Texas state legislators on Thursday started digging into the causes of deadly power blackouts that left millions shivering in the dark as frigid temperatures caught its grid operator and utilities ill-prepared for skyrocketing power demand.
Hearings are highlighting shortcomings by grid planners, electric utility and natural gas transmission operators that led to billions of dollars in damages and dozens of deaths. Consumer advocates have called for more stringent regulation of utilities and a review of retail marketing plans.
"The entire energy sector failed Texas," said NRG Energy Inc Chief Executive Mauricio Gutierrez, who testified at the hearing.
The biggest failure was the state's natural gas system, said Curtis Morgan, CEO of Vistra Corp , adding that without better ties between gas producers, pipelines and power plants, the state could face future cold weather outages.
"We just couldn't get the gas at the pressures we needed," said Morgan, who instructed employees to buy gas at any price but could not acquire enough to run plants.
Up to 48 percent of the state's power generation was offline at times last week and at least 32 people died, including an 11-year-old boy of hypothermia in an unheated mobile home.
"We owe it to them and every Texan to make sure this never happens again," said State Representative Ana Hernandez, noting that hospitals still have supply chain problems and burst pipes, and some people cannot access food and water. "The impact of this disaster was not only financial."
Utilities were ordered to cut power to prevent a larger catastrophe, Bill Magness, CEO of the Electric Reliability Council of Texas (ERCOT), the state's grid operator, said on Wednesday.
ERCOT, whose board is appointed by the state Public Utility Commission, faces lawsuits by customers and a generator claiming damages from misrepresentation and lack of planning. Six of ERCOT's 15 directors resigned this week and a nominee withdrew before taking a seat.
ERCOT did not warn residents that the state's power generation would not keep up with demand, even under perfect conditions, despite warnings the week prior from utilities, Morgan said.
"We did not give people a fighting chance," Morgan said.
Governor Greg Abbott on Wednesday said public anger was justified and pledged proposals to increase power supplies and to protect those residents hit with enormous power bills. He blamed ERCOT, saying it should have acted faster to prevent generators from falling offline.
Retail defaults ahead
Of the about 100 retail electric providers in Texas, a quarter are at risk of default on multimillion-dollar service charges levied by ERCOT. Some may sell customers to larger firms to cover costs, stifling retail competition, said Mark Foster, an attorney and former special counsel to the state's Public Utility Commission.
"They call it the blood week," Foster said. One of his clients, electricity marketer Young Energy LLC, faces a $19 million bill for services that cost $37,000 the prior month, he said. "There will be a significant decrease in competition for the consumer," he said.
Electricity failures from storms and wildfires are raising costs for insurance providers, compounding residential and business damages, said Andrew Siffert, a vice president at reinsurance broker BMS Group.
By one count, the winter storm that hit Texas spawned $18 billion in insured losses across 20 U.S. states affected. On average, winter storms cause $3 billion in insured losses.
Siffert said the storm, wildfires and hurricanes have insurers pushing for more resilient networks to stop their losses from ballooning.
"Time and time again we see during a disaster the long-term lack of electricity compounds the overall insured loss. The insurance industry needs a seat at the table," he said.