Madeline Vavricek, MJLST Staffer
On last week’s episode of “now what?”, Texas was experiencing massive power shortages following a winter storm, leaving hundreds of thousands of Texans without power and water. An estimated 4.3 million Texans were rendered without power for up to a week as the cold snap that swept the nation caused Texas’s power grids to fail. Though the power grid is back up and Texas has returned to its regularly scheduled spring temperatures, last month’s empty grocery store shelves and power shortages have yet to melt from many Texans’ memories. As massive electric bills arrive in citizens’ mailboxes (hello, surge pricing!), lawsuits levied against power companies, and bankruptcies filed by energy companies, one might ask why Texas, far from being the coldest part of the United States that week, was so thoroughly and singularly felled by the winter weather. The answer, perhaps unsurprisingly, is both political and economic, and requires a history lesson as well.
Nearly half a century after Thomas Edison’s 1880 invention of the light bulb, the advent of the power grid was gaining traction in the nation’s cities and becoming less of a luxury and more of a necessity. This created a highly profitable market for electricity where previously no market had existed, and the expansion of the industry only shed light on ways that electric companies were utilizing the novel market to their advantage. This expansion eventually lead to the passage of the 1935 Public Utility Holding Company Act (PUHCA) under President Franklin D. Roosevelt. The Act outlawed the “pyramidal structure” of interstate utility holding companies, preventing holding companies from being more than twice removed from their operating subsidiaries, and required companies with a ten percent stake or greater in a utilities market to register with the Securities and Exchange Commission for monitoring. Essentially, this legislation was to prevent energy companies from operating as monopolies in the relatively new energy market, a move met with vehement opposition by the utility companies themselves; the bitter feeling was mutual, with FDR notably calling the holding companies “evil” in his 1935 State of the Union address.
While PUHCA inconvenienced these villainous utility companies’ interstate operations, there was one loophole left available to them: their “evil” was left unregulated within the state, allowing holding companies that operated within a single state unregulated under PUHCA. While the Act was effective, decreasing the number of holding companies from 216 to 18 between 1938 and 1958, creating a “a single vertically-integrated system which served a circumscribed geographic area regulated by either the state or federal government.” It was following the 1935 passage of PUHCA that Texas power companies decided to band together within the state rather than submit to the federal regulation at hand. By only operating within state lines, Texas companies effectively skirted federal regulation and interference, politically maneuvering itself to an energy independence largely made possible through Texas’s energy-rich natural resources.
In the late sixties, the federal government created two main power grids to serve the country: the Eastern Interconnection and the Western Interconnection. Texas opted out of this infrastructure, choosing instead to form its own grid operator, called the Electric Reliability Council of Texas, or ERCOT. The ERCOT grid “remains beyond the jurisdiction of the Federal Energy Regulatory Commission,” the federal entity that regulates the power grid for the rest of the nation. ERCOT took on additional power following the 1999 move to deregulate the energy economy in Texas, an effort to create a completely free market for electricity in the state to benefit both consumers and companies. This independence had most Texans’ ardent approval . . . until the cold front rolled in late February 2021, obstructing the flow of the state’s natural gas and leading to the failure of 356 electric generators state-wide. While other Southern states relied on the national power grid to maintain their electricity, Texas had no one but itself to fall back on, and was quite literally left out in the cold.
While some argue that the independent electrical grid was not to blame for Texas’s misfortunes, insisting that the cold temperatures in the rest of the nation meant there wouldn’t be much energy to spare anyway, it is undeniable that the deep freeze has called attention to many cons of Texas’s pro-deregulation energy market. Though there is what could be considered an “instinctive aversion to federal meddling” in avoiding federal regulation, as well as sensible reasons for a state of Texas’s size and natural resources to remain separate from the other 47 continental United States, the reality remains that many Texans suffered at the hands of its own power grid. As the bills pile up and Texans increase the water bottles they have in their pantry at any given time, one can see how some might favor the security of a more regulated system over the freedom that lead to surge pricing, dry faucets, and dark homes. However, as with all government regulation, there is a price to pay, and perhaps the Lone Star State prefers to stay “lone” for that very reason. Either way, Texas, now warmer and well-lit, is no doubt grateful to return to our 2021 definition of “normal” and hoping that their lives stop sounding like a verse of a beloved Bill Joel song (no, not Piano Man).
