Why worry about the grid? Natural gas isn’t fixed yet and last year’s fallout will hit consumers

Winter storm warnings may never be routine again. Not in Texas, not after last year’s single-digit temperatures froze power generators and natural gas supplies, forcing much of the state to go dark.

The February 2021 storm left 4.5 million Texas customers without power, many for days, and killed at least 246 in the state.

When last week’s forecast warned of falling temperatures and icy conditions, residents had reason to be worried: The Texas grid remains vulnerable despite significant progress getting power plants ready for winter.

The biggest piece of unfinished business is in the natural gas system, which fuels roughly half the generation on ERCOT. While the industry has been prepping for cold weather, the law doesn’t require gas wells and related equipment to be hardened, at least not yet.

At the same time, Dallas-Fort Worth customers have reason to worry about electric bills. They’re paying more for electricity, and average rates in D-FW have surpassed a U.S. city benchmark. Some price hikes from last year’s disaster are still to come.

A stable gas supply is crucial to strengthening the power grid. During last year’s storm, all types of generation failed, and gas-powered plants lost 13,000 megawatts of capacity over one day, enough to power about 2.6 million homes.

Many gas plants failed because equipment froze and broke. Others, such as the 225 MW facility operated by Denton Municipal Electric, failed because it didn’t have sufficient gas pressure for 24 hours.

“After we got gas pressure again, it took us another 24 hours before we could get back up and running,” said General Manager Tony Puente.

Low natural gas supply was the second-greatest cause of power outages during last year’s storm, according to a November report by the Federal Energy Regulatory Commission, known as FERC.

Gas production in Texas declined by 70%, the report said, and outages at plants “were inextricably linked” to natural gas supply and delivery.

“We could fix all of the problems on the power plant side, but if the oil patch is not fixed, we’ll still have massive problems on our system,” said Doug Lewin, an Austin consultant who works on energy and climate issues.

The oil and gas industry spends hundreds of millions of dollars annually to weatherize facilities and has adopted “extensive protocols” for production, storage, distribution and transportation, said Todd Staples, president of the Texas Oil and Gas Association. During last week’s storm (Feb. 3-4), production fell less than 2%, he said.

“I am confident that necessary improvements and enhancements have been made to the system,” Staples told reporters in a conference call.

While low natural gas supply accounted for 27% of outages during last year’s storm, frozen gas wells were not the only factor. FERC also cited problems with gas pipeline pressure and commodity and transportation contracts, and other issues.

Before the storm, the vast majority of gas generators did not have firm contracts to buy and transport gas. Generators could boost reliability by spending more on firm contracts and gas storage, rather than relying on the spot market, Staples said.

One improvement is already paying off: protecting gas operators from losing electricity if ERCOT sheds load.

During last winter’s storm, nearly a quarter of the decline in natural gas production stemmed from operators losing power when ERCOT was trying to keep the grid from collapsing. Few locations had requested to be designated as critical infrastructure.

Before the storm, just 35 gas premises were classified as critical in the area served by Oncor Electric Delivery Co., the state’s largest transmission company. A few weeks ago, Oncor had 1,816 gas premises designated as critical.

“We saw again that keeping power on proves to be the best winterization tool,” Staples said.

Regulators are mapping the state’s electricity supply chain, and critical gas locations will be required to weatherize. They’ll be subject to inspections and independent assessments, and the process could be in place by next winter.

Critics are skeptical about the Texas Railroad Commission enforcing the rules with appropriate vigor. They also worry about costs to consumers, both from last year’s storm and improvements to reliability.

Electricity prices in Texas are generally lower than the national average. But the consumer price index for electricity showed D-FW topping the U.S. city average in December, according to the U.S. Bureau of Labor Statistics.

Natural gas prices have increased, and they drive rates in Texas’ competitive electric market. Companies also must pay off debt from last year’s storm, when they had to buy power and gas at sky-high prices.

The gas industry reaped an $11 billion windfall from the storm, according to Bloomberg News. The total included gas for power generation and heating and cooking in homes.

Dallas-based Atmos Energy borrowed $2.2 billion last March to cover the costs of natural gas during the storm. It’s using a state financing tool, called securitization, to spread out losses and blunt the impact on households.

In November, Atmos estimated that residential customers would pay an extra $3.50 to $5.50 a month over 10 to 15 years. That’s after its average monthly bill jumped to $58 last year, up $10.

Securitization may be good for Atmos and others, but it’s no free lunch, said Alison Silverstein, an energy consultant who formerly worked with FERC and the Public Utility Commission.

“All of those costs are going to land in the electric and gas bills of you and me,” she said. “And there’s 20% of Texans who cannot afford even a $5 increase.”

Related articles about Texas’ near-failure of the grid

What’s different about the Texas grid now? Regulators are on the beat, enforcing new laws

Texas power plants are ready for the cold as long as the gas keeps flowing

How Vistra, Atmos Energy and Energy Transfer are moving forward from Texas’ epic winter storm

Sticker shock: Electricity prices jump 17% in Dallas-Fort Worth, with more hikes likely