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Thoughts on Texas Electricity Market Issues

The recent difficulties experienced by electric consumers in Texas during the extreme cold weather have prompted considerable discussion regarding the market structure for Texas electric utilities. Most customers in Texas are provided service in a competitive market for energy with a separate charge for delivery services. Energy supply is most commonly supplied from competitive suppliers in the ERCOT (Electric Reliability Council of Texas) grid. Delivery services are then commonly supplied by individual electric distribution companies under tariffs approved by the Texas Public Utility Commission.

Bitterly cold conditions existed throughout Texas for the period from February 10 through February 19. During this period, numerous and significant electric service outages occurred, some of them for several days’ duration. Notable commentary has emerged in the news media regarding the suspected causes for the outages, most of them identifying ERCOT and the competitive Texas electricity market as the probable causes for the outages. In order to better understand this issue, a bit of background information is required.


Electricity outages can be broadly classified as, (a) outages related to power supply insufficiency, and (b) outages related to delivery disruptions.

Outages related to Power Supply Insufficiency are typically the result of one or more of the following conditions:

  1. Unexpectedly high electric loads, or

  2. Loss of significant generating capacity, or

  3. Unavailability of sufficient fuel supplies.

During the period from February 10 -19, ERCOT experienced all of the conditions cited above. It should be noted that the Southwest Power Pool (SPP), which coordinates power flow for a small portion of Texas and a 16-state area north of Texas, experienced similar weather conditions to those experienced by ERCOT but resorted to far less intrusive load shedding than ERCOT. This occurred in part because SPP is a regulated entity which is obligated to conform to guidelines developed by the North American Electric Reliability Corporation and is interconnected with other adjacent Electric Reliability Areas for mutual support.


However, the difference in the severity of outages between ERCOT and SPP were related to power supply sufficiency, having nothing to do with the retail market structure for sale of electricity.


Winter outages related to electric Delivery Disruptions are typically the consequence of wind and ice loading on overhead distribution structures. Distribution systems in densely populated or high load areas tend to be built more strongly than those in sparsely populated or low load areas.


Each electric distribution utility tends to have its own design standards for overhead and underground distribution systems. While all utilities serving the public must conform to the National Electric Safety Code and utility regulatory bodies, sometimes they impose or at least recognize distribution reliability measures as part of their regulatory oversight. There is no systematic difference in the application of such standards between vertically integrated electric utilities selling electricity under regulated rates and regulated distribution companies delivering electricity under regulated rates.


The conclusion to be drawn from all of this is that the difference in impacts from electric outages due to the severe weather in Texas compared to Oklahoma can be traced to differences between ERCOT and SPP, not to any differences in the retail market structures.

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Alliance for Electrical Restructuring in Oklahoma (AERO), 501(c)4, is a not-for-profit organization exploring the consumer advantages of electrical restructuring through true market competition and choice.
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