AUSTIN, Texas — Texas Railroad Commission Chairman Wayne Christian came in for some tough questioning from lawmakers during a Texas Senate committee hearing reviewing changes made since last February’s devastating winter storm that left millions without power.
Christian told concerned lawmakers he did not see the need for any additional regulation that would affect the natural gas industry.
Federal regulatory agencies oversee pipelines that cross state lines.
But for those pipelines that don’t cross state lines, there is a regulatory void.
The Railroad Commission’s position has been that it has no oversight authority over private contracts between power generators and suppliers within the state.
“If you would like for us to do it, we’ll need the legal authority to do it,” Christian said.
The hearing was the first major legislative hearing held since a new law went into effect overhauling the state’s power grid. That law mandated that all power generators winterize their facilities.
But the relationship between the natural gas industry and the power generators was front and center Wednesday.
“I think we still have holes we need to address,” said Senator Lois Kolkhorst, R-Brenham.
Almost half of the state’s power generators run on natural gas.
Many of those power plants have only one pipeline feeding the facility, creating in effect a monopoly situation for that natural gas supplier. Power generators have complained that their gas supplies were cut off without warning or explanation during last February’s winter storm.
“Y’all have a commensurate responsibility in times of crisis in particular to make sure that gas flows, to make sure that the industry is acting in an upright manner and not utilizing their legal mechanisms -- either contractual or force majeure -- to disadvantage the people and cause undue expensive and hardship on Texans,” said State Sen. Charles Schwertner, R-Georgetown.
Sen. Nathan Johnson, D-Dallas, asked Christian about his views of those situations in which a generator is reliant on one natural gas supplier.
Christian’s response was that it was the fault of the generator for making a “bad business decision.”
“At this time in history, the free market decides where those pipelines are built not,” said Christian.
Johnson pointed out that if the generator is losing money, they might just have to shut the plant down. Christian agreed. that could be an outcome.
“That’s contrary to what we’re trying to do at this table. We’re trying to preserve existing generation and get new generation,” Johnson said.
Johnson read portions of the Texas Utility Code to Christian.
One portion states that the Commission has the authority to “establish and enforce the adequate and reasonable price of gas and fair and reasonable rates of charges and rules for transporting, producing, distributing, buying, selling, and delivering gas by pipelines.”
“You have the authority and the obligation... to make sure that disproportionate leverage in the market place does not result in loss to the consumer... for something as critical as electricity,” Johnson said, “because if Footlocker goes out of business, I can buy my shoes somewhere else, but if a plant shuts down and another plant shut down and another plant shuts down, we might have 400,000 people without electricity.”
Christian disagreed, saying the statute does not cover the private contracts between companies.
There have been suggestions from experts and the interim ERCOT CEO Brad Jones that an independent market monitor position be created to oversee the intersection between the natural gas and electric industries.
State Sen. Donna Campbell, R-New Braunfels, said she believed that an independent market monitor would be a good idea.
“I’m just interested in transparency,” Campbell said. “I think we have some work to do there.”
The situation involving Dallas-based pipeline Energy Transfer and Luminant Energy also came up during the hearing.
This past January, records show that the Dallas-based pipeline Energy Transfer threatened to cut off gas to five of Luminant Energy’s natural gas-fired power plants in a fee dispute related to last February’s winter storm.
For two of those plants, Energy Transfer was the sole pipeline serving the facility.
Those five plants provide power to about 400,0000 people.
After Luminant filed a complaint with the Texas Railroad Commission, Energy Transfer pulled back on its threat. The company wrote in a Jan. 19 letter to the commission, that it "has and will continue to provide daily sales service."
Christian said he had intervened in the situation, making it known that the gas should not be turned off while the companies continued to negotiate. But he, again said, it was a private matter and the commission had no regulatory power in the situation.
Jones, ERCOT's interim CEO, also told lawmakers that ERCOT currently has no way to get information gas supplies that might affect the reliability of grid operations.
He has proposed creating a “gas desk,” which would entail having someone gathering information 24 hours a day from gas suppliers to power generators.
“That person can gather this information and make sure we have the situational awareness that we need at ERCOT that might affect our generators,” he said.
Christian indicated that he would not in favor of a gas desk.
“The trouble is no state or nation has that feature,” Christian said.
“Do we really care about that?” Campbell asked.
“Well, we care if it works or doesn’t, and the evidence of history is that it’s not done by anybody,” Christian responded.
Jones told lawmakers that three other grids in the northeastern part of the country do have gas desks and they work well.