Texas’ Electric Grid: The Market and Federalism

In the wake of the deadly winter storm that hammered the state mid-February, Texas suffered severe power outages. Rolling blackouts led to millions of people losing power for several days, due to a combination of frozen equipment, intentional shutdowns, and surging demand that overwhelmed emergency backup generators. In spite of only having power for at most a few hours over several days, many Texans recently received power bills for thousands of dollars. Why? 

Texas has had a deregulated energy market since the 90s. The state decided to maintain its own energy grid, disconnected from other states, so that Congress couldn’t regulate it through the Interstate Commerce Clause of the constitution. Texas further chose not to regulate at the state level, essentially allowing the free market to regulate itself, which eventually led to the creation of ERCOT (the Electricity Reliability Council of Texas) a nonprofit which oversees about 90% of Texas’ power market. ERCOT has little accountability or authority to enforce rules. In an uncontrolled market when demand is high, and supply low, prices skyrocket, leading to the astronomical bills reported by Texans recently.

What can the State of Texas do?

Texas has a lot of options here. There are several ways to regulate the power market, as used by other states. Already Texas’ Public Utility Commission (the state commission which oversees ERCOT) has temporarily forbidden disconnecting customers who can’t pay their bills from the grid. Governor Greg Abbott has called for winterizing power plants at the least, though he has to tread carefully if he wants to keep the campaign support Texas’ oil and gas industries have given him in the past. Interestingly, although limited-government, pro-free-market-Republicans have long held a comfortable majority in both the Texas state House and Senate, there is bipartisan support for new regulations, which means it is possible there are enough votes to pass legislation. The key question is whether there is enough time to investigate ERCOT, draft legislation, and pass it during the current legislative session, which ends in May and won’t meet again until 2023.

Can federal (national) help be expected?

Yes. President Biden and several congressional representatives, including Alexandria Ocasio-Cortez, D-NY, have accessed federal resources and raised millions of dollars, respectively. Federal monetary aid can be used to cover power bills. In addition, FEMA (the Federal Emergency Management Agency) has been sending physical resources, such as generators for hospitals, blankets, and meals, and setting up programs to ensure the basic needs of Texans are met. The President approved public assistance in all Texas counties, as well as individual assistance in 77 counties, about 30% of counties. 

However, the federal government can’t regulate the power industry unless Texas links its energy grid to that of other states, because Congress can’t legislate markets within a single state–it isn’t within their powers as defined by the constitution, and powers not explicitly given to Congress are reserved for the states and/or the people. This is an important aspect of federalism, or the idea that government is two-tiered: on one level are the states operating relatively independently of each other, and on the next level a national government links them all together and provides services states can’t provide on their own, like national defense.

In most versions of federalism, the states and the national government are more or less equal, though in recent decades in the US the national government has become somewhat more powerful than the states. Despite this, the states still have plenty of independence and room to push back against the federal government if they deem it necessary. For example, Texas and a handful of other states recently lifted their mask mandates, against the recommendations of the CDC, citing state independence, and the federal government can’t force their hand–it can only offer advice.

Need clarification? Where do you think this situation will wind up? Share in the comments!


NY Times on ERCOT

http://www.ercot.com/about and http://www.ercot.com/mktrules 







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