Stoel Rives - Renewable + Law

On October 21, 2021, the Public Utility Commission of Texas (PUCT) approved a rule that creates requirements for power companies to better prepare for winter weather. The rule stems from the Texas Legislature’s passage of Senate Bill 3 (S.B. 3) in response to the devastation caused to the energy grid by Winter Storm Uri.

S.B. 3, effective June 8, 2021, is a multi-pronged law that attempts to make the Texas energy system more resilient to the effects of extreme winter weather events. Key to S.B. 3 is a requirement that the PUCT implement winter weatherization requirements so that each of the entities providing electric generation service must implement measures to prepare its generation assets to provide adequate electric generation service during a weather emergency. The new rule, codified as 16 Texas Administrative Code §25.55,  requires electric generators and transmission service providers (TSPs) (collectively, generation entities) to implement the winter weather readiness recommendations identified in the 2012 Quanta Technology Report on Extreme Weather Preparedness Best Practices and the FERC/NERC 2011 Report on Outages and Curtailments During the Southwest Cold Weather Event on February 1-5, 2011. The rule also requires affected entities to fix any known, acute issues that arose from winter weather conditions during the 2020-2021 winter weather season. The deadline for implementation of many components of the new rule is December 1, 2021.

By December 1, 2021, a generation entity within the Electric Reliability Council of Texas (ERCOT) must:

  1. Use best efforts to implement weather emergency preparation measures intended to ensure sustained operation of all cold weather critical components during winter weather conditions;
  2. Install adequate wind breaks for resources susceptible to outages or derates caused by wind; inspect thermal insulation for damage or degradation and repair damaged or degraded insulation; confirm the operability of instrument air moisture prevention systems; conduct maintenance of freeze protection components for all applicable equipment, including fuel delivery systems controlled by the generation entity, the failure of which could cause an outage or derate;
  3. Establish a schedule for testing of such freeze protection components on a monthly basis from November through March; and install monitoring systems for cold weather critical components, including circuitry providing freeze protection or preventing instrument air moisture;
  4. Use best efforts to address cold weather critical component failures that occurred due to winter weather conditions during the 2020-2021 winter;
  5. Provide training on winter weather preparations and operations to relevant operational personnel; and
  6. Determine minimum design and experienced operating temperature and other operating limitations based on temperature, precipitation, humidity, wind speed, and wind direction.

The generation entity must also, by December 1, 2021, submit to both the PUCT and ERCOT, on a form prescribed by ERCOT, a winter weather readiness report that:

  1. Provides a description of all activities engaged in by the generation entity to complete the above-listed requirements, including any good-cause based reason for noncompliance; and
  2. Includes a notarized attestation sworn by the generation entity’s highest-ranking representative, official, or officer attesting to the accuracy of the information in the report and completion of all of the above-listed requirements, subject to any notice of or request for good cause exception.

The draft report forms for both generators and TSPs is available here: Winter Weather Readiness (ercot.com).

With the extremely tight timeframe to comply with the rule, generation entities are entitled to request an exception to the requirements for good cause. The generation entity must still file a winter weather readiness report; however, that report would include a notice that provides:

  1. An explanation and supporting documentation of the generation entity’s inability to comply with a specific requirement;
  2. A description and supporting documentation of the generation entity’s efforts to comply with the requirements; and
  3. A plan, including supporting documentation and a proposed deadline for each unfulfilled requirement, to comply with requirements.

PUCT Staff will collaborate with ERCOT in reviewing these good-cause exemption notices and the PUCT reserves the right to notify the generation entity that it disagrees with the assertion of good cause. If PUCT Staff disagrees with the assertion of good cause, the generation entity must preserve the good cause exemption by submitting, within seven days of receipt of the notice of disagreement, a request for approval of the good-cause exception to the PUCT. The request for approval must contain, in addition to all of the requirements of the good-cause exemption notice, (1) proof that notice of the request has been provided to ERCOT; and (2) A notarized attestation sworn to by the generation entity’s highest-ranking representative, official, or officer with binding authority over the entity attesting to the accuracy and veracity of the information in the request for approval.

Another component of the new rule provides for ERCOT inspections of generators and TSPs to ensure compliance with the requirements in the 2021-2022 winter season. ERCOT has the ability to make determinations on good cause exemption requests during an inspection. ERCOT will prioritize inspections based on the risk level.  The outcome of the ERCOT inspection may subject a generator to a PUCT enforcement investigation or civil penalties pursuant to 16 Texas Administrative Code §22.246.

It is not entirely clear as to the penalties that will be issued for noncompliance with the new regulations. Pursuant to the Public Utility Regulatory Act §15.023, the PUCT has the authority to apply up to a $1 million per day enforcement penalty for noncompliance. However, entities will be allowed a reasonable amount of time to cure any deficiencies prior to the imposition of any penalty. Entities will also be able to dispute an adverse finding and penalty through a contested case.

This rule represents the first of two phases in the PUCT’s response to the requirements of S.B.3. At a future date, the PUCT will implement a second, more comprehensive set of weather emergency preparedness reliability standards.

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