The Electric Reliability Council of Texas, or ERCOT, runs Texas’ electric grid. Unlike other states, which connect to a larger, federally run grid, Texas’ grid is independent. Its role, according to Ed Hirs, energy fellow in the department of economics at the University of Houston, is to “essentially be the air traffic controller” for the state’s power.
The roots of the system go back the 1930s, when new the federal government expanded electricity regulations. Hirs says that the specter of those new regulations spurred Texas officials to develop an independent grid.
“Texas made a deliberate decision basically to keep the grid internal,” Hirs told the Texas Standard.
The results of those decisions eventually became ERCOT, which was created in 1970. The organization itself is made up of members of the electricity industry, including power generators, utilities and consumers. Its board of directors includes appointees by the governor, the Public Utility Commission and industry groups.
As the “air traffic controller,” however, ERCOT only has so much control over independent power generators across the state. Under normal circumstances, these generators do not have to sell their electricity for ERCOT to use on the state’s main grid (although the state’s Public Utility Commission required them to do so on Monday because of the outages). Generators may have reined in production because high demand and weather-related outages distorted the price that ERCOT offered for power.
Hirs says that state decision-makers have long known that the system is flawed.
“And can you tell it’s flawed? Well, the average wholesale price received by generators is less than their cost of providing the service. They’re not able to get a return on capital,” Hirs said.
Hirs says it’s possible that these prices resulted in power generators deciding not to sell energy to ERCOT during the winter storm, which would have contributed to the number of people without power.