Texas Commission Proposes New Generator, Utility Weather Requirements and Opens Fast-Track Rulemaking Proceeding

Mayer Brown - Energy Forward
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Mayer Brown - Energy Forward

The Public Utility Commission of Texas (PUCT) has issued draft regulations1 to implement new electric weather-related requirements set forth in Texas Senate Bill 3 (SB 3),2 which was enacted in response to what the PUCT described as the February 1-5, 2021, “Southwest Cold Weather Event.” The PUCT release would adopt new Texas Administrative Code provisions (to be codified at 16 T.A.C. § 25.55) that would be binding on all registered generators and transmission owners within the Electric Reliability Council of Texas (ERCOT) portion of Texas. The proposed regulations apply to essentially all grid-interconnected generating entities and all transmission service providers in the ERCOT region and have some material and near-term requirements, even though the proposed regulations are the subject of further comment through September 16, 2021, and presumably to change thereafter.

Section 25.55 adopts a two-phase approach. In the first phase, by December 1, 2021, electric generators that are subject to PUCT registration requirements must:

  • Take all steps required to ensure the operability of “cold weather critical components,” which include all generator components that might freeze and thereby cause an operational failure, derate or start failure;
  • Install wind-break and other freeze protection equipment;
  • Take “all actions necessary” to prevent equipment failure due to cold weather, a potentially boundless requirement;
  • Develop and implement cold weather training;
  • Determine minimum design and operational temperature-related limits, adjusted for factors to include wind and humidity; and
  • File with the PUCT and ERCOT a comprehensive report on the foregoing, accompanied by a sworn attestation from the highest representative of the generating company with authority over operational matters.3

Transmission owners are required to take similar actions and to submit similar reports to the PUCT and ERCOT, also by December 1, 2021.

An entity regulated under Section 25.55 may request exemption for “good cause” from part or all of the requirements. However, the entity seeking exemption has a high burden of proof. The exempting authority is the PUCT and not ERCOT (although ERCOT is to receive notice of every exemption request and may provide comments), which suggests that formal legal process will be required. The exemption must document the alleged good cause, identify the particular requirements that cannot at that time be satisfied and an explanation as to why, include detailed probative materials, and set forth a detailed compliance plan and compliance timeline.

In addition, under the proposed regulations, ERCOT will be required to conduct compliance inspections of entities regulated under Section 25.55 and to provide reports of its inspection results to the regulated entities. ERCOT will be required to prioritize inspections based on risk, and, as a result, ERCOT will prioritize critical assets and assets that have experienced weather-related reliability events.

By December 10, 2021, ERCOT is required to develop and release a checklist disclosing the compliance status of regulated entities and certain other information.4

A weather-related service outage experienced by a regulated entity must be self-reported by the entity to ERCOT. The self-report must include an engineering analysis prepared by a completely independent engineer (to exclude the entity’s and presumably its affiliates’ own employees and also to exclude any engineer who has previously conducted any weather-related evaluation of the applicable facility). It appears that no de minimis exception to compliance requirements is to be adopted: ERCOT is required to refer all uncured violations to the PUCT for enforcement action.

SB 3 also provides ERCOT with the right to make punitive recommendations to the PUCT. In addition, SB 3 provides for certain reliability penalties to be applied to pipelines and other “gas providers.” Penalties under SB 3 are generally limited to $5,000 per violation except for those violations that are determined to be of the most serious kinds. However, Section 25.55 does not address punitive calculations, and the PUCT has no jurisdiction over SB 3-defined gas providers; Section 25.55 is therefore silent as to those issues.

The PUCT will accept comments on proposed Section 25.55 through September 16, 2021, and intends to conduct a public hearing on the adoption of the provisions on September 20, 2021. Even if the PUCT were to adopt the proposal at the conclusion of the hearing, exactly as drafted, that timing would afford regulated entities barely 10 weeks to inspect their equipment, conduct and record their findings, develop and implement compliance documents, plan and deliver training, and report on their winter weather-readiness preparation.

 

1 Rulemaking to Establish Electric Weatherization Standards, PUCT Control No. 51840, issued August 26, 2021, viewed at http://interchange.puc.texas.gov/Documents/51840_68_1150025.PDF.

2 Discussed in our earlier, April 8, 2021, Legal Update “Texas Bills Would Burden Renewable Gen.”

3 A generator that timely files a conforming report is exempt from a pre-existing ERCOT winter weatherization reporting requirement.

4 This may present a timing “issue” since the proposed regulations require generating entities and transmission service providers to provide a “winter-weather readiness report” in a form to be prescribed that attests under oath that the reporting entity has undertaken the required weather preparedness actions required under such regulations.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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