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    Natural gas sector balks at oversight

    September 16, 2022 - Bob Sechler


      The state's natural gas industry is bristling at the possibility of beefed-up reporting requirements as regulators work to develop final reforms aimed at ensuring the reliability of the Texas electricity grid.

      State Rep. Tom Craddick, R-Midland, said during a legislative hearing Tuesday that the prospect of a so-called "gas desk" to provide operators of the power grid with insight into real-time operational information regarding the natural gas sector is viewed by many industry players as an unwarranted intrusion into private enterprise.

      "My constituents are very heavily involved (in the natural gas industry) and they are not for it, I can tell you that right now," Craddick said. "They don't want the Legislature controlling the gas industry."

      He made the comments during an update over ongoing efforts to shore up the reliability of the power grid and implement reforms approved by the Legislature in the aftermath of the deadly freeze in February 2021, when a failure of the grid resulted in extensive blackouts that contributed to hundreds of deaths and billions of dollars in property damage in Texas.

      Overall, state regulators told lawmakers that the process of enacting the reforms is proceeding well, with a variety of measures already put in place — such as weatherization requirements for power plants and, just two weeks ago, for natural gas infrastructure deemed essential — and a proposed revamp of the Texas power market nearing completion for public review.

      "The bottom line is the reliability reforms y'all passed ... are working," Peter Lake, chairperson of the Public Utility Commission of Texas, told lawmakers. "The lights are staying on, and most importantly we are continuing to switch from the old crisis-based business model (on the ERCOT grid) to a reliability-based business model that focuses on people and households rather than corporate profits."

      Still, the possibility of increased oversight of the natural gas sector became a point of contention at several points during Tuesday's event.

      A federal study in the aftermath of the February 2021 grid disaster found that a lack of consistent supplies of natural gas — which is used to fuel a major portion of the state's power plants — was among the top causes of the widespread and lengthy power outages during the emergency.

      Proposals to help rectify the situation and provide state utility regulators with insight into potential trouble spots on the grid include establishing a mechanism for the grid's manager, the Electric Reliability Council of Texas, to monitor information regarding the natural gas industry through a designated gas desk at its Taylor headquarters.

      In addition, some state lawmakers and energy experts have raised the prospect of putting in place an independent entity to monitor natural gas pricing data during times of grid emergencies, because soaring wholesale prices during the February 2021 grid disaster have triggered accusations of market manipulation. A third-party contractor already is in place to monitor wholesale electricity prices on the ERCOT market as a guard against manipulation, but not natural gas prices.

      Brad Jones, ERCOT's interim CEO, didn't comment during Tuesday's hearing on the prospect of the state monitoring natural gas pricing information. But he said it would be valuable for ERCOT to have insight into "purely operational data" regarding the industry to help improve grid reliability, such as how much natural gas is available at various locations and any potential transport problems.

      "It only makes sense (because) gas is a significant contributor — over half of our generation uses natural gas for electric generation," Jones said. "We should be able to gather that information. When I say that (it means) purely operational information: Is the line operating? Or is the compressor station out? Is there maintenance being done? Those types of simple things is all we're talking about."

      He also said his preference would be to have natural gas companies voluntarily provide the information instead of having it mandated. Still, Craddick said ERCOT, which is overseen by the utility commission, should seek approval from the Legislature before it makes such a move.

      "The people out there in the industry are very opposed to this at this point," Craddick said.

      A variety of industry players, including Todd Staples, president of the Texas Oil & Gas Association, testified during Tuesday's hearing and agreed with Craddick's general comments.

      Meanwhile, Christi Craddick, a member of the Texas Railroad Commission and the daughter of Tom Craddick, said she's unclear how the various proposals for industry reporting requirements would work because Texas' intrastate natural gas industry operates under free-market principles. The Railroad Commission regulates the state's oil and gas sector, while the utility commission regulates electricity generators.

      "As an agency, we don't understand what a gas desk and a market monitor is because we are in a free market in the state," Christi Craddick said, in response to questioning by state Rep. Donna Howard, D-Austin. "I'm not clear what a gas desk or an independent market monitor, how that would resolve or make the electricity grid even more reliable. That's not clear to me."


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