Public Utility Commission adopts reliability standard for ERCOT following reform bills prompted by 2021 freeze

AUSTIN (KXAN) -- The Public Utility Commission of Texas voted this week to adopt a reliability standard for the Electric Reliability Council of Texas, or ERCOT, following legislation that was filed in 2021 to reform the electric grid operator after shortcomings during the February 2021 winter freeze.

The PUCT said in a release "setting a standard for reliability in ERCOT will allow for regular assessments of the grid’s ability to meet consumer demand and help the PUCT and ERCOT determine what market or reliability improvements could be necessary in the future."

This comes after more than three years of scrutiny toward ERCOT -- the organization that manages Texas' power grid -- following the 2021 winter freeze, where millions of people lost power for several days when the grid failed to keep up with demand during freezing weather conditions.

The PUCT release said adoption of the reliability standard meets requirements laid out in Senate Bill 3, which was passed in the 87th Legislature and signed into law by Gov. Greg Abbott in June of 2021.

SB 3 requires electricity providers operating on the ERCOT grid to weatherize their equipment and improves communication during outages with an alert system. The final rule was adopted Thursday and filed in PUCT Docket No. 54584.

According to the rule, the ERCOT grid must meet three criteria to remain in compliance with the reliability standard:

• Frequency – In the ERCOT region, a grid outage resulting from inadequate power supply to meet demand must be expected to occur no more than once per ten years on average.
• Duration – A potential grid outage resulting from inadequate power supply to meet demand must be expected to last less than 12 hours.
• Magnitude – The amount of electricity lost during any hour of a potential outage resulting from inadequate power supply to meet demand must be expected to be less than the amount of electricity that can be safely rotated during an outage.

Detailed explanations of the criteria can be found in the rule online.

“The ERCOT grid is more reliable today than it has ever been, and we know our system must continue to evolve to meet the growing demand for power in our state,” PUCT Chairman Thomas Gleeson said. “As we enhance our grid to support the future of Texas, it’s critical we clearly define the standard at which we expect the market and system to operate. By establishing a reliability standard for the ERCOT region today, we are setting a strong expectation for the market and charting a clear path to further secure electric reliability.”

The PUCT's release said the rule also establishes a process for a regular assessment of the ERCOT region’s reliability. The process is detailed below, per the release:

The rule also establishes a process for a regular assessment of the ERCOT region’s reliability. Beginning January 1, 2026, ERCOT must conduct a probability-based assessment every three years to determine whether the power system is meeting the reliability standard and is expected to continue meeting the standard for the next three years. If ERCOT determines that the system fails to meet the reliability standard, it must include in its report to the Commission recommended changes to the ERCOT market design that could address the deficiency and outline the potential cost of those changes. The PUCT would then provide 30 days for the public to comment on the ERCOT assessment.

If ERCOT’s assessment shows that the system fails to meet the reliability standard, the independent market monitor (IMM) must conduct an independent review and Commission staff must provide their own recommendations on potential market design changes and associated costs. The Commission would then review ERCOT’s assessment, the IMM’s review, Commission staff’s recommendations, and public comments to determine whether any market design changes may be necessary.

Commissioners on Thursday also approved a Value of Lost Load, or VOLL, which is an estimate of the value of electric reliability to consumers, for the ERCOT region. Commissioners approved a VOLL of $35,000 per megawatt-hour by using results from a survey of consumers in the ERCOT region and an ERCOT analysis. The PUCT said this value will also help the commission evaluate potential market or reliability improvements.