry cause of the out­ages Tues­day appeared to be the state’s nat­ur­al gas providers. Many are not designed to with­stand such low tem­per­a­tures on equip­ment or dur­ing pro­duc­tion.

    By some esti­mates, near­ly half of the state’s nat­ur­al gas pro­duc­tion has screeched to a halt due to the extreme­ly low tem­per­a­tures, while freez­ing com­po­nents at nat­ur­al gas-fired pow­er plants have forced some oper­a­tors to shut down.

    “Texas is a gas state,” said Michael Web­ber, an ener­gy resources pro­fes­sor at the Uni­ver­si­ty of Texas at Austin. While he said all of Texas’ ener­gy sources share blame for the pow­er cri­sis — at least one nuclear pow­er plant has par­tial­ly shut down, most notably — the nat­ur­al gas indus­try is pro­duc­ing sig­nif­i­cant­ly less pow­er than nor­mal.

    “Gas is fail­ing in the most spec­tac­u­lar fash­ion right now,” Web­ber said.

    More than half of ERCOT’s win­ter gen­er­at­ing capac­i­ty, large­ly pow­ered by nat­ur­al gas, was offline due to the storm, an esti­mat­ed 45 gigawatts, accord­ing to Dan Woodfin, a senior direc­tor at ERCOT.

    The out­ages dur­ing this storm far exceed­ed what ERCOT had pre­dict­ed in Novem­ber for an extreme win­ter event. The fore­cast for peak demand was 67 gigawatts; peak usage dur­ing the storm was more than 69 gigawatts Sun­day.

    It’s esti­mat­ed that about 80% of the grid’s capac­i­ty, or 67 gigawatts, could be gen­er­at­ed by nat­ur­al gas, coal and some nuclear pow­er. Only 7% of ERCOT’s fore­cast­ed win­ter capac­i­ty, or 6 gigawatts, was expect­ed to come from var­i­ous wind pow­er sources across the state.

    Woodfin said Tues­day that 16 gigawatts of renew­able ener­gy gen­er­a­tion, most­ly wind gen­er­a­tion, are offline and that 30 gigawatts of ther­mal sources, which include gas, coal and nuclear ener­gy, are offline.

    “It appears that a lot of the gen­er­a­tion that has gone offline today has been pri­mar­i­ly due to issues on the nat­ur­al gas sys­tem,” Woodfin said dur­ing a Tues­day call with reporters.

    Pro­duc­tion of nat­ur­al gas in the state has plunged, mak­ing it dif­fi­cult for pow­er plants to get the fuel nec­es­sary to run the plants. Nat­ur­al gas pow­er plants usu­al­ly don’t have very much fuel stor­age on site, experts said. Instead, the plants rely on the con­stant flow of nat­ur­al gas from pipelines that run across the state from areas like the Per­mi­an Basin in West Texas to major demand cen­ters like Hous­ton and Dal­las.

    In ear­ly Feb­ru­ary, Texas oper­a­tors were pro­duc­ing about 24 bil­lion cubic feet per day, accord­ing to an esti­mate by S&P Glob­al Platts. But on Mon­day, Texas pro­duc­tion plum­met­ed to a frac­tion of that: Oper­a­tors in the state pro­duced some­where between 12 bil­lion and 17 bil­lion cubic feet per day.

    The sys­tems that get gas from the earth aren’t prop­er­ly built for cold weath­er. Oper­a­tors in West Texas’ Per­mi­an Basin, one of the most pro­duc­tive oil fields in the world, are par­tic­u­lar­ly strug­gling to bring nat­ur­al gas to the sur­face, ana­lysts said, as cold weath­er and snow close wells or cause pow­er out­ages that pre­vent pump­ing the fos­sil fuels from the ground.

    “Gath­er­ing lines freeze, and the wells get so cold that they can’t pro­duce,” said Park­er Faw­cett, a nat­ur­al gas ana­lyst for S&P Glob­al Platts. “And pumps use elec­tric­i­ty, so they’re not even able to lift that gas and liq­uid, because there’s no pow­er to pro­duce.”

    Texas does not have as much stor­age capac­i­ty as oth­er states, experts said, because the resource-laden state can eas­i­ly pull it from the ground when it’s need­ed — usu­al­ly.

    Of the stor­age that the state does have, the resources are some­what dif­fi­cult to get to. Luke Jack­son, anoth­er nat­ur­al gas ana­lyst for S&P Glob­al Platts, said that phys­i­cal­ly with­draw­ing stored nat­ur­al gas is slow­er than the imme­di­ate, ready sup­ply of lines from pro­duc­tion and is insuf­fi­cient to make up for the dra­mat­ic declines in pro­duc­tion.

    Some pow­er plants were already offline before the cri­sis began, adding to the prob­lems, experts said. ERCOT antic­i­pat­ed 4 gigawatts of main­te­nance out­ages dur­ing the win­ter. Pow­er plants in Texas usu­al­ly do main­te­nance and updates to their plants dur­ing the typ­i­cal­ly mild win­ter months in prepa­ra­tion for the extreme elec­tric­i­ty and pow­er demand dur­ing the sum­mer. That, too, is strain­ing the grid’s sup­ply.

    ...

    ————

    “Texas large­ly relies on nat­ur­al gas for pow­er. It wasn’t ready for the extreme cold.” by Erin Dou­glas; The Texas Tri­bune; 02/16/2021

    “Pro­duc­tion of nat­ur­al gas in the state has plunged, mak­ing it dif­fi­cult for pow­er plants to get the fuel nec­es­sary to run the plants. Nat­ur­al gas pow­er plants usu­al­ly don’t have very much fuel stor­age on site, experts said. Instead, the plants rely on the con­stant flow of nat­ur­al gas from pipelines that run across the state from areas like the Per­mi­an Basin in West Texas to major demand cen­ters like Hous­ton and Dal­las.”

    Texas run on flow. The non-stop flow of nat­ur­al gas from the wells to the plants. And if that flow stops, the whole sys­tem stops because they did­n’t build the stor­age capac­i­ty. The flow was assumed to be nev­er-end­ing. Before then it end­ed.

    And note how Park­er Faw­cett, a nat­ur­al gas ana­lyst for S&P Glob­al Platts, also point­ed out that these nat­ur­al gas pumps run on elec­tric­i­ty, so if elec­tric­i­ty gets cut off from the pumps, the gas stops flow­ing. And if the gas stops flow­ing, the elec­tric­i­ty stops flow­ing. It’s not exact­ly a well thought out sys­tem:

    ...
    In ear­ly Feb­ru­ary, Texas oper­a­tors were pro­duc­ing about 24 bil­lion cubic feet per day, accord­ing to an esti­mate by S&P Glob­al Platts. But on Mon­day, Texas pro­duc­tion plum­met­ed to a frac­tion of that: Oper­a­tors in the state pro­duced some­where between 12 bil­lion and 17 bil­lion cubic feet per day.

    The sys­tems that get gas from the earth aren’t prop­er­ly built for cold weath­er. Oper­a­tors in West Texas’ Per­mi­an Basin, one of the most pro­duc­tive oil fields in the world, are par­tic­u­lar­ly strug­gling to bring nat­ur­al gas to the sur­face, ana­lysts said, as cold weath­er and snow close wells or cause pow­er out­ages that pre­vent pump­ing the fos­sil fuels from the ground.

    “Gath­er­ing lines freeze, and the wells get so cold that they can’t pro­duce,” said Park­er Faw­cett, a nat­ur­al gas ana­lyst for S&P Glob­al Platts. “And pumps use elec­tric­i­ty, so they’re not even able to lift that gas and liq­uid, because there’s no pow­er to pro­duce.”

    Texas does not have as much stor­age capac­i­ty as oth­er states, experts said, because the resource-laden state can eas­i­ly pull it from the ground when it’s need­ed — usu­al­ly.

    Of the stor­age that the state does have, the resources are some­what dif­fi­cult to get to. Luke Jack­son, anoth­er nat­ur­al gas ana­lyst for S&P Glob­al Platts, said that phys­i­cal­ly with­draw­ing stored nat­ur­al gas is slow­er than the imme­di­ate, ready sup­ply of lines from pro­duc­tion and is insuf­fi­cient to make up for the dra­mat­ic declines in pro­duc­tion.
    ...

    Think about how incred­i­bly brit­tle this sys­tem is. Even a tem­po­rary dis­rup­tion in the elec­tri­cal grid — which might arise from a dif­fer­ent sec­tor of the ener­gy sup­ply like nuclear or coal — could poten­tial­ly set off a self-rein­forc­ing cycle of fail­ing gas wells if those wells’ pumps lose elec­tric­i­ty. A self-rein­forc­ing cycle of fail­ure that will cause record price surges and a giant wind­fall for any pro­duc­ers still able to oper­ate.

    So as we can see, Texas built its elec­tri­cal grid for full spec­trum fail­ure. Reg­u­la­to­ry and phys­i­cal fail­ure. Beyond the mas­sive reg­u­la­to­ry fail­ures, where law­mak­ers seem­ing­ly built a mar­ket­place intend­ed to be manip­u­lat­ed by the pow­er gen­er­a­tors, Texas built an elec­tri­cal grid so reliant on the end­less real-time flow of nat­ur­al gas that if that flow was ever seri­ous­ly dis­rupt­ed the grid basi­cal­ly col­laps­es. It’s like a socioe­co­nom­ic Rube Gold­berg machine of cor­rup­tion and neg­li­gence. A wild­ly prof­itable socioe­co­nom­ic Rube Gold­berg machine of cor­rup­tion and neg­li­gence cur­rent­ly ful­fill­ing its pur­pose.

    Posted by Pterrafractyl | February 19, 2021, 4:49 pm
  13. Welp, we just got some con­fir­ma­tion on one of the biggest, and dumb­est, ques­tions, fac­ing Tex­ans as they con­tin­ue to thaw them­selves out of the his­toric freeze. That would be the ques­tion of whether or not the Texas elec­tri­cal grid oper­a­tors real­ized they were cut­ting off pow­er to the nat­ur­al gas pumps that were sup­ply the real-time nat­ur­al gas sup­ply Tex­as­’s elec­tri­cal grid was over­whelm­ing­ly rely­ing on. The answer appears to be no, the grid oper­a­tors did not real­ize they were cut­ting off pow­er to the nat­ur­al gas wells in the Per­mi­an Basin when they cut off pow­er there. It’s that dumb.

    At least that’s what we can infer from the answers the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT) gave to jour­nal­ists who asked a very sim­i­lar ques­tion. A very sim­i­lar ques­tion that threat­ens to make this whole scan­dal all the more avoid­able and absurd. Because it turns out there’s anoth­er part of Tex­as­’s nat­ur­al gas sys­tem that went down due to the black­outs. A com­po­nent arguably more vital than the pumps pow­er­ing the wells: the com­pres­sor sta­tions that pres­sur­ize the nat­ur­al gas pipelines.

    Yes, the grid oper­a­tors lit­er­al­ly cut pow­er to the sta­tions that pow­er the flow of nat­ur­al gas that sup­plies well over half of Tex­as­’s elec­tri­cal sup­ply in the win­ter. Recall how we’ve seen that Tex­as­’s nat­ur­al gas pow­er plants rarely have much onsite stor­age and rely on a con­stant flow of gas from the gas grid. More impor­tant­ly recall what Daniel Cohan wrote about the sys­tem-wide fail­ure of Tex­as­’s nat­ur­al gas sec­tor: the prob­lem with gas wells los­ing pow­er was­n’t as big as the prob­lem of the gas pipeline los­ing pres­sure and the con­stant flow speeds these plants need to oper­ate:

    ...
    But ERCOT’s biggest miss came in prepar­ing for out­ages at what it thought were “firm” resources — gas, coal, and nuclear. Those out­ages topped 30 GW, more than dou­ble ERCOT’s worst-case sce­nario. Just one of those gigawatts came from a tem­po­rary out­age at a nuclear unit. Most of the rest came from gas.

    That doesn’t nec­es­sar­i­ly mean a lot of indi­vid­ual gas pow­er plants broke down. Most out­ages came because deliv­ery sys­tems failed to sup­ply gas to those plants at the con­sis­tent pres­sures that they need.
    ...

    So knock­ing out pow­er to the com­pres­sor sta­tion was actu­al­ly a far more severe and imme­di­ate death blow to the grid than knock­ing out pow­er to the well pumps. Again, it’s big­ger and dumb­er than we thought.

    And it gets worse because of course it does: when ERCOT was asked by jour­nal­ists if util­i­ty oper­a­tors real­ized they were cut­ting off pow­er to the com­pres­sor sta­tions ERCOT said no, they did not real­ize they were cut­ting off pow­er to these com­pres­sor sta­tions. It’s based on that answer that we can infer that the grid oper­a­tors did­n’t real­ize they were were cut­ting off elec­tric­i­ty to the nat­ur­al gas well pumps too.

    So it’s increas­ing­ly sound­ing like the Texas pow­er grid’s ini­tial ‘rolling’ black­outs stopped rolling after they blacked out both the gas wells and com­pres­sor sta­tions, induc­ing a self-rein­forc­ing death spi­ral, appar­ent­ly with­out real­iz­ing it. Tex­as­’s grid blind­ly stran­gled itself. Or at least that’s the pre­vail­ing excuse at the moment:

    Bloomberg

    A Giant Flaw in Texas Black­outs: It Cut Pow­er to Gas Sup­plies

    By Rachel Adams-Heard, Javier Blas, and Mark Che­di­ak

    * Pow­er plants need­ed nat­ur­al gas, but nat­ur­al gas need­ed pow­er
    * A vicious cycle left pro­duc­ers unable to sup­ply gas in cri­sis
    Feb­ru­ary 19, 2021, 7:52 PM EST Updat­ed on Feb­ru­ary 20, 2021, 8:00 AM EST

    When the Texas pow­er grid was on the brink of col­lapse and its oper­a­tor plunged thou­sands into dark­ness, it didn’t make an excep­tion for the oil and gas field.

    Pow­er was, unsur­pris­ing­ly, divert­ed to hos­pi­tals and nurs­ing homes. Ercot, as the grid man­ag­er is known, was staving off utter cat­a­stro­phe, its chief exec­u­tive lat­er said.

    But leav­ing shale fields like the Per­mi­an Basin dark had an unin­tend­ed con­se­quence. Pro­duc­ers who depend on elec­tric­i­ty to pow­er their oper­a­tions were left with no way to pump nat­ur­al gas. And that gas was need­ed more than ever to gen­er­ate elec­tric­i­ty.

    As one exec­u­tive described: It was like a death spi­ral.

    The result was a vicious cycle that serves as a painful les­son to any pow­er grid oper­a­tor and util­i­ty com­pa­ny deal­ing with rolling out­ages dur­ing extreme weath­er.

    Sev­er­al ener­gy com­pa­nies say that, while frozen infra­struc­ture and equip­ment mal­func­tions caused gas vol­umes to plum­met, a lack of pow­er also had a pro­found impact on sup­ply. It’s a phe­nom­e­non that high­lights just how inter­con­nect­ed — and inter­de­pen­dent — Texas’s ener­gy net­work is.

    In the Per­mi­an, most drillers tar­get more valu­able crude, with gas typ­i­cal­ly con­sid­ered an unwant­ed byprod­uct. That wasn’t the case over days of forced pow­er out­ages as near­ly every source of fuel fal­tered in the unprece­dent­ed cold that slammed Texas.

    Even with its explor­ers focus­ing on crude, the state is the country’s biggest gas pro­duc­er, and the fuel makes up just over half of the sources of its pow­er gen­er­a­tion mix.

    A cru­cial part of the nat­ur­al gas sys­tem was knocked out by the pow­er out­ages: com­pres­sor sta­tions that help keep gas flow­ing through pipelines.

    As Ercot start­ed ask­ing util­i­ties to prompt big cus­tomers to reduce con­sump­tion Sun­day evening, those sta­tions went down and the pres­sure across mul­ti­ple gas pipelines start­ed to drop, ulti­mate­ly trip­ping some util­i­ties off line because of lack of fuel.

    That, in turn, led some areas of the Eagle Ford shale and the Per­mi­an to sim­ply turn off gas pro­duc­tion com­plete­ly.

    The sit­u­a­tion got much worse in the ear­ly hours of Mon­day as demand con­tin­ued to climb. Ercot sim­ply didn’t have the pow­er, and mil­lions of homes fell into dark­ness.

    Ercot exec­u­tives have said the util­i­ties ulti­mate­ly deter­mine which cir­cuits to turn off dur­ing a rotat­ing out­age. The grid oper­a­tor didn’t have infor­ma­tion on pow­er being cut to gas com­pres­sor sta­tions, a spokes­woman said in an email.

    At its peak, near­ly 40% of U.S. oil out­put was shut­tered due to the extreme cold and asso­ci­at­ed black­outs. Three-quar­ters of the U.S. frack fleet was lost this week, leav­ing 41 crews work­ing to blast water, sand and chem­i­cals under­ground to release trapped oil and gas, Matt John­son, chief exec­u­tive offi­cer at Pri­ma­ry Vision Inc., said Fri­day.

    ...

    It’s not yet clear how long it will take to restore all the lost oil and gas sup­ply, but oil traders and exec­u­tives have said they hope most of the pro­duc­tion lost will return with­in days as tem­per­a­tures rise and pow­er becomes avail­able.

    ———–

    “A Giant Flaw in Texas Black­outs: It Cut Pow­er to Gas Sup­plies” by Rachel Adams-Heard, Javier Blas, and Mark Che­di­ak; Bloomberg; 02/19/2021

    “But leav­ing shale fields like the Per­mi­an Basin dark had an unin­tend­ed con­se­quence. Pro­duc­ers who depend on elec­tric­i­ty to pow­er their oper­a­tions were left with no way to pump nat­ur­al gas. And that gas was need­ed more than ever to gen­er­ate elec­tric­i­ty.”

    Yes, cut­ting off elec­tric­i­ty to the Per­mi­an Basin, the heart of Tex­as­’s oil and gas drilling, had the unin­tend­ed con­se­quence of cut­ting off the cru­cial real-tome sup­ply to nat­ur­al gas need­ed to gen­er­ate elec­tric­i­ty. It was a death spi­ral that indus­try offi­cials seem to be char­ac­ter­iz­ing as some­thing they did­n’t see com­ing. Like this was a new les­son the indus­try just learned now. Is that plau­si­ble?

    ...
    As one exec­u­tive described: It was like a death spi­ral.

    The result was a vicious cycle that serves as a painful les­son to any pow­er grid oper­a­tor and util­i­ty com­pa­ny deal­ing with rolling out­ages dur­ing extreme weath­er.

    Sev­er­al ener­gy com­pa­nies say that, while frozen infra­struc­ture and equip­ment mal­func­tions caused gas vol­umes to plum­met, a lack of pow­er also had a pro­found impact on sup­ply. It’s a phe­nom­e­non that high­lights just how inter­con­nect­ed — and inter­de­pen­dent — Texas’s ener­gy net­work is.
    ...

    But even worse was the cut­ting of pow­er to the com­pres­sor sta­tions that main­tained the required flow in the pipelines feed­ing the elec­tric­i­ty plants. You knock those out and entire util­i­ties go offline from a lack of fuel. This, in turn, prompt­ed some Per­mi­an well oper­a­tors to shut off gas pro­duc­tion entire­ly. It was an act of crit­i­cal self-sab­o­tage that we are told was mere­ly an acci­dent:

    ...
    A cru­cial part of the nat­ur­al gas sys­tem was knocked out by the pow­er out­ages: com­pres­sor sta­tions that help keep gas flow­ing through pipelines.

    As Ercot start­ed ask­ing util­i­ties to prompt big cus­tomers to reduce con­sump­tion Sun­day evening, those sta­tions went down and the pres­sure across mul­ti­ple gas pipelines start­ed to drop, ulti­mate­ly trip­ping some util­i­ties off line because of lack of fuel.

    That, in turn, led some areas of the Eagle Ford shale and the Per­mi­an to sim­ply turn off gas pro­duc­tion com­plete­ly.
    ...

    And yet we are told by ERCOT that the grid oper­a­tor did­n’t real­ize it was cut­ting pow­er to these com­pres­sor sta­tions because it did­n’t have that infor­ma­tion:

    ...
    The sit­u­a­tion got much worse in the ear­ly hours of Mon­day as demand con­tin­ued to climb. Ercot sim­ply didn’t have the pow­er, and mil­lions of homes fell into dark­ness.

    Ercot exec­u­tives have said the util­i­ties ulti­mate­ly deter­mine which cir­cuits to turn off dur­ing a rotat­ing out­age. The grid oper­a­tor didn’t have infor­ma­tion on pow­er being cut to gas com­pres­sor sta­tions, a spokes­woman said in an email.

    At its peak, near­ly 40% of U.S. oil out­put was shut­tered due to the extreme cold and asso­ci­at­ed black­outs. Three-quar­ters of the U.S. frack fleet was lost this week, leav­ing 41 crews work­ing to blast water, sand and chem­i­cals under­ground to release trapped oil and gas, Matt John­son, chief exec­u­tive offi­cer at Pri­ma­ry Vision Inc., said Fri­day.
    ...

    Is this remote­ly plau­si­ble? It’s like imag­ine an exhaust­ed body decid­ing to shut down the heart to con­serve ener­gy. It’s that insane. Could Tex­as­’s elec­tri­cal grid have plau­si­bly made these kinds of mis­takes with­out real­iz­ing it? And based on every­thing we’ve seen so far with dis­as­ter, the answer appears to be, yes, it’s entire­ly plau­si­ble Tex­as­’s elec­tric­i­ty grid could have been oper­at­ed in an insane man­ner because it was designed to be oper­at­ed in an insane man­ner. The sys­tem did­n’t just break down spec­tac­u­lar­ly. It broke down in a spec­tac­u­lar­ly prof­itable way, where the more it broke down the more prof­itable it became. That’s how the sys­tem was designed. To be manip­u­lat­ed. Whether the mar­ket manip­u­la­tion is direct, like when pow­er gen­er­a­tors inten­tion­al­ly with­hold sup­plies to jack up the prices, or indi­rect manip­u­la­tion — like win­ter weath­er lock­ing up unpre­pared phys­i­cal infra­struc­ture cre­at­ing a supply/demand imbal­ance — the sys­tem designed to break down spec­tac­u­lar­ly. We’re just enjoy­ing the show. Some are clear­ly enjoy­ing it more than oth­ers.

    Posted by Pterrafractyl | February 21, 2021, 4:43 pm
  14. It sounds like we may have received an answer to one of the big ques­tions loom­ing over the Texas win­ter black­out dis­as­ter. That would be the ques­tion of whether or not the Texas util­i­ty oper­a­tors were aware of the fact that they were cut­ting off pow­er to the nat­ur­al gas gen­er­a­tors as well as the com­pres­sor sta­tions run­ning the nat­ur­al gas pipelines feed­ing Tex­as­’s pow­er plants:

    The answer, accord­ing to the tes­ti­monies of ener­gy exec­u­tives, is that yes, the util­i­ty oper­a­tor real­ized they were cut­ting off pow­er to nat­ur­al gas gen­er­a­tors and told the gas gen­er­a­tors that they weren’t a pri­or­i­ty. At least that was the tes­ti­mo­ny of Cur­tis Mor­gan, the CEO of Vis­tra Corp., who told Tex­as­’s law­mak­ers that when offi­cials from his com­pa­ny called the util­i­ty after the black­outs were impose they were told they weren’t a pri­or­i­ty. It’s a pret­ty shock­ing detail.

    But Mor­gan went on to pro­vide an addi­tion­al expla­na­tion for why the util­i­ty oper­a­tors were will­ing to hit pow­er plants with black­outs: out­dat­ed lists of crit­i­cal infra­struc­ture in Texas. Could some­thing that mind-numb­ing­ly stu­pid have played a role in this? It seems plau­si­ble. But still, out­dat­ed lists of crit­i­cal infra­struc­ture would­n’t explain why oper­a­tors were appar­ent­ly telling the pow­er gen­er­a­tors that they weren’t a pri­or­i­ty after those com­pa­nies called the util­i­ty over the black­outs.

    Mor­gan added an addi­tion­al poten­tial­ly very dis­turb­ing detail: pow­er at one of his com­pa­ny’s nuclear plants was with­in three min­utes of going offline. You have to won­der what kind of safe­ty impli­ca­tions that kind of sce­nario could have had.

    Final­ly, the arti­cle notes that Bill Mag­ness, CEO of the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas (ERCOT), gave a few more details on the source of the pow­er out­ages last week. The freeze was respon­si­ble for only 42% of the fail­ures. A lack of fuel and equip­ment dam­age unre­lat­ed to the weath­er con­tributed, but around around 38% of the plant out­ages hap­pened for rea­sons that remain unclear..

    So 42% of the dam­age was from the cold, 38% of from mys­tery rea­sons, leav­ing 20% from a lack of fuel and equip­ment dam­age unre­lat­ed to the weath­er. Keep in mind that the lack of fuel could have been due to the util­i­ty cut­ting off pow­er to the gas gen­er­a­tors and pipeline com­pres­sor sta­tions, but it would be inter­est­ing to learn about the rest of that equip­ment dam­age that was­n’t caused by the weath­er. So over­all, well over half of the pow­er fail­ures appear to be caused rea­sons unre­lat­ed to the cold weath­er.

    And note a source of fail­ure that Mag­ness did­n’t list: the util­i­ty cut­ting off pow­er to the gas gen­er­a­tors and com­pres­sor sta­tions. So we know the cut off of pow­er to gas gen­er­a­tors and pipelines played a major role in the black­outs, and we have the CEO ERCOT announc­ing a huge mys­tery cause for the pow­er fail­ures that have yet to be dis­cov­ered. Hmmm....what could that mys­tery cause be...:

    Asso­ci­at­ed Press

    ‘Who is at fault?’ Inves­ti­ga­tion into Texas black­out begins

    By PAUL J. WEBER and DAVID KOENIG
    Thurs­day Feb 25, 2021 18:40:19 CST

    AUSTIN, Texas (AP) — The cat­a­stroph­ic Texas black­out was a wider fail­ure than the state’s pow­er grid, which teetered on the brink of an even big­ger col­lapse dur­ing a freeze that knocked out elec­tric­i­ty to 4 mil­lion cus­tomers, ener­gy exec­u­tives said Thurs­day.

    One CEO said he sound­ed warn­ing days before what became one of the worst pow­er out­ages in U.S. his­to­ry, includ­ing to the office of Repub­li­can Gov. Greg Abbott, whose reg­u­la­to­ry appointees came under sharp crit­i­cism dur­ing the first inves­tiga­tive hear­ing since last week’s cri­sis.

    Lead­ers of oth­er pow­er com­pa­nies said they thought the sys­tem would hold, while also acknowl­edg­ing that a fail­ure to but­tress their gen­er­a­tors against sub­freez­ing weath­er con­tributed to the out­ages.

    “Who is at fault?” state Rep. Todd Hunter, a Repub­li­can, demand­ed of wit­ness­es dur­ing hours of tes­ti­mo­ny at the Texas Capi­tol.

    Pres­i­dent Joe Biden is set to fly to Texas on Fri­day, in what will be his first vis­it to a major dis­as­ter site since tak­ing office.

    Abbott has zeroed in almost sin­gu­lar­ly on the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, accus­ing the state’s embat­tled grid oper­a­tor of mis­lead­ing the pub­lic about the readi­ness of a sys­tem that was min­utes away from total col­lapse in the ear­ly hours of Feb. 15, when tem­per­a­tures plunged and demand for elec­tric­i­ty vast­ly out­stripped sup­ply.

    But ener­gy exec­u­tives, includ­ing those whose com­pa­nies lav­ish­ly donate to Abbott and law­mak­ers, made clear that the fault is far wider.

    The tes­ti­mo­ny offered a trou­bling new look at how quick­ly America’s ener­gy cap­i­tal ran out of ener­gy. Cur­tis Mor­gan, the CEO of Vis­tra Corp., told law­mak­ers at the out­set that the black­outs affect­ed plants that could have gen­er­at­ed more pow­er that was urgent­ly need­ed. He said when offi­cials from his com­pa­ny called util­i­ty providers, they were told they weren’t a pri­or­i­ty.

    “How can a pow­er plant be at the bot­tom of the list of pri­or­i­ties?” Mor­gan said.

    “You-know-what hit the fan, and everybody’s going, ‘You’re turn­ing off my pow­er plant?’” he said.

    At least 40 peo­ple in Texas died as a result of the storm, and 10 days after the black­out start­ed, more than 1 mil­lion peo­ple in the state were still under boil-water notices.

    ERCOT offi­cials have claimed that the scale of the forced black­outs — the largest in Texas his­to­ry — were nec­es­sary to avert an even more cat­a­stroph­ic fail­ure that would have wiped out pow­er to most of the state’s 30 mil­lion res­i­dents for months.

    “Obvi­ous­ly what you did didn’t work,” said Demo­c­ra­t­ic state Sen. John Whit­mire of Hous­ton, which had more than 1 mil­lion out­ages.

    “It worked from keep­ing us (from) going into a black­out that we’d still be in today, that’s why we did it,” ERCOT pres­i­dent Bill Mag­ness said. “Now it didn’t work for people’s lives, but it worked to pre­serve the integri­ty of the sys­tem.”

    Among Vistra’s sub­sidiaries is, Lumi­nant, which oper­ates near­ly two dozen plants across Texas. Mor­gan blamed out­dat­ed lists of crit­i­cal infra­struc­ture in Texas for dark­en­ing gas processers and pro­duc­tion sites as grid man­agers began shut­ting off parts of the sys­tem.

    Mor­gan didn’t say how many of the company’s plants were turned off or for how long, but he did say the com­pa­ny was with­in three min­utes of pow­er going offline at one nuclear plant, and that the main pow­er grid in America’s ener­gy cap­i­tal was just moments away from total col­lapse Feb. 15. He said he had reached out to state offi­cials, includ­ing Abbott’s office, with con­cerns.

    “We came dan­ger­ous­ly close to los­ing the entire elec­tric sys­tem,” Mor­gan said.

    Of Texas’ pow­er gen­er­a­tors that were not oper­a­tional dur­ing the storm, Mag­ness said the freeze was respon­si­ble 42% of the fail­ures. A lack of fuel and equip­ment dam­age unre­lat­ed to the weath­er also con­tributed, but Mag­ness said that for 38% of the plant out­ages, the prob­lem remains unclear.

    Repub­li­can law­mak­ers pulled no punch­es in crit­i­ciz­ing DeAnn Walk­er, chair­woman of the Pub­lic Util­i­ty Com­mis­sion, who was appoint­ed to the reg­u­la­to­ry agency by Abbott. Sev­er­al were frus­trat­ed by her claims the com­mis­sion had lit­tle enforce­ment lever­age over ERCOT.

    “You are the chair, I would con­tend you are choos­ing not to lever­age the author­i­ty we have giv­en you. That is a seri­ous prob­lem,” Sen. Bran­don Creighton said.

    The out­ages last­ed days for mil­lions of Texas homes, and mil­lions more lost water as water treat­ment plants shut­down and miles of pipes burst across the state. The toll of the storm includ­ed at least 15 hypother­mia-relat­ed deaths around Hous­ton, said Demo­c­ra­t­ic state Rep. Ana Her­nan­dez, vice chair­woman of the House State Affairs com­mit­tee.

    The cri­sis has put Texas’ pow­er and fos­sil fuel indus­try under heavy scruti­ny from law­mak­ers who reap mil­lions of dol­lars in unlim­it­ed polit­i­cal con­tri­bu­tions from ener­gy inter­ests, more than any oth­er sec­tor.

    ...

    ————

    “‘Who is at fault?’ Inves­ti­ga­tion into Texas black­out begins” by PAUL J. WEBER and DAVID KOENIG; Asso­ci­at­ed Press; 02/25/2021

    “Of Texas’ pow­er gen­er­a­tors that were not oper­a­tional dur­ing the storm, Mag­ness said the freeze was respon­si­ble 42% of the fail­ures. A lack of fuel and equip­ment dam­age unre­lat­ed to the weath­er also con­tributed, but Mag­ness said that for 38% of the plant out­ages, the prob­lem remains unclear.

    Over a third of the caus­es for the plant out­ages have yet to be under­stood, accord­ing to ERCOT. It’s pret­ty remark­able for a state-wide fail­ure that seem­ing­ly has a very obvi­ous cause of record cold weath­er. But that 38% mys­tery cat­e­go­ry only gets more mys­te­ri­ous when we hear from ener­gy exec­u­tives that they were explic­it­ly told by the util­i­ty offi­cials that sup­ply pow­er to their plants was­n’t a pri­or­i­ty:

    ...
    The tes­ti­mo­ny offered a trou­bling new look at how quick­ly America’s ener­gy cap­i­tal ran out of ener­gy. Cur­tis Mor­gan, the CEO of Vis­tra Corp., told law­mak­ers at the out­set that the black­outs affect­ed plants that could have gen­er­at­ed more pow­er that was urgent­ly need­ed. He said when offi­cials from his com­pa­ny called util­i­ty providers, they were told they weren’t a pri­or­i­ty.

    “How can a pow­er plant be at the bot­tom of the list of pri­or­i­ties?” Mor­gan said.

    “You-know-what hit the fan, and everybody’s going, ‘You’re turn­ing off my pow­er plant?’” he said.
    ...

    And then there’s the accu­sa­tion by Vista Corp CEO Cur­tis Mor­gan that the lists of crit­i­cal infra­struc­ture are out of date:

    ...
    Among Vistra’s sub­sidiaries is, Lumi­nant, which oper­ates near­ly two dozen plants across Texas. Mor­gan blamed out­dat­ed lists of crit­i­cal infra­struc­ture in Texas for dark­en­ing gas processers and pro­duc­tion sites as grid man­agers began shut­ting off parts of the sys­tem.
    ...

    So was the pow­er to the gas gen­er­a­tors cut off know­ing­ly because they were deemed a low­er pri­or­i­ty? Or were they cut off because the util­i­ty oper­a­tor did­n’t real­ize they were cut­ting off pow­er to crit­i­cal infra­struc­ture because their crit­i­cal infra­struc­ture lists were out of date? All of that still remains a mys­tery.

    But ERCOT offi­cials appear to be large­ly stick­ing with the nar­ra­tive that they had to cut off pow­er to gas gen­er­a­tors and oth­er crit­i­cal infra­struc­ture because pow­er was falling off the grid so quick­ly the entire elec­tri­cal grid was min­utes away from a phys­i­cal melt­down. It’s a sce­nario Vista Corp CEO Cur­tis Mor­gan appeared to back up, when he also not­ed that his com­pa­ny’s nuclear pow­er plant was min­utes away from los­ing pow­er:

    ...
    ERCOT offi­cials have claimed that the scale of the forced black­outs — the largest in Texas his­to­ry — were nec­es­sary to avert an even more cat­a­stroph­ic fail­ure that would have wiped out pow­er to most of the state’s 30 mil­lion res­i­dents for months.

    “Obvi­ous­ly what you did didn’t work,” said Demo­c­ra­t­ic state Sen. John Whit­mire of Hous­ton, which had more than 1 mil­lion out­ages.

    “It worked from keep­ing us (from) going into a black­out that we’d still be in today, that’s why we did it,” ERCOT pres­i­dent Bill Mag­ness said. “Now it didn’t work for people’s lives, but it worked to pre­serve the integri­ty of the sys­tem.”

    ....

    Mor­gan didn’t say how many of the company’s plants were turned off or for how long, but he did say the com­pa­ny was with­in three min­utes of pow­er going offline at one nuclear plant, and that the main pow­er grid in America’s ener­gy cap­i­tal was just moments away from total col­lapse Feb. 15. He said he had reached out to state offi­cials, includ­ing Abbott’s office, with con­cerns.

    “We came dan­ger­ous­ly close to los­ing the entire elec­tric sys­tem,” Mor­gan said.
    ...

    Over­all, the pic­ture that’s emerg­ing from the var­i­ous sources is that the Texas grid real­ly was min­utes away from being over­whelmed when util­i­ty oper­a­tors first imple­ment­ed their rolling black­outs. Then the black­outs could­n’t actu­al­ly be ‘rolled’ because the pow­er sup­ply con­tin­ued to fall after the black­outs were imposed, in part because they were lit­er­al­ly cut­ting off pow­er to the gas gen­er­a­tors and com­pres­sor sta­tions. At that point, the grid death-spi­ral was in place.

    So the ques­tion of why the grid oper­a­tors cut off pow­er to the gas gen­er­a­tors and com­pres­sor sta­tions remains an open ques­tion, with util­i­ty oper­a­tors inti­mat­ing that it was the urgency of the moment that forced them to cut pow­er to gas gen­er­a­tors. The urgency cre­at­ed by a pre­cip­i­tous drop in pow­er sup­ply at the same time demand was surg­ing. But that expla­na­tion rais­es anoth­er sig­nif­i­cant ques­tion: what was the exact cause of the pre­cip­i­tous pow­er sup­ply drop that trig­gered the ini­tial black­outs and threat­ened to take down the entire grid? We’ve now learned that ALL of Tex­as­’s pow­er sys­tems failed to some extent over the course of this cri­sis. So which of those sys­tems failed first? Was it the wind tur­bines that went down first? Or was it some­thing else, like goal or gas pow­er plants shut­ting down unex­pect­ed­ly? We still have no answer on that.

    But as we’ll see in the fol­low­ing arti­cle from last week, when Texas was still in the grip of the black­outs, the ini­tial answer util­i­ty oper­a­tors gave for why they had to impose those black­outs was a loss of pow­er due to the cold weath­er. Of course, as we just saw from the more recent arti­cle above, ERCOT is now only esti­mat­ing that 42% of the pow­er loss was due to cold weath­er. And that rais­es the poten­tial­ly scan­dalous ques­tion: was the ini­tial drop in pow­er sup­plies that trig­gered the black­outs pri­mar­i­ly due to the cold weath­er or some­thing else?:

    The Texas Tri­bune

    Texas was “sec­onds and min­utes” away from cat­a­stroph­ic month­s­long black­outs, offi­cials say

    Offi­cials with the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas said that grid oper­a­tors imple­ment­ed black­outs to avoid a cat­a­stroph­ic fail­ure that could have left Tex­ans in the dark for months.

    by Erin Dou­glas Feb. 18, 2021
    Updat­ed: 6 PM

    Texas’ pow­er grid was “sec­onds and min­utes” away from a cat­a­stroph­ic fail­ure that could have left Tex­ans in the dark for months, offi­cials with the enti­ty that oper­ates the grid said Thurs­day.

    As mil­lions of cus­tomers through­out the state begin to have pow­er restored after days of mas­sive black­outs, offi­cials with the Elec­tric Reli­a­bil­i­ty Coun­cil of Texas, or ERCOT, which oper­ates the pow­er grid that cov­ers most of the state, said Texas was dan­ger­ous­ly close to a worst-case sce­nario: uncon­trolled black­outs across the state.

    The quick deci­sion that grid oper­a­tors made in the ear­ly hours of Mon­day morn­ing to begin what was intend­ed to be rolling black­outs — but last­ed days for mil­lions of Tex­ans — occurred because oper­a­tors were see­ing warn­ing signs that mas­sive amounts of ener­gy sup­ply was drop­ping off the grid.

    As nat­ur­al gas fired plants, util­i­ty scale wind pow­er and coal plants tripped offline due to the extreme cold brought by the win­ter storm, the amount of pow­er sup­plied to the grid to be dis­trib­uted across the state fell rapid­ly. At the same time, demand was increas­ing as con­sumers and busi­ness­es turned up the heat and stayed inside to avoid the weath­er.

    “It need­ed to be addressed imme­di­ate­ly,” said Bill Mag­ness, pres­i­dent of ERCOT. “It was sec­onds and min­utes [from pos­si­ble fail­ure] giv­en the amount of gen­er­a­tion that was com­ing off the sys­tem.”

    Grid oper­a­tors had to act quick­ly to cut the amount of pow­er dis­trib­uted, Mag­ness said, because if they had wait­ed, “then what hap­pens in that next minute might be that three more [pow­er gen­er­a­tion] units come offline, and then you’re sunk.”

    Mag­ness said on Wednes­day that if oper­a­tors had not act­ed in that moment, the state could have suf­fered black­outs that “could have occurred for months,” and left Texas in an “inde­ter­mi­nate­ly long” cri­sis.

    While gen­er­a­tors rapid­ly dropped off the grid as the weath­er wors­ened, oper­a­tors mon­i­tored the dif­fer­ence between the sup­ply of pow­er on the grid and the demand for that pow­er. As sup­ply dwin­dled and demand grew, the mar­gin nar­rowed to more and more dan­ger­ous lev­els, forc­ing grid oper­a­tors to enact emer­gency pro­to­cols to either increase sup­ply or decrease demand.

    The worst case sce­nario: Demand for pow­er out­strips the sup­ply of pow­er gen­er­a­tion avail­able on the grid, caus­ing equip­ment to catch fire, sub­sta­tions to blow and pow­er lines to go down.

    If the grid had gone total­ly offline, the phys­i­cal dam­age to pow­er infra­struc­ture from over­whelm­ing the grid could have tak­en months to repair, said Bernadette John­son, senior vice pres­i­dent of pow­er and renew­ables at Enverus, an oil and gas soft­ware and infor­ma­tion com­pa­ny head­quar­tered in Austin.

    “As chaot­ic as it was, the whole grid could’ve been in black­out,” she said. “ERCOT is get­ting a lot of heat, but the fact that it wasn’t worse is because of those grid oper­a­tors.”

    ERCOT has three emer­gency pro­ce­dures to bal­ance the equa­tion between sup­ply and demand. Grid oper­a­tors can call on oth­er grids for help — Texas’ grid has lim­it­ed con­nec­tions to the east­ern U.S. and Mex­i­co. But in this week’s storm, so much pow­er went offline that oth­er grids couldn’t close the gap, in part because those grids were being stressed by the same storm.

    Next, ERCOT can try to reduce demand by inter­rupt­ing pow­er to large indus­tri­al cus­tomers that have pre­vi­ous­ly agreed to have pow­er cut dur­ing an emer­gency.

    If that doesn’t work — and it didn’t in this case — ERCOT has a last resort option: order­ing trans­mis­sion com­pa­nies to reduce demand on the sys­tem with rotat­ing out­ages for cus­tomers.

    That’s what hap­pened in the ear­ly hours of Mon­day morn­ing.

    Usu­al­ly, those out­ages are lim­it­ed to less than 45 min­utes. But this week, the out­ages last­ed days. That’s like­ly because after ERCOT ordered com­pa­nies to stop pro­vid­ing pow­er to cus­tomers, even more pow­er gen­er­a­tion tripped offline, and it was not able to “roll” the out­ages effec­tive­ly, John­son explained.

    The amount of pow­er ERCOT need­ed util­i­ties to cut back in order to pre­vent com­plete black­out was so great that the com­pa­nies didn’t have flex­i­bil­i­ty to roll pow­er from one area to anoth­er to spread out the pain.

    The emer­gency pro­ce­dures are designed to avoid over­whelm­ing the entire Texas grid. If that had occurred, even as pow­er gen­er­a­tors recov­ered from the cold, ERCOT would have been unable to quick­ly recon­nect them back to the grid, John­son said.

    Grid oper­a­tors would have need­ed to slow­ly and care­ful­ly bring gen­er­a­tors and cus­tomers back online, all the while tak­ing care to not to cause more dam­age to the grid. It’s a del­i­cate process, John­son explained, because each part of the puz­zle — the gen­er­a­tors pro­duc­ing pow­er, the trans­mis­sion lines that move the pow­er and the cus­tomers that use it — must be care­ful­ly man­aged.

    “It has to bal­ance con­stant­ly,” she said. “Once a grid goes down, it’s hard to bring it back online. If you bring on too many cus­tomers, then you have anoth­er out­age.”

    ERCOT offi­cials have repeat­ed­ly said that the win­ter storm that swept the state caught pow­er gen­er­a­tors off guard, and that it pre­vi­ous­ly appeared there was more than enough sup­ply to meet demand. But the storm far exceed­ed what ERCOT pro­ject­ed in the fall to pre­pare for win­ter.

    “The oper­a­tors who took those actions to pre­vent a cat­a­stroph­ic black­out and much worse dam­age to our sys­tem, that was, I would say, the most dif­fi­cult deci­sion that had to be made through­out this whole event,” Mag­ness said.

    Nine grid oper­a­tors are work­ing at any giv­en time who make these sorts of deci­sions, said Leslie Sop­ko, a spokesper­son for ERCOT.

    “At the end of the day, our oper­a­tors are high­ly trained and have the author­i­ty to make deci­sions that pro­tect the reli­a­bil­i­ty of the elec­tric sys­tem,” she said in a state­ment.

    ...

    ————

    “Texas was “sec­onds and min­utes” away from cat­a­stroph­ic month­s­long black­outs, offi­cials say” by Erin Dou­glas; The Texas Tri­bune; 02/18/2021

    “Usu­al­ly, those out­ages are lim­it­ed to less than 45 min­utes. But this week, the out­ages last­ed days. That’s like­ly because after ERCOT ordered com­pa­nies to stop pro­vid­ing pow­er to cus­tomers, even more pow­er gen­er­a­tion tripped offline, and it was not able to “roll” the out­ages effec­tive­ly, John­son explained.

    The rolling black­outs could­n’t be rolled after more pow­er gen­er­a­tion tripped offline fol­low­ing the black­outs. It’s been the con­sis­tent sto­ry of ERCOT through­out this mess but ERCOT has nev­er real­ly explained why pow­er gen­er­a­tion con­tin­ued to trip offline, although we now know it was like­ly due to the pow­er being cut to the gas gen­er­a­tors and com­pres­sor sta­tions. The point is that ERCOT has been giv­ing the pub­lic a high­ly incom­plete sto­ry this entire time. And a big part of that incom­plete pic­ture is why exact­ly was the pow­er drop­ping so pre­cip­i­tous­ly in the lead up to the black­outs. Because, sure it was extreme­ly cold and that would impose a lim­it on the sys­tem. But as we saw, this weath­er sys­tem was­n’t unex­pect­ed and ERCOT pro­ject­ed in advance that it would have the required pow­er sup­plies. So was it pure­ly the extreme cold that knocked pow­er out in the lead up to black­outs or was there anoth­er cause? That is still an open ques­tion:

    ...
    The amount of pow­er ERCOT need­ed util­i­ties to cut back in order to pre­vent com­plete black­out was so great that the com­pa­nies didn’t have flex­i­bil­i­ty to roll pow­er from one area to anoth­er to spread out the pain.

    ...

    ERCOT offi­cials have repeat­ed­ly said that the win­ter storm that swept the state caught pow­er gen­er­a­tors off guard, and that it pre­vi­ous­ly appeared there was more than enough sup­ply to meet demand. But the storm far exceed­ed what ERCOT pro­ject­ed in the fall to pre­pare for win­ter.

    “The oper­a­tors who took those actions to pre­vent a cat­a­stroph­ic black­out and much worse dam­age to our sys­tem, that was, I would say, the most dif­fi­cult deci­sion that had to be made through­out this whole event,” Mag­ness said.
    ...

    Yes, pre­vi­ous­ly appear there was more than enough sup­ply to meet demand. Then that sud­den­ly changed Sun­day night and the sys­tem was thrown into such an extreme sup­ply-demand imbal­ance that black­outs were imposed on the ener­gy gen­er­a­tors, set­ting off the death-spi­ral.

    And as we’re see­ing, when faced with the ques­tion of why the util­i­ty oper­a­tors were will­ing to cut off sup­plies to ener­gy gen­er­a­tors, the answer we are giv­en is that the ener­gy demands were so extreme at that moment on Sun­day night that they had no choice. It was a choice between cut­ting off pow­er to the gas gen­er­a­tors or let the whole sys­tem col­lapse. And yet we are also now told from ERCOT that 38% of the pow­er fail­ures had noth­ing to do with the weath­er, which rais­es the ques­tion of now much of that non-weath­er-induced pow­er fail­ure took place when the pow­er was per­ilous­ly drop­ping in the lead up to the black­outs. If the sit­u­a­tion Sun­day night real­ly was that sud­den­ly severe, we have to ask: was the sud­den drop in pow­er sup­plies pure­ly due to the cold weath­er? Or was it mere­ly the lat­est instance of legal­ized price manip­u­la­tion in sys­tem designed to allow pow­er sup­pli­ers to with­hold sup­plies in order to jack up prices? Price manip­u­la­tion that exceed­ed beyond their wildest dreams. Or was maybe rough­ly in line with their wildest dreams.

    Posted by Pterrafractyl | February 26, 2021, 5:00 pm

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