Texas Moves to Make Generators Winterize, Bar Future Griddys

(Bloomberg) -- The Texas Senate passed a sweeping bill to overhaul the state’s electricity market following last month’s historic blackouts by forcing power plants to winterize and barring the type of business model used by Griddy Energy.

The measure, which still needs approval by the state’s House of Representatives, would require the owners of all power generators, transmission lines, natural gas facilities and pipelines to protect their facilities against extreme weather or face a penalty of up to $1 million a day.

Nearly half of Texas’s power-plant capacity went down in February after a severe winter storm froze equipment, halted gas supplies and triggered blackouts that left more than 4 million homes and businesses in the dark for days. More than 100 people died during the crisis. In its aftermath, lawmakers have scrambled to address some of the power-system flaws laid bare by the catastrophe.

The bill aim to rein in, albeit modestly, Texas’s laissez-faire approach to electricity markets, which some have argued contributed to the crisis. The state’s power system operates independently from other grids so as to avoid federal oversight, and the market relies almost exclusively on price signals to secure electricity rather than holding supply in reserve for emergencies.

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On Tuesday, the Texas house preliminarily approved its own package of bills designed to respond to the grid failure. They includes a measure that would only require power plants and power line owners to weatherize.

Notably, both the Senate and House measures would ban power providers from offering electricity plans tied to the state’s volatile wholesale power market, a practice that resulted in exorbitant bills for customers during the energy crisis. Griddy, whose customers received bills in the tens of thousands of dollars, declared bankruptcy in the wake of the crisis.

The Senate bill would change the way that electricity is priced during an emergency -- and limit the amount of time any price cap can be in place -- to protect utilities from the sky-high bills. It would also require renewable energy sources to have backup plans to provide power at critical periods by purchasing so-called ancillary services.

The Senate measure now heads to the House of Representatives. The House bills will need a final vote before moving onto the Senate. Both chambers will need to reconcile the various pieces of legislation before sending it to the governor’s desk for signing.

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