Feb
15
Written by:
Mark Lavergne
2/15/2011 4:21 PM
Lt. Gov. David Dewhurst released this statement today in response to the joint Senate hearings: "We need to determine what measures we can take in a deregulated market to ensure that our plants are adequately prepared for extreme cold weather conditions and that we have sufficient natural gas to provide additional generation if plants trip and go offline. My preference is always to find a free market solution; nevertheless, we must ensure this does not happen again."
The possible policy initiative that Natural Resources Chairman Troy Fraser (R-Horseshoe Bay) and others repeated throughout the day was to require natural gas suppliers to maintain a backup supply for extreme weather situations like the one February 2 that resulted in rolling blackouts. He said at the joint committee hearing this afternoon between Senate Natural Resources and Senate Business and Commerce that the legislature should look at making sure that gas suppliers who have “interruptible gas contracts” have such backups. Gas purchased for an interruptible contract may be cheaper, but it is hard to tell a customer that that is the reason there power has been turned off, Fraser said.
Lawmakers talked with electric generation companies including Luminant and NRG. Fraser told them that since they have a seat at the table at the Electric Reliability Council of Texas, he expects them to put protocols in place to prevent natural gas interruptions.
Reports indicate that Luminant, which owns 11 out of the 82 generating units that shut down on the ERCOT grid, lost $30 million. That’s because the company had previously contracted a certain amount of power, and when their generators couldn’t meet it, they had to purchase the power on the open market.
Luminant lost four coal units and seven gas. Most of the units that went offline turned out to be newer units. Luminant CEO David Campbell said the newer units were more vulnerable to the freeze because they were less experienced than the older units, which had been through a few freezes past and therefore whose operators knew which parts of the units needed extra protection. Now that these newer units have been through a hard freeze, such preparations will be makeable in the future, Campbell said.
Campbell said the new environmental controls on the plants did not make the plants more vulnerable. Campbell assured lawmakers that Luminant will do “everything we can” to implement a sound winterization system across the fleet.
Meanwhile lawmakers commended NRG for being able to meet the demand of their customers with comparatively minimal hiccups. NRG regional president John Ragan said the company has old and new plants. He said the company spent a lot of time preparing those units for the winter and the scheduled additional generation.
Fraser said that NRG kept not just a reserve, but a reserve for the reserve. Fraser characterized that move as “gambling some of ye company’s money” to ensure that their ratepayers would get the power when they needed it. He called NRG a “success story” in the crisis.
Sen. Leticia Van de Putte (D-San Antonio) questioned how the freeze affected NRG’s bottom line compared to Luminant. Ragan said that number hasn’t been calculated yet. Ragan also said that the nodal system has been working very well and kept congestion low throughout the freeze.
Sen. Kirk Watson (D-Austin) observed that many of the plants on the list of ERCOT generating units that either tripped off or stayed off February 2 were plants that had been fast-tracked to meet the state’s growing energy demand.
Sen. Glenn Hegar (R-Katy) emphasized the need for legislators and the public to be able to see the winterization plans for electric generators to instill public confidence that the power will be available the next time a hard freeze hits Texas. He said he understood the need for confidentiality among private companies for security purposes, but questioned whether weatherization plans should be confidential as well.