Full Title: Regulatory Questions Engendered by the Texas Energy Crisis of 2021
Author(s): Dr. Carl Pechman, Elliott J. Nethercutt
Publisher(s): National Regulatory Research Institute
Publication Date: March 9, 2021
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Description (excerpt):
The February extreme cold weather event in Texas resulted in significant electric outages across the Electric Reliability Council of Texas (ERCOT) system. The disruptions contributed to the loss of human life, with significant economic harms in the aftermath. Understanding the regulatory dynamics, markets, and economics that resulted in widespread power outages across the state will be instrumental for determining whether the price of power that resulted from the crisis warrants modification. Further, understanding the causes of the problem will facilitate redesigning market rules, regulations, and other protocols. It is important to note that the market design in Texas has evolved over many years and that the solutions to the issues raised by the crisis will require the cooperation of many stakeholders.
The purpose of this paper is to pose regulatory questions that will facilitate the understanding of the underlying regulatory actions and market behaviors that affected the likelihood of this catastrophic event. Although a thorough investigation and root cause analysis will be required to formulate complete answers, NRRI offers these perspectives and discussion about the role of the current regulatory regime and market design to further promote resource adequacy, resilience, and operating security for a system that has experienced an increasing number of extreme weather events during the past two decades. In presenting these questions, we explain the underlying rationale behind them. The questions elucidate a number of themes: 1) inherent market design flaws, 2) insufficient regulatory oversight, 3) market manipulation, and 4) the distinction between reliability and resilience in designing and managing the electric market.