5 things to know about potential causes of Texas’s power crisis

A select committee of the Texas state Senate lambasted executives from a Houston-area power company Monday over the utility’s preparation for Hurricane Beryl, which left millions of Texas residents without power for days after the storm.

In the aftermath of the crisis, which has resurfaced concerns over the stability of Texas’s grid amid the more violent weather caused by a heating climate, the Republican-dominated panel sought to pin the Houston outages on unique failures by CenterPoint, Texas’s biggest utility.

While Texas state officials and CenterPoint executives have identified numerous failings at the company before the storm, local energy and power experts believe the problems are structural — a theme some legislators picked up during the hearing.

Here’s what you need to know.

Why are hearings being held?

Because Texans are angry, state senators told CenterPoint executives.

Since Hurricane Beryl, Texas media, lawmakers and experts have laid blame on CenterPoint for the extended outages wrought by the storm and their consequences — a line of criticism senators further pursued in the increasingly testy hearing.

“One company blew it,” state Sen. Paul Bettencourt (R) said, following state Sen. Brandon Creighton’s (R) recitation of the names of three of his constituents who had died during Beryl — three of the 36 who died from causes such as heat-related illness following the storm.

Sen. Mayes Middleton (R) laid one of these deaths directly at CenterPoint’s feet. He described a case of two constituents in Baytown who repeatedly called the company about a downed live wire. 

“They were saying, someone’s going to get killed,” he said. “And guess what? They found a body underneath it.”

One after another, senators listed what has become a totemic registry of problems following Beryl, punctuated with recitations of the names of their dead constituents.

There were the millions left without power after a Category 1 storm, the weakest form of hurricane; CenterPoint’s reported lack of effective communication with ratepayers as to when their power would be restored; its failure to restore its outage tracking system after the derecho storms in May left a million without power; the expensive mobile generators — what Bettencourt called “boat anchors” — that CenterPoint earned millions from purchasing but that proved too large to deploy.

“What I find astonishing — what makes my blood boil — is the fact of having to have a hearing to hear about a whole bunch of people that did their job right. But the biggest multibillion dollar corporation, we’re having to tell them how to do your job,” Bettencourt said.

With two months left in hurricane season, senators focused on the looming danger to Houston and Southeast Texas, the state’s energy capital.

“What I’m afraid of is that we’re getting into this situation of the haves and have nots,” Sen. Carol Alvarado (D) told colleagues. “People who can afford to, will buy their way out of this — they can go and buy generators. But we have people who can’t afford generators, many of our constituents. That should not be that that’s the type of place that Houston, Harris County, or Texas is becoming.”

The state Senate spoke with one voice, Sen. Judith Zaffirini (D) said, because “this situation achieved worldwide attention.”

The question before the Legislature, she said, is whether “we are going to isolate CenterPoint — or look at CenterPoint as an example, and then look at all other companies and all other providers of energy and say, ‘These are the standards that you must meet going forward?’”

What has CenterPoint said?

In statements to the media and the Public Utilities Commission (PUC) leading up to the hearing, CenterPoint has acknowledged issues with its preparation and response. “I want to apologize,” CEO Jason Wells told the PUC last week.

Wells said he and his “entire leadership team will not make excuses. We will improve and act with a sense of urgency.”

In comments before the PUC on Friday, company executives acknowledged it had failed in communicating with ratepayers — particularly critical care facilities such as nursing homes — as well as that it hadn’t done enough tree trimming and had erred in not moving its outage tracker to the cloud after the May derecho.

The failure of CenterPoint’s outage tracker was a standout problem in the broader crisis, leaving many Houston residents to rely on the Whataburger store closure app as a proxy for which neighborhoods still had power.

What did witnesses tell the committee?

The hurricane was a predictably unpredictable disaster, Texas Division of Emergency Management head W. Nim Kidd told the state senators.

For weeks before Beryl hit Texas, state and federal agencies were watching the hurricane, and were concerned it might “increase into a major flood producing storm,” Kidd said.

While Kidd emphasized the importance of the work of the National Hurricane Center, he worried that the agency’s precise 10-day forecasts left Texans with a “false sense of security,” because hurricanes strike outside the forecasted “cone of uncertainty” about a third of the time.

“While we like to say major hurricanes are Category 3 or greater, I will tell you — this was a major hurricane,” he said.

Kidd also told Sen. Borris Miles (D) that his agency had invited CenterPoint to its regular planning call.

“So,” Miles asked, “for the people back home that call my office, asking multiple times, asking me, did the state, not notify CenterPoint, the state—” 

“Notified CenterPoint,” Kidd said. 

PUC Chair Thomas Gleeson told senators his agency was investigating whether CenterPoint had spent “enough money on vegetation management.”

The outages in the company’s area represented “a compounded issue over years,” Gleeson added.

Other questioning focused on CenterPoint’s spending of around $1 billion for 15 mobile generators, which — because they require the equivalent of three semitrucks to transport — proved too large to move through Houston.

The generators were a major focus of Monday’s hearing. “Who’s paying for that?” Sen. Lois Kolkhorst (R) asked, to which Bettencourt responded, “My ratepayers.”

Bettencourt noted CenterPoint had leased those generators despite competing bids that would have cost 40 percent to 60 percent less. Zaffirini noted the bid process had lasted only two days, and that the CEO of the winning company had been convicted of violating federal environmental law.

“If I was an inspector general, I’d be looking at [CenterPoint] for fraud,” Bettencourt told the committee.

Whether the outages were CenterPoint’s fault remained to be seen, Gleeson said. “But at the end of the day, it doesn’t really matter, because it’s their responsibility,” he added. “When you’re providing electricity, you’re not building widgets, you’ve made a compact with your customers, with the state: that you will provide electricity.

“And I think that’s their responsibility to figure out how to do it reliably,” he said.

Gleeson pointed to the PUC’s ongoing investigation of CenterPoint — which he described as a necessary clearing of the air.

“The goal of this is: It should not be to do everything behind closed doors, six months from now, come out with an administrative penalty that just gets deposited to general revenue for a million dollars,” he said. “The goal is to get answers.”

What broader problems have been identified?

Reports and experts have pointed to a broader system of misplaced incentives of which they say CenterPoint is just the most prominent example.

In the late 1990s and early 2000s, Texas deregulated its electricity market but left the “poles and wires” portion of the market — the part represented by CenterPoint — as a regulated monopoly, reporter Russell Gold noted in Texas Monthly a week after the storm.

In CenterPoint’s case, that means the company faces no competition within its Greater Houston territory — and that state law allows it to charge ratepayers for its infrastructure spending, plus a healthy profit of, in CenterPoint’s case, up to 10 percent.

“The trade-off for that is, we get to set their rates — as opposed to, say, a competitive area” where “they would have to have competitive rates,” Gleeson said.

As the hearing went on, CenterPoint sought permission from state regulators to spend more than $2 billion on new infrastructure — costs it is expected to pass on to its ratepayers, millions of whom spent an extended period without power in Beryl’s wake.

The company has passed on costs in this way in the past. For example, when it came to the $800 million CenterPoint spent on the mobile generators that proved ineffective in the storm, the PUC let the company charge about 6.5 percent in profit to its ratepayers, for a total of around $50 million — despite protests from local municipalities that the generators were too big to be usable.

Those generators were a major focus of Texas regulators even before Monday’s hearing. Because the state allowed CenterPoint to pass on those costs to consumers, “it’s incumbent on us to dig deep into” how those generators performed, Public Utility Commissioner Jimmy Glotfelty told Texas regulators Friday.

In a rare nod to climate change from the Republican-controlled body, Glotfelty added that “understanding that our weather is changing, we have to be more diligent.”

The generators point to a broader structural problem, power market expert Doug Lewin of Stoic Energy wrote: The investments that regulated utilities earn money from aren’t necessarily those that most effectively keep the lights on in a storm.

For example, while distributed power — from rooftop solar and batteries to natural gas microgrids — provided islands of light and cooling in the post-Beryl dark, every home battery connected to a utility represents less money paid to that utility in rates.

The Texas Legislature approved $1.8 billion in the last session to build local microgrids. But the PUC has done little to actually get the program underway, reported Canary Media, a nonprofit newsroom focused on climate change and the energy transition.

“We’re at the stage now where the technology is a little ahead of the policy,” Matthew Boms, executive director of the Texas Advanced Energy Business Alliance Trade Group, told Canary.

Similarly, as Lewin noted, CenterPoint earns no profit for vegetation management or tree trimming of the sort that helps prevent boughs and trunks from turning into line-wrecking missiles.

Investigations by Houston news station KHOU found CenterPoint had] spent about just half to a quarter as much on tree trimming as other regional utilities. 

In Monday’s hearing, Bettencourt connected that comparatively low spending on maintenance and the profit utilities can charge for expensive infrastructure, and vowed to introduce legislation clawing back the cost of the generators from CenterPoint.

“In a high inflationary era, we’re probably going to have to increase vegetation management — and boy, we could have used this cut,” he said. 

Senators also connected the failure of the outage tracker to the misalignment of incentives. If CenterPoint had moved its outage tracker to the cloud, Middleton noted, it would have kept residents apprised of how long they would be without power, allowing them to make plans to keep themselves safe in the heat — but the company would have lost the ability to earn a profit on server infrastructure.

“They got their nine and a half percent return on something that wasn’t working, and they essentially defrauded their ratepayers,” Middleton said, noting people died in overheated houses waiting for the return of electricity that an accurate tracker would have told them was still days away.

“It’s disturbing to think that they may have chosen something that was likely to fail to get that return. They took their money, and all of our money, and didn’t provide the product they promised.”

How are Texas legislators thinking about reforming the power system?

Kolkhorst argued that her fellow state legislators should shift to a system where utilities are paid for performance, not simply installing infrastructure.

“Is it time for our formula to be more outcomes based?” she asked the PUC’s Gleeson. “Looking at incentives, do they align with customers?”

She added, “I’m just going to tell you: it does not. … I don’t really feel like we have a performance-based system.”

“I don’t either,” Gleeson said. While “there is statutory language that says we can reduce their return on it based on their performance,” he added, that power has only been used once.

Making Houston’s power system more resilient can’t come “on the backs of the ratepayers,” Kolkhorst said. 

“Do the incentives align with the consumer?” she asked. “And obviously they did not during Beryl, and I don’t think they [will] go forward, unless we make major adjustments.”