FERC is planning a national power grid that includes Texas, they just aren't admitting it

FERC plans a nationalized grid to spread the pain as it enacts rules that force early retirement of coal and natural gas plants which will lead to power shortages.

The Federal Energy Regulatory Commission, FERC, has long yearned to get its regulatory hands on the Texas electricity grid. Early Texans did not trust the federal government, so when President Franklin D. Roosevelt signed the Federal Power Act in 1930, which charged the Federal Power Commission with regulating interstate electricity sales, electric providers in Texas made an informal agreement not to send power across state lines. Texas has continued being an independent power grid, avoiding regulatory oversight by the FERC.

FERC started developing the regulatory pieces of a national integrated grid framework in 1996 with Order No. 888, followed by Order No. 890 in 1997, and then Order 1000 in 2011. Each order developed and refined the regulatory framework necessary for a unified national power grid. In July 2021, FERC published in the Federal Register: Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection, the official public notification that a national power grid was in the works.

The big missing piece of an integrated national power grid is the Texas ERCOT grid. FERC has kicked around ideas of enticing Texas to interconnect with the Western Connection and the Eastern Connection to form a national grid. The latest was the “Staff-Led Workshop on Establishing Interregional Transfer Capability Transmission Planning and Cost Allocation Requirements,” held on December 5, 2022. This two-day virtual seminar was carefully labeled as a“staff-led” affair to avoid any suggestions that the leadership at FERC was moving forward with implementing a national power grid that included Texas but don’t let that fool you.

I managed to stay awake while watching the video of two full days of presentations at the “Staff-Led Workshop.” The stated purpose of the workshop was to exchange information on the importance of grid interconnection to facilitate load sharing. The importance of having the Texas grid as an integral part of the national grid arose numerous times in the presentations and discussions.

The Houston Chronicle reached out to FERC about the possibility of forcing Texas to join a national power grid and reported:

A spokesperson for FERC on Wednesday said its rulemaking around increasing interconnection capacity between grids, which is in the preliminary stages, could include Texas, under the agency's authority to set reliability standards for ERCOT (emphasis added) and made these statements:

Whether and to what extent, Texas is implicated would depend on the specific action that FERC takes and under what authority it takes that action, she said. As of now, the Commission has not put forward any particular proposal on interregional transfer capability.

We are aware of the issue. It would be premature for us to comment until anything is finalized and becomes effective, as it can change throughout the process, or not move forward at all," she said. 

Any FERC effort to regulate the Texas power grid will likely face some pushback in Austin. After the 2021 winter storm, former Gov. Rick Perry wrote in a blog post, "Texans would be without electricity for longer than three days to keep the federal government out of their business."

Pat Wood, a former FERC chairman and Houston-based energy consultant, said:

Were the federal government to assure Texas leaders that the state would come under no additional regulation around wholesale power markets or other policy, the proposal to set minimum connection requirements could potentially win the support of politicians in Austin.

The question is, is it in the public interest? And the answer is yes," he said. The question is: Will (FERC) do it? People are scared of the jurisdictional issue. Nobody wants to piss off anyone in Texas.

While that may be true, we know that FERC really wants ERCOT as part of a national grid, and while “nobody wants to piss off anyone in Texas,” that sentiment could evaporate in a heartbeat if Congress decides to create a national grid through legislation, taking that decision out of the hands of FERC. That possibility happens to be in the works.

A legislative mandate designed to create a nationwide power grid that could easily include provisions about Texas’ participation was floated by two senators last May. Sen. John Hickenlooper, D-Colo., and Rep. Scott Peters, D- Calif., announced plans to introduce legislation, the Big Wires Act, that would require power grids nationwide to maintain interconnections with neighboring grids covering at least 30 percent of peak power demand.

After an 18-month rulemaking period, (the Big Wires Act) gives regions two years to decide themselves how they will meet the minimum-transfer requirements, and requires them to submit plans that specify: Which entities will build or implement grid upgrades and which entities will pay for the grid upgrades.

In a press release about their proposed legislation, the senators emphasized in their proposed legislation that it would not force Texas to join:

This straightforward approach would protect against extreme events like Winter Storm Uri, which in 2021 took 4.5 million Texas residents offline, killing hundreds and increasing energy prices 100-fold. During the storm, each added gigawatt of interregional transmission would have saved nearly $1 billion over just four days.

In the case of Texas, that would mean the construction of transmission lines capable of delivering 25 gigawatts of electricity — enough to power 22 million homes — to Louisiana, Arkansas, Oklahoma, and New Mexico.

Of course, the Senator’s emphasized that the proposed legislation would not require Texas to be part of the national grid:

The bill would not otherwise expand the Federal Energy Regulatory Commission’s authority, allowing the Texas Interconnect to remain independent of federal regulation. (emphasis added)

That last statement could quickly change if they decide Texas’ participation in the national grid is necessary.

Another piece of the puzzle to create a national power grid came in a recent letter from Senator Charles E. Schumer, Senator from New York and Senate Majority Leader, to the FERC dated July 20, 2023. Schumer said he has a “strong interest” in FERC “expeditiously finalizing a strong transmission planning and cost allocation rule, as well as a federal backstop electric transmission siting rule, saying:

FERC has more work to do on rules that make further progress” on generator interconnection queue reforms and interregional transfer requirements” to deliver reliable, affordable, and clean power to Americans.

A Wall Street Journal opinion piece said that Schumer clearly was actually saying:

progressive states don’t want to bear the trillions of dollars in costs for building out their green electricity grids, so he is directing the Federal Energy Regulatory Commission to stick red states with the bill and,

FERC should order states that “act as free riders” to pay for transmission upgrades. He also wants FERC to clarify its “backstop authority” to issue permits when states won’t. In other words, if West Virginians don’t want to pay for connecting New Jersey offshore wind farms to the grid, FERC should mandate that they pay anyway.

Obviously, that would also apply to the “free riders” in Texas as well.

Conclusion

The goal of creating a national power grid that FERC controls has been under development for over 25 years. Due to the grid instabilities that have been introduced by federal legislation, especially the absurdly misnamed Inflation Reduction Act, which has destabilized all power grids, and the EPA proposed rules to reduce power plant carbon emissions, the FERC and other lawmakers have decided that nationalizing the power grid so grids can share the pain will solve the problems. This “share the pain” concept will further destabilize the nation’s power grids.

Texas should reject whatever FERC promises as incentives to become part of a national grid. Other grid operators should be wary as well.

Thank you for reading “Thoughts about Energy and Economics.” This is a reader-supported publication, so please “Like” it, share it with friends and colleagues, and become a paid subscriber. Your support is greatly appreciated!