Will Greg Abbott Pay a Political Price for Texas’s Faulty Power Grid?
Texas is the energy capital of the world, and the governor can’t even keep the lights on. That is a criticism regularly leveled against Greg Abbott—often by his Democratic challenger, Beto O’Rourke. The former congressman from El Paso, who came within 3 percentage points of unseating Sen. Ted Cruz in 2018 and then ran a quixotic campaign for president in 2020, is now hoping to prevent Abbott from winning a third term. While some polls from the summer have O’Rourke trailing Abbott by 5 points, the RealClearPolitics average puts the gap at around 7 points.
The snarky barb about Abbott and energy is a reference to Winter Storm Uri, the history-making Arctic blast that, for four days in February 2021, held Texas in its deadly grip. Unable to meet demand, the state’s power grid failed, leaving 11 million people without electricity. The result was catastrophic. The estimated death toll ranges from 246 (Texas Department of State Health Services) to over 750 (Buzzfeed). Damage to homes and business totaled $100 billion. And when the power was on, electric rates charged by the Electric Reliability Council of Texas (ERCOT) soared to such astronomical levels that, according to Robert Bryce writing in Forbes, “Texas ratepayers are on the hook for at least $10.1 billion in debt . . . and they will be paying off much of that debt for the next 30 years.” That’s because the sky-high bills forced some municipalities to offer 30-year bonds to pay them off.
Many industry insiders believe the grid was vulnerable because the electricity system in Texas is deregulated, a result of Enron founder Ken Lay convincing Governor George W. Bush in 1999 to embrace the free market and end state-imposed regulation. Texas has long maintained independence from federal regulation by refusing to connect to nearby state or regional grids. So, when the grid collapsed, primarily due to natural gas pipelines freezing up because they were not winterized—which would not have been the case had the grid been regulated—Texas could not rely on other grids for help. As The Texas Tribune put it a decade ago, “Texas has its own grid to avoid dealing with the feds”—and it paid the price with Uri.
After such a devastating storm, it would seem logical for Texas to impose sweeping reforms to ensure a similar tragedy was avoided in the future. Instead, in March 2021, the Texas legislature passed two bills: Senate Bill 2, which gave the governor added control over ERCOT, and Senate Bill 3, which, as Nitish Pahwa notes in Slate, included “a proposed overhaul of emergency alert systems, a requirement for state regulators to review the availability of energy reserves, and orders for power generators as well as transmission lines to bolster their weather resiliency.” Abbott, who faced fierce criticism for his handling of the storm, declared victory. The bills “fixed all of the flaws” of the grid, he said; “everything that needed to be done was done to fix the power grid in Texas.”
One thing the bills did not do was to require the natural gas pipelines be winterized, the main reason the grid failed. Oil and gas industry leaders did not want to incur the debt of winterizing the pipelines, so the legislature, with Abbott’s blessing, did not require it. According to Disaster by Design, a soon-to-be-released short film about Uri, Kelcy Warren, chairman of Dallas-based Energy Transfer Partners, contributed $1 million to Abbott at the end of the legislative session, four times more than any previous donation he made. Even though Energy Transfer enjoyed a $2.6 billion windfall from Uri, the company opposed moves to winterize Texas’s natural gas pipelines.
As the anniversary of Uri approached this past February, Abbott said the Texas electric grid “is the most reliable and resilient it’s ever been.” Critics disagree. “He is stating that the ERCOT grid has never been stronger,” says Ed Hirs, University of Houston Energy Fellow, “but given that it has been the worst and weakest in the nation, that is not saying much. Abbott complains that Biden policies in favor of renewables have weakened the grid. But the voters are smarter than that. Other grids have dealt with new generation resources without problems. The legislature and Governor Abbott know they did not address the critical failures identified following the 2021 winter grid failure.”
Abbott’s coziness with the oil and gas industry has opened him to criticism. “Governor Abbott has resisted all significant improvements on the grid,” says George Shipley, a longtime Democratic strategist in Texas. “What he has done is take millions of dollars from oil and gas. He is bought and paid for by the oil and gas industry.”
With some success, O’Rourke has turned the grid into a wedge issue in the campaign, which is not surprising since a University of Texas at Tyler survey from last month found that only 15 percent of Texans have confidence in the current grid. Hence tweets like this from O’Rourke:
We can’t rely on the grid when it’s hot.
We can’t rely on the grid when it’s cold.
We can’t rely on Greg Abbott. It’s time to vote him out and fix the grid.
— Beto O'Rourke (@BetoORourke) July 11, 2022
Mike Collier, O’Rourke’s running mate for lieutenant governor, has adopted as his campaign slogan “Fix the damn grid!”
As O’Rourke navigates the campaign trail, which has seen him crisscrossing the state as he hits rural towns often overlooked by Democrats who resist politicking in traditionally Republican strongholds, he calls for the grid to be regulated. He also argues that Texas should develop more renewable energy sources, like wind and solar, and proposes that the state connect to one or more nearby state or regional grids. Still, Hirs believes “O’Rourke has not totally grasped the situation either [because], unless the ERCOT grid is strengthened on its own, there would be no benefit to neighboring grids to connect with ERCOT.”
More accurate is O’Rourke’s argument that it’s unfair for Texans to pay for the inflated prices charged during Uri. “For those electricity consumers who thought they had fixed-rate contracts,” Hirs argues, “this is an abrogation of those contracts and a big-government-ordered bailout of Abbott’s biggest contributors.”
Texas is by no means the only state where deregulation has created problems. In 1998, California deregulated its electricity system, and it was not long before a scarcity of power, at first sometimes a result of market manipulation by Enron, caused major cities to suffer blackouts, which only became worse over the coming years. The energy crisis so weakened Governor Gray Davis that he survived a re-election bid in 2002 only to lose in a recall election ten months later to Arnold Schwarzenegger. In recent years, Californians have seen their energy costs rise as the electricity system remains unreliable. Connected to other grids, California often relied on energy supplied by nearby states, especially Oregon, until climate change increased demand on the entire West Coast, meaning California can no longer rely on power other than what it generates itself.
Meaningful increases in the cost of electricity have plagued other deregulated states besides Texas and California. Rate hikes in states like New York and Illinois are likely the main reason why, as Bloomberg’s Will Wade reported last month, one in six Americans is currently behind on his energy bill.
Unreliability combined with cost increases produce a toxic mix in the country’s deregulated electricity markets. “The storyline emanating today from these ‘competitive’ markets,” Brien Sheahan wrote in the energy industry website Utility Dive, “is policy failure, catastrophic system failures, blackouts, brownouts, and higher prices (more than 4,000% in [Illinois’s] case).”
This has led some industry analysts to advocate a national response to the problem. The Federal Energy Regulatory Commission (FERC), the federal agency charged with overseeing interstate commerce, is inadequate in its mission. “FERC rules aren’t working, and they are not workable,” one former public utility regulator tells me. “The grid has become so complex it is ungovernable as a marketplace.”
Meanwhile, Texas has endured a summer defined by severe heat waves. In July, as a “heat dome” hovered over the state for four days, a dozen municipalities sustained record temperatures with some reaching 112 degrees. To meet the extraordinary demands for power, ERCOT resorted to offering to pay business and industrial customers to cut their electricity use. Reuters reports that such incentives given by an agency whose commissioners are appointed by Abbott, a sort of corporate pay-off scheme, “has added more than $1 billion to power fees” paid by ordinary customers.
But Abbott had no choice. Without power cuts, the grid would likely have failed, plunging Texas into another statewide crisis. Even so, there were some localized outages. No political analyst can say for sure what would happen in the governor’s race in November if there were a grid failure before then, but it would probably be unlikely to help the incumbent who keeps insisting that all the problems are fixed.