109. Former FERC Commissioner Says ‘Market Design Problem’ a Cause of 2021 Texas Power Crisis

In February 2021, a severe cold weather event, known as Winter Storm Uri, caused numerous power outages, derates, or failures to start at electric generating plants scattered across Texas and the south-central U.S. The Electric Reliability Council of Texas (ERCOT), which manages the power supply for about 90% of the load in Texas, ordered a total of 20,000 MW of rolling blackouts in an effort to prevent grid collapse. According to the Federal Energy Regulatory Commission (FERC), this was “the largest manually controlled load shedding event in U.S. history.” More than 4.5 million people in Texas lost power—some for as long as four days. The National Oceanic and Atmospheric Administration’s National Centers for Environmental Information reported that the event resulted in 226 deaths nationwide and cost an estimated $24 billion. There has been a lot of finger pointing surrounding the blackouts that occurred. Several studies have been done into the causes, including one spearheaded by FERC, the North American Electric Reliability Corp. (NERC), and NERC’s regional entities. The key finding from the FERC/NERC report was that a critical need exists “for stronger mandatory electric reliability standards, particularly with respect to generator cold weather-critical components and systems.” The study found that a combination of freezing issues (44.2%) and fuel issues (31.4%) caused 75.6% of the unplanned generating unit outages, derates, and failures to start. But Bernard McNamee, a former FERC commissioner, and current partner with the law firm McGuireWoods and a senior advisor at McGuireWoods Consulting, suggested the study missed the real cause of the problem. Speaking as a guest on The POWER Podcast, McNamee said, “I think the reality is, is that there was a market design problem in Texas, and that was that, as you had more subsidized resources driving down the overall cost of power, you’re not providing enough financial incentive for other dispatchable resources to harden their systems—winterize their systems—to be av