ERCOT Isn’t the Only Thing That Needs Fixing

Texas’ Grid Problems Exposed Institutional Challenges at the Public Utility Commission of Texas

The unprecedented power outages last month in the central United States, particularly in Texas, underscore the urgent need for grid resilience in the face of growing climate-related natural disasters. Disproportionate impacts felt by low-income and frontline communities highlight the need for sustained attention to more equitable grid services and access to clean and resilient energy options. Policymakers should use this experience to drive modernization of state regulatory institutions that are responsible for creating and enforcing the rules of the road for electric utilities, independent generators, and regional operators—in Texas and beyond.

While much attention has rightfully been focused on ERCOT’s role in the outages, the Texas grid operator isn’t the only decision-making body with responsibility. For example, ERCOT oversight and regulation of the broader Texas power sector fall under the Public Utility Commission of Texas’ (PUCT) purview. Separately, natural gas supply issues that contributed to the crisis fall under the Texas Railroad Commission’s jurisdiction.

Long-standing challenges at the PUCT in particular illustrate the importance of modernizing state regulatory agencies. As events in February demonstrate, PUCT priorities and regulations have not kept pace with the needs of a more resilient, distributed, and low-carbon grid. In this vein, the Texas legislature bears some responsibility too. In recent budget requests and its latest strategic plan, the PUCT highlighted an inadequate number of technical staff and budget constraints as key challenges to successfully achieving its regulatory and oversight objectives.

This isn’t just a Texas issue. At nearly every state public utility commission (PUC), outdated organizational mandates, staffing capacity constraints, gaps in in-house technical expertise, and a culture of risk-aversion pose barriers to innovation and informed regulatory decisions. These issues exacerbate systemic challenges like preparing the grid for climate-change-induced natural disasters or incorporating desired outcomes like equity into the decision-making process.

While no one-size-fits-all solution exists, RMI’s experience in grid modernization and regulatory reform suggests attention to several key areas can help launch the PUCT into a more resilient, equitable, and clean energy future—and in doing so provide benefits for all Texans.

Align the PUCT’s Core Mission with Resiliency and Equity

Like PUCs in other states, the PUCT must increasingly address a broader range of outcomes than it has in the past. It remains accountable to traditional regulatory objectives like safety, reliability, and affordability, but must also account for resilience, equity, and climate in its deliberations. Today, however, these outcomes are not well-integrated into the Commission’s core mission and enabling statutes. While the Texas Public Utility Regulatory Act (PURA) refers to “equitable” rates, for example, equitable service provision is not referenced in PURA, nor does it feature among the PUCT’s goals in its latest strategic plan.

The PUCT must give greater weight to these outcomes in its decisions. This requires solving for multiple objectives, with consideration for short- and longer-term priorities. Policymakers can encourage this shift by ensuring that resilience, equity, and climate impacts are incorporated throughout the Commission’s rules and activities.

Similarly, policymakers should eliminate any doubt about the Commission’s authority to address these outcomes. The Commission’s ability to mandate winter weatherization for infrastructure, for example, needs clarification. Both ERCOT and the PUCT have said they lack the authority to mandate winter weatherization. Eliminating uncertainty around the PUCT’s authority may also require clarifying the Texas Railroad Commission’s authorities and purpose, given interdependencies between power and gas systems in the state.

A Sunset review—the periodic assessment of state agency performance and continued need—is the traditional process for addressing such issues in Texas. But it has been too long since the last review (2013) and the next review is too far in the future (2024).  In the same way that PUCs order management reviews for utilities struggling to address the demands of a rapidly evolving utility environment, an independent management audit for the PUCT and ERCOT will likely reveal opportunities for improvement and staffing needs.

Other approaches may be available as well. In Oregon, for example, Governor Kate Brown’s Executive Order 20-04 directed the PUC in that state to develop a series of work plans to “identify and manage” activities it will undertake to help reduce greenhouse gas emissions over a two-year period. Importantly, the work plans specify which staff members will be responsible for managing and supporting each workstream and include a schedule of anticipated activities. This effort could provide the blueprint for a Texas-specific initiative focused on resiliency, equity, and climate.

Increase PUCT Resources to Meet Industry Needs

While tight budgets are a challenge for most PUCs, the PUCT’s additional responsibilities relative to most states (namely, oversight of ERCOT) make chronic underfunding a particularly acute issue. To put the situation in perspective, state PUCs spend approximately $30 million per year on average. The PUCT’s budget, by contrast, hovers around the national median, at $16 million. On a per megawatt-hour (MWh) basis, the PUCT’s budget ($0.04/MWh consumed in the state) falls drastically below both the national average (about $0.50/MWh) and the national median (about $0.35/MWh). In recent reports to the legislature, the PUCT has cited these challenges as contributing to delayed rate case decisions and complaint resolution, reduced customer outreach, insufficient staff development, and other problems.

For Texas, an ounce of prevention may equal a pound of cure. Several weeks ago, the PUCT asked for $1.7 million in additional funds—in part to hire additional staff to help improve ERCOT oversight. If approved, the PUCT’s total budget would still amount to just around 0.1% of the $16 billion in ERCOT overcharges to power companies resulting from the recent freeze.

A relatively modest budget increase may be particularly effective if considered alongside internal reorganization consistent with short- and long-term priorities. The PUCT could revive its Oversight and Enforcement Division and its reliability monitor, for example, both of which were discontinued in 2020. Texas could also build on the experiences of states like Colorado and Michigan, which have dedicated units in their PUCs focused on analyzing emerging issues, developing Commission strategy, and/or implementing new energy legislation. Similarly, the California PUC has established a wildfire preparedness division that requires utility wildfire mitigation plans and conducts regular staff investigations into utility responses to wildfires, shutoffs, and impacts on the grid.

Improve Interagency Coordination

The Texas freeze impacted almost every aspect of Texans’ lives, including millions of peoples’ access to power, water, and heat. It also highlighted the interdependencies of these services and the duties of the agencies that regulate them. The Texas Railroad Commission regulates the oil and gas industry; natural gas supply issues  were a key factor in outages that left millions without electricity several days or longer during sub-freezing temperatures. The Texas Commission on Environmental Quality (TCEQ) regulates water quality issues; water quality and pressure issues due in part to power outages resulted in city boil water notices.

Governor Greg Abbott is uniquely positioned to convene discussions between ERCOT, the PUCT, the Texas Railroad Commission, the TCEQ, state energy offices, and the Attorney General’s office around coordination and planning for future extreme weather scenarios. Sponsoring greater cooperation between agencies represents a no-regrets opportunity to make government in Texas work more effectively.

In addition to encouraging interagency coordination, Governor Abbott can encourage the PUCT to engage with mayors and local agencies and incorporate their energy needs into regulatory activities. For example, Houston has committed to purchasing 100 percent renewable energy from NRG Energy. Other cities and communities may follow suit. Factoring these goals into its decision-making will help the PUCT better serve the public interest.

Modern Grids Require Modern Regulation

By including attention to PUCT modernization in any forthcoming energy reforms, Texas policymakers can help maintain safe and livable conditions for all Texans.

Luckily, Texas doesn’t need to start from scratch; it should develop a uniquely Texas approach building upon the experiences of states like Colorado and Oregon. Facing their own challenges, these states have recently launched efforts to ensure regulatory decision-making remains informed, transparent, and consistent with state policy and regulatory objectives. Texas can also build upon experiences in states that have sought to build back stronger after natural disasters, like Connecticut did in the wake of Superstorm Sandy.

Experiences in these states and others suggest that policymakers should take immediate steps to update the PUCT’s core mission, address budget and staff deficiencies, and improve coordination and cooperation with other interrelated agencies. Doing so will help Texas move toward a resilient, clean, and equitable energy future.