Explained: The two new laws prompted by the Texas power grid failure

Senate bills 2 and 3 were heralded by Texas Gov. Abbott as the antidote to February’s deadly power outages. Here’s what they do.

Editor’s note: Watch a KSAT Explains/Defenders collaboration on KSAT 12 Tuesday at 9 p.m.: Power Grid Failure: What Went Wrong.

Even before February’s winter storm had moved out of the state, Texans were wondering who would be held responsible and what could be done to prevent a similar catastrophe in the future. The winter storm caused multiple days of power outages for millions in sub-freezing temperatures and at least 200 deaths.

Six months later, there are still a lot of questions on this front, but state lawmakers have taken some steps to address the issues with our power grid that were spotlighted by the disaster. Senate Bill 2 and Senate Bill 3 were both passed during the regular session of the 87th Texas Legislature. In June, Gov. Greg Abbott signed them into law, saying that “everything that needed to be done was done to fix the power grid in Texas.”

While the effectiveness of these two new laws in regards to preventing another massive grid outage remains to be seen, we’ll break down what they actually do below.

Shaking up ERCOT’s board of directors

Before the storm, a lot of Texans had never given the Electric Reliability Council of Texas, or ERCOT, much thought.

ERCOT operates the majority of Texas’ power grid - the only state in the country with its own grid. They manage the flow of power to millions of households and businesses, set prices for energy available on the grid and they have the authority to require utility companies to carry out rolling outages during emergencies.

That’s what happened back in February. In the early hours of Feb. 15, while people were cranking their heaters as temperatures reached record lows, the cold weather was also leading to problems with energy generators. The problem affected all types of energy: natural gas, coal, wind, solar.

When ERCOT ordered utilities across Texas to shed demand by cutting power during the February storm, millions of cold, angry Texans came to know ERCOT as the organization taking much of the blame for the crisis.

But the new law — known as Senate Bill 2 — will change the makeup of ERCOT’s board of directors.

Among the changes, instead of 16 members, the board will soon have 11. The law also changes how those board members are appointed. Previously, they were appointed in a variety of ways: some chosen by a nominating committee, some by electric companies and consumers. Moving forward, the governor, lieutenant governor and Texas House Speaker will appoint a committee, and that committee will select the board of directors for ERCOT.

“They really wanted to replace what they consider to be industry insiders with people who are more accountable to their representatives,” said Erin Douglas, Environment Reporter for The Texas Tribune.

To try to ensure the board is made up of qualified members, the committee will use a consulting firm to help make decisions.

Another requirement of the new law: all board members must reside in Texas.

This was a controversy when it was revealed back in February that five of ERCOT’s 16 board members did not live in Texas. They have all since resigned.

When news of ERCOT’s out-of-state board members broke, a lot of people were left wondering why non-Texans would be hired to serve on a board tasked with overseeing power grid operations in Texas. One of the reasons likely has to do with the fact that one of the requirements for the job was that board members couldn’t have conflicts of interest.

“Since the ERCOT market covers most of Texas, it was, I presume, difficult to get people who both resided in the state and also didn’t have any touchpoints to the market and had all of the experience that you would want for them to be on that board,” Douglas said.

Some energy experts, though, are now concerned ERCOT’s board will now be more political.

“What happened with Senate Bill 2 is kind of a codification of the governor’s ability to make it all a political appointment,” said Ed Hirs, Energy Fellow at the University of Houston.

Weatherization requirements

Obviously one of the biggest and most immediate problems during the winter storm was equipment failure. Texas’ power plants were not built to withstand extreme cold. The law that was known as Senate Bill 3 will require power companies to upgrade their power plants and transmission lines to withstand more extreme weather.

The bill didn’t lay out specific requirements for weatherization. Instead, it gave that responsibility to the Public Utility Commission of Texas, or the PUC. The regulatory agency is now working on drafting those requirements, and a power company’s failure to comply could lead to a fine of up to $1 million.

But even once the new rules are in place, some say there’s not enough incentive in place for the companies to comply. In fact, according to Hirs, it effectively pays companies not to weatherize generation units. A power company stands to make billions if some of the grid’s power generators go offline in the event of severe cold or heat. Because when demand goes up, so do prices.

“One million dollar fine, when somebody is making billions, is just a slap on the wrist,” Hirs said.

The new law also orders the creation of a statewide emergency system to alert Texans about severe weather and possible power outages, similar to Amber and Silver Alerts.

How effective will these new laws be?

Overall, the new laws have been met with mixed reviews.

Douglas said that most experts she’s talked to in her reporting called these new laws key pieces of legislation, but they don’t think work is done addressing all the problems spotlighted in February.

“They are going to begin to address issues on the power grid,” Douglas said. “But it’s not going to be an all-encompassing solution to the power grid crisis.”

And the reforms could take years to fully implement, so It’s too soon to say just how effective they’ll be at preventing another massive outage.

“We’re not ready for this August,” Hirs said. “We’re not going to be ready for next February.”