After the Storm: Public Utility Commission of Texas Adopts New Winter Weatherization Rule Requirements for ERCOT-based Generators and Transmission Service Providers
In the aftermath of Winter Storm Uri, the Texas Legislature passed Senate Bill 3, which, among other things, required the Public Utility Commission of Texas (“the Commission”) to adopt certain market-related rules. A key component of Senate Bill 3 required the Commission to adopt weatherization rules not later than December 1, 2021.
On October 21, 2021, the Commission formally adopted new winter weatherization requirements for power generation entities (“generators”) and transmission service providers (“TSPs” ). The new rule (16 Tex. Admin. Code § 25.55), which only addresses winter weather readiness requirements, represents the first of two phases in the Commission’s development of new weather emergency preparation measures intended to increase ERCOT grid reliability during severe weather events. At some undefined future date, the Commission will commence “phase two” of the program by promulgating a more comprehensive, year-round set of weatherization standards.
Winter Weather Emergency Preparation Measures
The new rules are targeted at the protection of “cold weather critical components” — equipment that is susceptible to freezing or icing, the occurrence of which is likely to “significantly hinder the ability of a [generator] or [TSP] to function as intended.” While generators and TSPs are subject to distinct weatherization protocols enumerated in the rule, the following general requirements are applicable to both types of entities. By December 1, 2021, generators and TSPs both must:
- Use best efforts to implement weather emergency preparation measures intended to ensure the sustained operation of certain critical equipment during winter weather conditions, including: weatherization, staffing plans, operational readiness and structural preparations; securing sufficient chemicals and fuel supplies; and ensuring sufficient personnel are available to operate the facilities.
- Use best efforts to address any weather-related failures that occurred during Winter Storm Uri or during the period from November 30, 2020, and March 1, 2021.
- Provide winter weather preparation and operations training to relevant personnel.
- Determine the minimum operating limitations of equipment based on temperature, precipitation, humidity, wind speed, and wind direction.
In addition, generators must undertake winter weather preparation measures for each resource under their control, including, but not limited to, installing protective devices and monitoring systems for cold weather critical components, confirming the operability of instrument air moisture prevention systems, and establishing a schedule for monthly testing of freeze protection components during the period from November through March. TSPs are also required, among other things, to confirm that the sulfur hexafluoride gas in breakers and metering and other electrical equipment is at the correct pressure and temperature to operate in winter weather emergencies, and to confirm the operability of power transformers and auto transformers in winter weather emergencies.
Winter Weather Readiness Report Filing Requirement
The new rule requires entities to submit a “winter weather readiness report” that describes the efforts the entity is taking to implement the weatherization standards outlined in the rule. This report must be submitted to the Commission by December 1, 2021, on a form prescribed by ERCOT and developed in consultation with the Commission staff. The draft report form was issued on November 5, 2021 and can be found on the ERCOT’s Winter Weather Readiness page. The draft form remains subject to change, and ERCOT will provide the final DocuSign form to each generator and TSP. The report must include a notarized attestation sworn to by the entity’s highest ranking representative, official or officer with binding authority attesting to the accuracy and veracity of the information contained in the report.
Good Cause Exceptions for Noncompliance with the Rule Requirements
If a generator or TSP believes it has good cause for not complying with a specific weatherization rule requirement, it may include within its winter weather readiness report a notice asserting good cause for noncompliance with the winter weather preparation requirements of the rule. In the event that the Commission disagrees with an initial assertion of good cause, the rule provides an opportunity to submit a request for approval of a good cause exception on a temporary or permanent basis.
The rule states that the Commission will work with ERCOT to expeditiously review notices asserting good cause for noncompliance but does not provide a specific deadline by which the Commission must determine the validity of such requests. It is also worth noting that the mere submission of a good cause assertion does not delay the deadline for compliance with the underlying weatherization requirements if the Commission disagrees with the assertion of good cause. In other words, a generator or TSP that has its request for a good cause exception denied will not necessarily be allotted additional time to comply.
ERCOT Required Inspections
ERCOT will be conducting inspections of generators and TSPs to determine compliance with the rule for the 2021-2022 winter season. During an inspection, ERCOT may also make determinations on requested good cause exceptions. In prioritizing these inspections, ERCOT may consider, among other factors, the “risk level” and “vulnerability” of a resource or facility. However, ERCOT has not yet determined the number, extent, or content of these inspections.
If ERCOT finds a generator or TSP to be in violation of one of the rule’s provisions, ERCOT must provide the entity a reasonable period of time to cure any violations. Violations that are not remedied within the cure period will be reported to the Commission, and the entity in noncompliance may be subject to enforcement actions, including penalties of up to $25,000 per violation per day.
Generators and TSPs that experience repeated or major weather-related forced interruptions of service are required to hire an independent engineer to conduct an assessment of their weather emergency preparedness. This assessment must then be submitted to the Commission for review. ERCOT will adopt rules specifying the scope and content of this assessment, as well as the circumstances in which it will apply. To date, no such rules have been proposed.
The new weatherization rules provide significantly tight deadlines for compliance prior to the upcoming winter season. With the impending December 1, 2021 reporting deadline, time is of the essence for generators and TSPs to compile the necessary information to demonstrate compliance with the requirements of the new rule. The Vinson & Elkins energy regulatory team can assist you with preparing the necessary reports, including notices asserting good cause exceptions, in order to mitigate the risk of noncompliance. Should you have further questions or need assistance in navigating compliance with the rule requirements, please contact either Mike Tomsu or Jaren Taylor.
*Steve Weinberger is a law clerk in our Austin office.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.