Paperwork failures worsened Texas blackouts, sparking mid-storm scramble to restore critical fuel supply

By Erin Douglas

On Valentine’s Day, the major utility that supplies electricity to West Texas readied for a severe winter storm. Hired contractors prepared to fix power lines, managers started up the storm emergency center, and operators reviewed the list of facilities that should — no matter what — keep power during an emergency: 35 of them on Oncor’s list were natural gas facilities that deliver fuel to power plants.

As Sunday turned to Monday, Allen Nye, the CEO of Oncor, one of the state’s largest transmission and delivery utilities, thought his team was ready.

But the situation rapidly deteriorated as the storm bore down on Texas. At 1:20 a.m., the Electric Reliability Council of Texas, which manages the state’s power grid, ordered the first cut of power to bring demand down to match an extremely low power supply as the frigid temperatures caused power plants to rapidly trip offline.

Oncor’s team, along with other utilities, began a plan to roll outages at 15- and 30-minute intervals. But just before 2 a.m., ERCOT ordered them to take even more power offline — then kept ordering more reductions. By late Monday morning, ERCOT had ordered 20,000 megawatts of power offline; Oncor’s share was 8,000 megawatts, or enough to power 1.6 million homes.

Rolling the outages “quickly became impossible,” Nye said. “We sat there praying that electrons showed up.”

With millions of Texans without power, Nye got an urgent request from DeAnn Walker, then chair of the Public Utility Commission: She needed Oncor to flip the switch back on to certain natural gas facilities that couldn’t deliver fuel to power plants without electricity.

A PUC spokesperson said Walker was “ceaselessly” on the phone, calling Nye about dozens of natural gas facilities that weren’t on Oncor’s “critical” list.

That meant that Oncor, which delivers power to the Permian Basin — the state’s most productive oil and natural gas basin — had unwittingly shut off some of the state’s power supply when it followed orders to begin the outages.

The desperate scramble to power up natural gas facilities again exposed a major structural flaw in Texas’ electric grid: Oncor and other utilities didn’t have good lists of what they should consider critical infrastructure, including natural gas facilities — simply because natural gas companies failed to fill out a form or didn’t know the form existed, company executives, regulators, and experts said.

It’s the electricity customer’s responsibility to fill out the form, which is provided by electric utilities, usually online (ERCOT provides a second avenue with its own form). Retail electricity providers inform residents and businesses of their right to apply, according to a PUC rule.

At one point during February’s winter storm, more than half of the state’s natural gas supply was shut down due to power outages, frozen equipment, and weather conditions, analysts estimate. More than 9,000 megawatts of power outages were caused by power plants not getting enough gas, enough to power 1.8 million Texas homes, and accounting for at least 20% of the total outages during the week of the storm, according to ERCOT’s estimate.

As natural gas stopped flowing from the oil patch to power plants, big natural gas pipelines and production companies including Kinder Morgan, Targa Resources Corp., and Diamondback Energy Inc., kept Nye’s phone ringing off the hook during the storm, requesting that power be restored to their facilities, he would later tell state legislators at hearings the week after the storm.

“I don’t know where [power plants] are buying their gas, and I don’t know how that gas is getting to them,” Nye said during his testimony. “They’ve gotta tell me, or, whoever’s delivering that gas [does]. Take your pick.”

Woody Rickerson, vice president of grid planning and operations at ERCOT, said in an interview with The Texas Tribune that getting gas facilities back online in the middle of a power crisis further complicated a delicate situation. Each time a utility called to inform ERCOT they were going to cut power somewhere else so they could restore power to a critical natural gas fuel facility, grid operators worried that supply and demand would see-saw in the wrong direction. Any power they brought back online had to be equal to what they cut.

“I was surprised at the amount of [critical] infrastructure that hadn’t been identified,” said Rickerson, who was part of an essential ERCOT team that stayed in or near the control room the entire week. “There were phone calls every day.”

By Wednesday, Feb. 17, the natural gas supply in the state hit its lowest point during the storm, experts said. Nye told legislators during his testimony that they were so concerned about the supply of natural gas that his chief operating officer called him and said: “I’m just going to turn on the Permian and see what happens.”

“And we just turned it on,” he said.

By the end of the week, Oncor had added 168 new natural gas facilities to its “critical” list — a nearly five-fold increase from just a few days prior.

A month after the storm, lawmakers are investigating multiple failures that led to 4.9 million customers losing power, some of them for days during subfreezing temperatures in a storm that caused at least 57 deaths statewide.

“In my opinion, if we had kept the supply [of natural gas] on, we would’ve had minor disruptions,” James Cisarik, chairman of the Texas Energy Reliability Council, told legislators. “[Texas] has all the assets, we just have to make sure we evaluate every link in that chain to keep it going.”

The failures were years in the making: There is no requirement for natural gas and other companies that operate crucial parts of the grid to register as “critical.” And a trend toward electrifying key components of the state’s natural gas infrastructure in recent decades, plus the lack of a single agency to oversee all parts of the electric delivery system, created what Kenneth Medlock, a fellow in energy and resource economics at the Rice University’s Baker Institute, called a “single point of failure” — one that state regulators were blind to.

“That’s a failure of regulation,” said Medlock, who is also the senior director of the Center for Energy Studies at Rice. “That’s all it is. It’s relatively simple.”

Power cut to fuel source

A few days before Winter Storm Uri barreled into Texas, more than 100 natural gas production and transportation executives, power generation executives, regulators, and ERCOT engineers, tuned in to a conference call. The goal: Make sure the natural gas system remained functional during the storm.

The Texas Energy Reliability Council — a voluntary body with no regulatory authority — usually meets twice a year. Rickerson, the ERCOT vice president, said the primary conversation before the storm hit was about residential heating, which is the top priority for delivering natural gas during times of short supply.

Power generation is much lower on the list, and TERC advised the Texas Railroad Commission, which regulates the oil and natural gas industry, including pipelines, to move it up to No. 2.

But that move wouldn’t prevent the coming disaster. When the storm hit that weekend, the group’s participants began to report “big supply cuts” of natural gas. Production had plummeted at the wellheads — crews couldn’t go out on icy roads and the water that comes up from the ground with oil and gas during production froze and created a mess for operators if trucks couldn’t get to the wellheads to move it.

The power cuts to wellheads, processing plants, and compressors dramatically exacerbated the shortage. The daily conference calls became dire.

It quickly became clear to TERC members that some new natural gas facilities hadn’t yet filled out the form to be added to their utility’s critical infrastructure list. Some had interpreted “critical” narrowly and assumed they didn’t qualify. Still, others that were not considered critical before the storm suddenly became critical when other facilities froze.

So, in the middle of one of the worst winter storms in Texas history, Cisarik, Rickerson, and others advised companies of what their emergency response should be: Fill out the form.

“Ideally, every critical [facility] would’ve been registered before the storm,” Rickerson said. “That didn’t happen. The only way to get [utilities] aware is to fill out the form.”

During the legislative hearings after the storm, major natural gas companies said they didn’t know there was a form to ensure that their power wasn’t turned off.

“It was the first time that we had learned about a form, as well, to my knowledge,” said Grant Ruckel, vice president of government affairs for Energy Transfer, one of the largest natural gas pipeline companies in the U.S., during testimony to the Senate Committee on Business and Commerce.

The committee’s chair, Sen. Kelly Hancock, R-North Richland Hills, stopped him.

“Really? It’s not like you just came into existence — the business has been around a while,” Hancock said. “And yet, you just learned about a form from ERCOT that you needed to identify those key locations.”

State Rep. Charlie Geren, R-Fort Worth, asked industry representatives during a House hearing the week after the storm to do what he said the state has not: “Since the state hasn’t done a very good job of telling people you need to sign up as critical infrastructure, will you get the word out to your members that they need to and they need to now?” Geren asked Todd Staples, president of the Texas Oil and Gas Association, the largest oil and gas industry group in Texas.

Staples assured him he would.

“A vicious downward spiral”

When Texas deregulated its electricity market in the early 2000s, making supply and demand the primary forces for the price of power and increasing competition, wholesale power prices fell. That made it cheaper to electrify natural gas compressor stations and other equipment rather than the traditional method of using the natural gas produced in the field to run the compressor’s turbines or engines, energy experts said.

Reliance on electricity, however, made the state’s electric power system a loop rather than a chain: Electricity relied on natural gas production, and natural gas production relied on electricity.

If anything goes wrong with any part of the loop, it creates what Medlock, the Rice University expert, calls “a vicious downward spiral.” Deliveries of gas are slowed and supply dwindles. Power plants can’t generate as much electricity, making the problem worse. “If anything in that circle breaks, the whole circle breaks,” he said.

“We cannot just harden power generation if we do not harden the natural gas system,” Mauricio Gutierrez, the CEO of NRG Energy Inc., a large Houston-based power generation company, told legislators. “We have a system-wide problem.”

Some regulators and experts believe that Texas’ power outages would have been minimal, or at least shortened if the natural gas supply system had not lost power.

Christi Craddick, chair of the Railroad Commission, told lawmakers during testimony the week after the storm that outages “caused a domino effect,” adding that “any issues of frozen [natural gas] equipment could have been avoided had the production facilities not been shut down by power outages.”

Supply shortages caused U.S. natural gas prices to spike more than 700% during the storm.

But no matter the price, the system couldn’t deliver enough of it to power plants. Cisarik, the TERC chairman, explained to legislators that, particularly in major metro areas, natural gas pipelines are contractually obligated to prioritize residential customers; power plants typically don’t have similar contracts guaranteeing their fuel supply. So when demand for natural gas spiked during the frigid weather, homes got natural gas and some power plants didn’t, he said.

Still, as Medlock, the Rice University expert, put it: “There’s no getting around the fact that there just wasn’t enough gas on the system.”

Calls for a new agency

The chaos in the natural gas system during the storm has sparked calls for a new regulatory agency or giving additional powers to the Public Utility Commission, to ensure regulators can identify gaps and weak points between the natural gas industry and the electric power industry.

“Could [a single agency] make it better? Just think about everything that has happened here,” Kenneth Mercado, executive vice president of the company’s electric utility business at CenterPoint Energy, told the Senate Committee on Business and Commerce on Feb. 26. “Gas not talking to electric, electric not talking to gas.”

James Robb, the president and CEO of the North American Electric Reliability Corp., which has some authority to regulate power generators in the U.S., said during a U.S. Senate Committee on Energy and Natural Resources hearing on March 11 that he believed the regulation of natural gas supply for the purpose of electric generation, “needs to be rethought.”

“The natural gas system was not built or operated with electric reliability first in mind,” Robb told the committee. “Policy action will be needed to ensure reliable fuel supply for electric generation.”

In an interview with the Tribune, Robb said regulators don’t have enough oversight of the natural gas supply system in the U.S., given how much its role has grown in the electric power system — a result of the increasing replacement of coal-fired and nuclear power plants with natural gas, wind, and solar generation.

America’s fracking boom has led to an explosion of natural gas production — and that gas fueled 40% of all power generation in 2020, more than coal and nuclear, the next two largest sources, combined, according to the U.S. Energy Information Administration. But the industry isn’t set up to make delivering fuel for reliable electricity a priority.

“Our gas system, quite frankly, is designed for industrial [use], and space heating. It’s not designed to serve large power plants,” Robb said. “We don’t think of gas as the same criticality as we do power. That makes sense, except when you realize a power system without reliable gas supply is not that useful.”

Pat Wood, former chair of the Federal Energy Regulatory Commission who previously served on Texas’ PUC, told the Tribune that the critical “interplay” between the gas supply system and the electric power system was pointed out a decade ago in a Federal Energy Regulatory Commission report, and since then, their reliance upon one another has only grown.

He said having a single regulatory body that could oversee both gas suppliers and electric generation in Texas is “long overdue,” but added that in Texas, pushing for additional oversight of the politically powerful oil and gas industry is a “pipe dream.”

“Getting that all under one purview seems to make a lot of sense,” said Wood, who has worked in the energy industry for decades in Houston. “I know the politics are very intense, but if we were thinking of the good government thing to do, I think a lot of people would agree with me on that one.”

This story originally published by the Texas Tribune.