At its September 23, 2021 open meeting, the Federal Energy Regulatory Commission (“FERC”) received a preliminary report jointly prepared by FERC and North American Electric Reliability Corporation (“NERC”) staff addressing the causes of the February 2021 winter storm event that caused widespread electric outages affecting millions of customers throughout ERCOT, MISO and SPP.
The full joint FERC/NERC report is due in November, but the staff briefing sets forth the following preliminary findings as to “what went wrong.”
1. Generation Freezing Issues – particularly frozen instrumentation and wind turbine blade icing
2. Natural Gas Fuel Supply Issues – accounting for 87% of all fuel-related outages and derates
3. Natural Gas and Electric Reliability Interdependency – power line outages and firm load shed being the primary cause of natural gas production facility losses
4. ERCOT Firm Load Shed Affected Natural Gas Facilities – reflecting failure to identify most natural gas production and processing facilities as critical load that should have been protected from load shedding
5. Manual and Automatic Load Shed Coordination Failures - particularly the magnitude and duration of manual load shed required
The report did note that the SPP, MISO, and ERCOT Reliability Coordinators effectively managed the constrained bulk power system conditions.
The report provided several preliminary recommendations – including mandatory electric reliability standards – to prevent a recurrence. Notably, the recommended reliability standards require Generator Owners (“GOs”) to:
• identify and protect cold-weather-critical components
• build new generating units and retrofit existing units to operate to specific ambient temperatures and weather based on extreme temperature and weather data (including the effects of precipitation and wind)
• hold annual training on winterization plans
• develop a corrective action plan (for GOs that experienced freeze-related outages)
• provide the GO’s Balancing Authority with the percentage of the GO’s total generating unit capacity upon which the Balancing Authority can rely during “local forecasted cold weather,” including reliability risks related to natural gas fuel contracts
• account for the effects of precipitation and the accelerated cooling effect of wind when providing temperature data
FERC Chairman Richard Glick, suggesting a failure by the industry to meaningfully respond to the 2011 winter event, described the results of the preliminary report as a “wake-up call” for the energy sector and noted that FERC must take these recommendations seriously and act decisively to ensure the bulk power system does not fail in future extreme weather events. To that end, Chairman Glick stated, “I guarantee you that this time FERC will not permit these recommendations to be ignored or watered down.” Chairman Glick also suggested that the isolation of the ERCOT power grid may have contributed to the gravity of the winter storm event by limiting the ability to import power to most of Texas from neighboring regions. Commissioner Christie suggested that ERCOT’s lack of a capacity market was the root cause of the outages, noting that “the biggest single problem is that in an energy-only market, no one has an obligation to serve [electricity].”
FERC’s inquiry into these issues continues against the backdrop of continued efforts by the Texas PUC and ERCOT to address the factors that precipitated the winter weather event and its catastrophic impacts on the ERCOT market. At its own open meeting on September 23, 2021, the Texas PUC indicated immediate plans to revise its rules to lower the cap on wholesale power prices from $9,000/MWh to $4,500/MWh and solicited continuing input from market participants regarding additional market reforms.
The Texas PUC has also implemented a phased approach to weatherization reform. In the first phase, to prepare quickly for the 2021-2022 winter, the proposed rule requires generators and transmission service providers to implement recommendations made a decade ago following the 2011 winter storm:
• Generators must implement recommendations from the 2012 Quanta Technology Report on Extreme Weather Preparedness Best Practices
• Transmission service providers must implement recommendations contained in the 2011 Report on Outages and Curtailments During the Southwest Cold Weather Event on February 1-5, 2011, jointly prepared by FERC and NERC
In the second phase, to be handled in a future rulemaking, the Texas PUC will develop “a more comprehensive, year-round set of weather emergency preparedness reliability standards that will be informed by a robust weather study that is currently being conducted by ERCOT in consultation with the Office of the Texas State Climatologist.
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