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Texas’ recent large-scale disaster at the hands of Winter Storm Uri stirred up a good deal of curiosity about the state’s future. Will Texas ever rejoin the national grid?

Today, the issue of tying into the national grid is a divisive subject. For some, it runs contrary to the very essence of Texas’ independent spirit and means more federal regulations, less competitive pricing, and a sacrifice of values. To proponents of the idea, it would mean greater reliability in the event of future catastrophic weather events, more advancements in future national environmental initiatives, and other advantages.

For many, the idea of at least being able to draw on outside power more reliably — the state has just five bridges to external power sources, three of which are to Mexico — would mean that future disasters like the one that took place in February 2021 could be avoided. The event led to increased skepticism around the Electric Reliability Council of Texas (ERCOT), which directly oversees nearly all of the state’s electric load.

It wasn’t just the outages that raised the specter of unification. During the crisis, Texas electric companies’ energy rates skyrocketed to preposterous levels, with some customers receiving electric bills for tens of thousands of dollars for a week’s worth of electricity. It turns out that Texas electricity rates were vulnerable to such a disturbance thanks to the presence of an electricity providers who passed wholesale electricity rates directly on to customers, which despite providing cheap electricity during times of low demand, could not prevent astronomical price hikes during the winter storm when demand soared and supply wilted. This provider is no longer in business in the Texas market.

Proponents argue that the future of the U.S. power grid is one of complete interconnection, in which an end-to-end grid powered largely by green energy provides power wherever it is needed. By remaining isolated, these proponents argue that Texas will continue to impede such progress.

To those opposed to joining the national grid, it comes down to money and independence. Texas electricity providers operate on a grid that does not, at least in the eyes of the law, cross state borders. That makes it exempt from the Federal Power Act’s regulations, which exercises oversight over energy that crosses state lines. This could mean higher electricity rates and greater regulatory pressure on Texas electricity providers.

Opponents also argue that there isn’t compelling evidence that being connected to the larger grid could have prevented the blackouts, as other areas were experiencing the same problem.

However, several days with no electricity, heat, or in many cases, potable water has left a deep imprint on many Texans. With the coming $2 trillion infrastructure bill, it will be interesting to see what position Texas takes for the future.

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It took nearly five hours of debate, but on Tuesday, March 30, the Texas Senate finally signed off on a slate of legislation known as Senate Bill 3. Drawn up in response to the devastating power outages that left much of the state freezing during the worst winter storm in the state’s recent memory, this sweeping overhaul of the electric grid received unanimous support in the Texas Senate before advancing to the House.

According to top lawmakers in the Senate, SB 3 fixes many of the problems exposed by the storm. Among its mandates is that transmission lines, power generators, pipelines, and natural gas facilities receive weatherization upgrades to handle extreme weather. Many were unable to operate when temperatures reached the single digits.

What Caused This to Happen?

Predictably, the period in which this bill was formed has been rife with finger-pointing. First came a wave of blame against renewables, which many decried as responsible for the calamity. The two culprits were the intensity of the cold — which affected all fuel types equally — and the fact that Texas has its own isolated power grid and cannot receive help from other states during outages.

Those in the natural gas industry have pointed out that the power outages were responsible for the natural gas shortage, which caused more power outages to occur. They argue that weatherization would not correct the root of the issue — a point the Senate Bill addresses by delegating the decision around natural gas to the Texas Railroad Commission (which oversees the oil and natural gas industry in Texas).

What Does the Bill Contain?

The bill lacks any detail on how the required upgrades will be funded. Because of the high expenses involved in retrofitting power plants with weatherization equipment, it remains to be seen how energy providers will incorporate the various types of upgrades into their business models.

One area of improvement is the banning of all indexed retail electric plans. Customers with such plans purchased electricity from Texas electric companies at wholesale prices, a strategy that delivered cheap electricity during normal times but that, during the cold spell, led to astronomical electricity rates. Some bills soared as high as $15,000 or more over a week. One of these electricity providers, Griddy, declared bankruptcy in mid-March.

Another portion of SB 3 mandates the creation of a statewide emergency alert system that would keep Texans abreast of future energy blackouts. It also calls for the formation of the Texas Energy Reliability Council (TERC) to coordinate electric companies, regulators, and natural gas facilities and providers to make sure gas distribution is reliable.

Lawmakers used the opportunity to make operations more expensive for renewable energy providers, which Senator Charles Schwertner of Georgetown called “unreliable” in a recent statement. While he claims that too many government subsidies for renewables have created an unfair market advantage for those energy sources, it should be noted that the government subsidizes fossil fuels to the tune of around $20 billion per year.

Will SB 3 Protect Cheap Texas Electricity Rates?

In summary, SB 3 addresses many of the core problems behind Winter Storm Uri’s devastating effects. Though many of the political maneuverings within it are thinly veiled, such is par for the course in any new legislation. It will be fascinating to follow the rollout of this bill and to see how energy companies react.

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