Texas power grid out of emergency conditions, ERCOT says

The state's power grid manager said no additional outages were reported overnight, though some generating units went offline.

Video Transcript

LESLIE SOPKO: Good morning, everyone. I'm Leslie Sopko, the Communications Manager for ERCOT. Joining me this morning, our ERCOT President and CEO Bill Magness, and our Senior Director of System Operations Dan Woodfin. At nine o'clock this morning, we officially ended rotating outages throughout the ERCOT region, and we continue to work through the process of ending our emergency conditions. At this time, I will turn it over to Bill and Dan, for an update.

BILL MAGNESS: Thank you, Leslie. This is Bill Magness, ERCOT President and CEO. With me is Dan Woodfin, our Senior Director of System Operations. ERCOT does expect, as Leslie said, to come out of emergency operations this morning.

We have levels of emergency operation, and the one that involves load shed, we are already out of. So that part of this is over, and we expect we'll come completely out of any emergency operations later this morning and return to the normal operating conditions we had before this storm came at us. There's enough generation in the system now to return to those normal operations, and we don't believe we'll need to go back.

Now, folks are getting their power restored at a very regular clip now. There may still be some outages that have to do with fallen trees or broken equipment that are out there in the electric company systems, and they are out there managing those as well. But any outages that were associated with the rotating outages that ERCOT had to order should be getting back very soon.

First, as we are able to announce the end of this emergency, I really want to acknowledge just the immense human suffering that we saw throughout this event. When people lose power, there are heartbreaking consequences. And as a company that has the job of trying to do everything we can to make sure that power is provided every day, 24 hours a day, seven days a week, watching those heartbreaking conditions over several days was terrible.

The bottom line, I guess, while we had to watch that, and fellow Texans had to experience it, when we had to make tough decisions, when the storm came in, ERCOT really didn't have a choice. We lost about 40% of the generation that we expected to have on the system. That's 40% of the supply to serve the demand customers needed, and customers' demands were exceeding anything we had ever seen, ever forecast, ever expected, anything, more than a lot of people in Texas have ever experienced as this massive storm came at us.

And the choice we had, we could manage the best we could with 60% of the supplies, and the only way we could do that was to reduce that demand. And the only way we could do that was to have the outages, and those outages, we hope, they're ending now served a purpose as difficult as they were. And that purpose is we don't act. We do nothing.

We could have a much worse event, and I know it's hard to imagine a much worse event right now. But I guess, as we are coming out of the energy emergency, if we had not taken that action, I'm pretty sure that we wouldn't be sitting here today talking about ending outages. We'd be talking about when we might estimate weeks or months from now that we'd see the power system repaired. And we'd still see people suffering from outages, just as they did under the outages that we directed.

So doing nothing was not really an option to protect the safety of the electric system and get us back on our feet as soon as we could. And ERCOT doesn't run power plants, or we can't make them work if they get broken in storm damage or otherwise. There have been people out in zero degree temperatures who do run power plants, fixing the problems nonstop since Sunday night.

And the reason that ERCOT is able to come back and say we don't have emergency operations anymore is because of the courage and activities of those folks, who went out on icy roads, who brought people to bear on a problem during one of the worst weather events in Texas. There's a reason we're back is those generators were able to overcome the problems they had caused by a historic storm and get back on the system. So we appreciate their efforts as well and know that the situation we were in was a difficulty faced by generation owners. It was faced by transmission owners, as well, as the storm affected every part of our industry.

And I know we'll sort of begin the process of analyzing and looking at the situations immediately. There are legislative hearings scheduled for next week. We have an ERCOT board meeting set next week to delve into this issue, and look at what happened, and I think look at what could be better. Because Texas can't afford for this to happen, again, and there are a lot of ideas about how to make that different.

And we want to participate in the process of considering those ideas, and if there's things we could do different that are better, we want to hear about it. Because we don't want an event to occur like this either, but we also have to always have in mind that we have to protect from that worst blackout. So the governor's idea yesterday of putting the winterisation of power plants into the emergency charge to the legislature, it's a good idea to begin discussing that issue. And I'm sure as we get into legislative hearings, there are going to be a lot of other proposals for things that can be done to try to avoid this in the future.

And that is a key priority for us just to avoid this in the future. However, if the legislature or policymakers tell us to implement it, that's what we'll do, because that's what we do. With that, I think I could open it up to questions.

LESLIE SOPKO: OK, thank you, Bill. As a reminder to everyone, if you do have a question, please either submit it through the chat function, or you can text me if you have my cell phone number. And we will get through as many as we possibly can. So the first question is from Argus Media.

BILL MAGNESS: Leslie?

LESLIE SOPKO: Yes?

BILL MAGNESS: I'm sorry to interrupt, but we just got the notice from our control room that we have left the last stage of emergency operations. So we are completely back to normal operations as of now.

LESLIE SOPKO: That's excellent, excellent news. Thank you. No, thank you very much for bringing that to our attention. OK, so as Bill said, we are completely out of emergency conditions right now. And with that, I will begin our question and answer session. So the first question from Argus Media, when does ERCOT expect it to restore power to a large industrial facilities that are voluntarily offline, specifically, energy infrastructure, like refineries and LNG terminals?

BILL MAGNESS: I think-- and Dan can correct me if I'm wrong. But I think now that we're into more normal operations, the workings of the market will sort of determine when people decide to use power and what they're willing to pay to be on the system. And we don't have as many concerns about large demand coming back into the system. So those will be arrangements between the power companies and the customers, whether petrochemical or other industrial customers going forward.

DAN WOODFIN: And we've been talking with the transmission operators, and they've been working with the industrial facilities that are hooked up to their wires and developing plans for coming back. Some of them have already come back. Others may be longer out into the future over the next week or so. It just depends on what their schedules are, but we're definitely all trying to work with those facilities to bring them back online when they want.

LESLIE SOPKO: OK the next question is, does ERCOT know how much gas fired power is offline or was offline at the peak of the outages due to a lack of natural gas pipeline

BILL MAGNESS: You know, I don't think we have the data in front of us about that. I mean, certainly, we got reports that there were natural gas supply issues for the gas generators. I don't think we have anything that we've developed yet that breaks down exactly what the generators told us was caused by natural gas supply issues and what was caused by mechanical issues that were caused by the storm coming in.

DAN WOODFIN: But over the next very soon, we will be sending our guys out to each plant to find out exactly why they went offline, because that's really important. I mean, fundamentally, this is a-- you only have this much generation that;s available regardless of what the reason was. That's all the load you can serve. You can't serve more than that. So as generation went from here down to here for whatever reason, load had to go down there, too, because you can't serve more-- just with any kind of product, you can't serve more consumption than what you have available resources to serve it. If you don't have enough, [INAUDIBLE]. And that's the hard thing about this is that the reason we had to do those reductions was because that's just all the supplies that the generators were making available for us to use.

BILL MAGNESS: And, Dan used the term RFI. I'll just mentioned that. That's a request for information, where we'll send information requests out to generators on issues that we're investigating to determine the root cause analysis and things like that for any event.

LESLIE SOPKO: Dan, if you could scoot into the frame a little bit more, a little bit closer to Bill. There you go. Thank you. OK, the next question is from KPRC. Does ERCOT believe it received an accurate forecast, and can you provide copies of the notices sent to generators starting on February 8?

BILL MAGNESS: Leslie, I'm sure you can arrange to have copies of the notices sent out.

LESLIE SOPKO: Yep.

BILL MAGNESS: And an accurate forecast. Well, the weather forecast that we were relying on, I don't have any reason to believe was inaccurate. Because the temperatures as the week went on last week, and all the weather forecasts just kept declining, and the expanse of the storm expanded, and our meteorologist was telling us probably by midweek, last week, we hadn't seen anything strong in a long time, and then it just continued.

The temperatures continue to drop. So by the end of the week, we were running our forecast ahead for this week and seeing that, as we've said before, you know, we expected to be in some sort of rotating outage. Monday morning to Tuesday morning was certainly a risk that we were prepared to manage, but it was when we saw the much larger loss of the generation that we had the much bigger problem. Rather, Sunday night, Monday morning.

So I don't think that the forecast because of the weather was all that off. I don't think the forecast of the demand was all that off, because we were seeing extremely high demand. And I think we forecast generation really by just what generators tell us they can do, what's available on the system, what they plan to be running.

And looking at what they plan to be running, they understood there was a big storm coming, and we needed all hands on deck and all power on the system. And that's what they were planning to provide, but the storm came in. And lots of different issues occurred that have now been resolved, so they can be back on the system. But during the period when they had to go fix those things, that was a central problem.

LESLIE SOPKO: OK, the next question. Does ERCOT have any authority over the winterisation of power generation facilities, or does that authority lie with a separate governing body?

BILL MAGNESS: Authority over that really falls to the North American Electric Reliability Council. They are the reliability rules setter. That's a national-- actually, an international standards included national standard setting body that has enforceable rules. They can be enforced by very large penalties. We're subject to those rules as well. We're not a regulator. We're more the traffic cop, the air traffic controller of the power flow on the system, and we don't set policy or rules. We are really more in the business of following them than setting them.

LESLIE SOPKO: OK, the next question related is from the Texas Tribune. Does ERCOT have a sense of how many power plants or how much generation capacity was weatherized before this disaster? And of those plants, did they remain online during the storm?

DAN WOODFIN: So in theory, all of them are weatherized to some extent. So the question is, now, how well they were weatherized, and I think that's one of the things that we're going to have to look more at is, did they trip because of lack of weatherization? We'll get that through this request for information to find out kind of what was going on there. I think that's definitely something we're going to be looking at.

BILL MAGNESS: And we've seen progress on weatherization in the last 10 years since the 2011 event, and generators have spent time and resources to prevent those sort of wind related problems. But I'm sure those generators, now that they were able to get up and be back in action, are looking at what happened that caused them to trip out during this time And taking measures to repair that, to address that. We're still in the winter. So I think the responsible generators are out there looking and fixing those things that can be fixed to continue to operate at full capacity when we have other events, where we need all hands on deck.

LESLIE SOPKO: OK, and a follow up question. Can you explain if there were any other factors other than lost generating capacity in why the rolling outages were unable to effectively roll?

BILL MAGNESS: Yes, the main reason they were not able to effectively roll is that the amount of demand that we had to put into outage because of the imbalance in supply and demand, that amount of demand was so large that when we directed the transmission companies, hey, we need you this number of megawatts, at one point, it was up to 20,000 megawatts on outage. You know, the way you do rotating is you have a number of megawatt, number of household neighborhoods that are going to be served that you need to put an outage, and you can move those to different parts of your service territory. This was such a large block that it made it very difficult for the transmission providers to move them, while they were still needed. So it was harder to rotate them.

So as the amount of rotating outages, rather, the amount of megawatts that we're needed to balance supply and demand diminished, they could more easily rotate. But for most of the time, we were facing this crisis. That was really difficult for them to do.

DAN WOODFIN: I think this is probably a lesson learned for the industry, not just ERCOT, but kind of internationally that, as we start to now think through some of the process improvements that need to be made, there's a lesson learned that maybe, well, nobody wants this to happen ever. Because we've seen the outcomes of it, but maybe you need to have a higher percentage of your demands as capable of handling these rotating outages because of the potential. If you try to avoid the potential for those kinds of massive load events, you may need the ability to rotate more of your load rather than a smaller amount that they were able to do during this one to try to avoid it.

BILL MAGNESS: I mean, it is always a very difficult issue for the transmission providers. You know, when we make that directive in order to keep the grid safe and out of blackout, we're asking them to execute it. And the plans they make have to be sensitive to you don't want to turn off circuits that serve hospitals or other critical care facilities.

So managing around those critical care areas, where you really don't want to turn off power, leaves you less and less area to execute these when you have to do them. Dan is saying, it's something that I imagine people will look at having seen an outage of this size had to be executed, while still keeping abreast of you have to have critical care customers protected. And then how do you balance that out to make sure you can do both?

LESLIE SOPKO: OK, the next question is from Texas Public Radio. Climate change is making extreme weather events, like the storm we saw this week, more probable. Does ERCOT recognize this reality, and will it prepare for a storm even worse than the one we just saw?

BILL MAGNESS: Well, we do assessments of what we expect in coming seasons. And in that assessment, we take a look at all the weather data going back. And I think as we look at having seen a storm that was so much enormously more demand than had been seen before, that certainly sets a new standard.

And then, I think, we'll be looking at those estimation processes in general. I mean, as we sort of go back and say, what can we do to recognize what we saw here, and how should that inform the way that we provide the information that we want to be as reliable as possible, as meaningful as possible, but also, take into account potential extremes. So I think we'll be looking at a lot of different things and working with the market participants to figure out those questions.

DAN WOODFIN: And probably not just us, but also, there are other industries that this is going to be a storm that apparently beyond water systems and the natural gas system, there's going to be a need for all of them to consider this kind of storm or beyond now that we've seen that this kind of thing can happen. And how can they reduce some of the outages that they saw? So it;s not only ERCOT. It's the generation on ERCOT, the water systems, the natural gas system. I think it's going to be important for all of us from what limited news reports I've seen on this have time to look at that are going to need to improve.

LESLIE SOPKO: OK, next two questions are from the Dallas Morning News. What percent of available natural gas generation units were offline , and what percent of available wind units were offline?

DAN WOODFIN: So I think we can answer part of that question, and it was roughly half of the installed capacity. For the natural gas, we don't have the different fuel types broken out at this point. But that question has been asked twice now, this morning, and that will be something we'll-- as we started into more of the investigation on this, we'll try to break that out and provide the numbers to Leslie, maybe as quickly as we can.

BILL MAGNESS: And since you mentioned it, why don't you mention what's installed capacity?

[INTERPOSING VOICES]

DAN WOODFIN: Sure, so the install capacity of a wind turbine is kind of the amount that, if the wind was blowing kind of full out, the amount of consideration that it would be able to produce. Typically, though, from our capacity planning perspective for a wind turbine, we count about 30% of that capacity. Because that's typically how much the wind is blowing. What percentage of the power can be produced by wind turbines during peak conditions from our kind of future looking capacity assessment? So we're really not counting. We've got roughly 30,000 megawatts of wind, and we don't count all of that for meeting peak during peak conditions, peak demand during peak conditions. It's about a third of that.

LESLIE SOPKO: OK, and their second question was, did some cities have to increase their percentage of load shed? Because other cities weren't able to rotate.

BILL MAGNESS: You know, I don't think we have an answer for that, because those plans for how you conduct an outage are managed by the transmission utilities. And I really don't think we could speak to how those were distributed amongst parts of their territory. Some of their territories have many cities in them. Some of them are focused in one city, and we just really don't have any data on that.

LESLIE SOPKO: OK, the next question is from Reuters. There are reports that wealthier areas of Dallas received power, while other areas faced outages. Can you comment on that, and can you detail how decisions are made around which areas and when go through rotating outages?

BILL MAGNESS: I'd say similar to the last question, once we direct that rotating outages or outages, as we've seen here, that aren't rotating needs to occur to avoid a blackout and maintain system security, we issue that direction to the utility. And then they manage how the outages are distributed within their area, so I couldn't speculate really about exactly what went on as far as the distribution of those went or what the details of those plans are. Those plans are put together by those utilities, and they drill on them and execute them. So really, they're the ones to speak to that.

LESLIE SOPKO: OK, the next question from Jack Howland. Yesterday, ERCOT officials mentioned the winter of 2011 was used as a basis for worst case scenario limits. Did ERCOT consider the impact climate change can have on winter weather making winters more severe than in the past?

BILL MAGNESS: I don't know. I thought we had addressed that. I think we're looking at any number of scenarios as we examine how our forecast reports are put together. 2021 certainly puts a marker down for the kind of severe weather that we really had not seen, and we're going to have to examine everything about that and then what implications, what we've seen for the future.

LESLIE SOPKO: OK, the next question. Texas Railroad commissioner Wayne Christian says ERCOT failed to maintain a backup supply of electric generation. What's your response?

BILL MAGNESS: There is not a backup supply of generation, but that's really caused by the way our market is structured. The way the energy only market is structured since the, I guess, passage of SB Seven has been called energy only. It doesn't involve having a set of units that you don't use, except in a backup type situation.

And I think what we were seeing out on the system as the storm came in was just about every generating unit that could was running or wanting to run, and that included backup generation from some industrial facilities that put that power that usually is used to run their systems on the grid. So there's not a backup system maintained by the state or maintained by the generators. But that's been a part of the structure of this market that you rely on, generation that's out in the system. And if it's sufficient, you should be able to meet your demand.

DAN WOODFIN: And in this case, because we lost 40% of the generating capacity on the system, you would have had to have a backup of 40% of your expected peak demand. That's not even something that's been talked about the past. That number has to be reduced. We've got to keep the generators available.

BILL MAGNESS: And I just add, too, and I think probably obvious on what I was saying earlier about the efforts the generators have made to get the stuff fixed. The backup generation would be just as vulnerable to the weather damages that we saw. If you're backup generation was gas, you might have gas supply issues. You might have mechanical issues caused by a storm blowing through. If it was wind, you have freezing turbines. There didn't seem to be, with this 2021 storm, any kind of generation that was immune from damage because of the way this came in over the last week.

LESLIE SOPKO: OK, the next question is from NBC Dallas. The governor said, yesterday, ERCOT failed. How do you respond to that comment?

BILL MAGNESS: Well, I think the assessment of how we performed and how everyone performed in this event related to it is what we're going to be looking at starting next week in the legislative hearings. I think that's something that will be examined when our regulators, the NAERC, I mentioned earlier. NAERC is certainly going to have a full examination of every step we took and whether it complied with reliability rules. And that process is starting, and we expect it to be full throttle for quite a while. Because this was absolutely a major event, and I just feel like I do have to say that, certainly, there are always things we can do better.

But the decision that the operators made at 1:25 on Sunday night, Monday morning, to protect the system, given the dire conditions they were seeing, that's a decision I'll defend. And if the failure is in that, I guess we'd have to disagree. But I think it's a failure within other areas. Certainly, we'll talk about anything that we did that we can improve.

LESLIE SOPKO: OK, next question. Some state lawmakers are saying the situation shows the state needs to build more natural gas plants. What are Dan and Bill's response to that?

BILL MAGNESS: Well, again, I think, as we start the analysis and investigation process, there may be things that people learn that indicate various things about the resources that we have or the resources that we ought to have in our market system. ERCOT manages the grid that is presented to us, and that grid that's driven by private investment decisions is composed of lots of different kinds of generation. So I think as policymakers look at how to avoid an outcome like this in the future, certainly, there will be issues about all aspects of the power system on the table. And obviously, we'll participate in those discussions as much as they want us and implement the rules they make.

DAN WOODFIN: And in this case, the gas plants that remained online and weren't tripped offline either because of weather conditions were having trouble getting natural gas for their plants. So if we had a higher, let's say, percentage of natural gas plants that we were depending on, there would have to be a commensurate increase in available gas. And since a lot of the problems with the gas plants was all the way back to the wellheads that we're not weatherized, putting gas from the ground into the pipes that then could be used for heating and for these plants, there's going to have to be an increase in that process in those systems to make sure that you've got enough gas for those increased number of plants. So it's interrelated, and you have to solve the-- you can't solve the problem just with one thing. You'd have to solve the problem with multiple ways of doing that if the policymakers want us to go down that path.

LESLIE SOPKO: OK, the next question. To what degree do you think the events of last week are the results of systemic problems in how ERCOT runs the grid? Namely, there is not enough incentive for backup power during weather events. I think you've sort of addressed that, but I'll let you respond directly to it.

BILL MAGNESS: I guess to sort of pick up on what I was saying earlier about the structure of Senate Bill Seven and the restructured market, it may generate a competitive business. It took it out of the old sort of monopoly regulation framework. And very soon after that SB Seven was passed by the legislature, we saw a dramatic increase in capacity. I mean, we saw new capacity built.

A lot of it was natural gas, and I think the competitive market has driven investment decisions that have given us a generation fleet that has managed the highest summer loads, the highest summer peaks we've ever seen, you know, year after year. So there is generation on the system more efficient to manage the loads that we're seeing. I just have to say that the challenge here was not so much that there wasn't enough capacity, like I was saying earlier.

When we were planning ahead for the storm, the capacity appeared to be sufficient, except in certain periods, where we saw the demand exceeding it, like Monday morning and Tuesday morning. But for the most part, it was sufficient. What happened is when that generation was not able to supply 40% of the generation that was planned because of all the things associated with the storm, that's what really caused the issue. So I don't know I agree there are insufficient investment incentives for backup generation. But I just think, as you look at this event, so much would have to do with this event, and the sort of catastrophic weather, and all it did to the power system, as Dan said before, you know, to the road, to the water system, where we're continuing to have so many issues.

LESLIE SOPKO: OK, the next question is from NBC in Dallas. On Monday morning, you went from a level two to level three emergency in a matter of minutes. Can you describe what happened in those minutes? What was it like in your control center, and what exactly led to such a sudden move from level two to level three?

BILL MAGNESS: I'll start. I think the reason it moved so quickly is that those levels are determined by certain factors we're seeing on the system. So if you're in energy alert level one, there are certain things that trigger that. Two and three are the same, and there are responses that are triggered by those levels with rotating outages being the last one in the energy emergency level three. So what happened is we declared the emergency.

We started the processes for getting the resources we needed using the tools that are available to us in that first and second level. But the key issue is around 11 o'clock that night, we saw a lot of the generation we've been talking about coming off. The storm really blew in around that time, and there were so many units that had to come off the system so quickly that the frequency was dropping very quickly. That drove us into the energy emergency alert levels, and it just kept moving very quickly.

I mean, that was really what it comes down to is that we have to respond in real time to real things that are happening out on the system, and that's what was happening was we had to go in EEA three. In fact, the NAERC rules that we responded to or talked about before that regulate us on reliability issues demand that you take those steps, and they should. So that's why it went fast, because the situation was extremely fluid and moving very fast. As far as the environment in the control room, you know, people are, obviously, highly aware when we have these kind of conditions. Fortunately, the control room operators remain calm in these situations.

They've drilled on these situations. Many of them are very experienced that have been through difficult situations on the grid. They didn't have nearly as difficult an outcome as this one, but certainly, they've had very big issues. So they were being pretty calm, but they took the steps they needed to take.

And they weren't afraid to do them, because they knew the consequences of not doing them. So it wasn't like there were people running around, yelling and screaming. People were calm and doing their job. Do you have anything to say?

DAN WOODFIN: No, that was a good description.

BILL MAGNESS: All right, we were both there, so you saw it differently.

LESLIE SOPKO: OK, the next question's from Salvador Cruz Fernandez. Are customers still being asked to conserve power?

DAN WOODFIN: Now, Bill mentioned earlier that we've moved out of emergency operations as of-- I think it was 10:35. So now, that also removes the conservation request, I think, at that time.

BILL MAGNESS: Yeah, and we only request conservation from customers when we really feel like we're nearing emergency conditions. We put out a conservation request Sunday just because we knew the storm was really coming in Sunday night, Monday, and we discussed the need for conservation at the press conference at the state operations center on Saturday. We're just trying to get Texans to realize this was for real, and there really was a need to conserve.

And I don't know. I want to thank people who did. Because even though the conservation efforts were not able to stop us from having the event that came, because we lost so much of the supply side, it can make a difference. And it often has made a difference when we've been in tight conditions before. It can prevent us from having to go into energy emergencies at all.

So when we request it, we do it sparingly, because we don't want to be crying wolf at people. But when we request it, we really do appreciate when people take it up, and we heard from people who were. And it's very much appreciated, because it makes it different in how we can manage difficult situations.

DAN WOODFIN: Probably reduce the amount of load of their neighbors-- or not their neighbors. But other people and other Texans, the amount that we had to turn off to make-- because we have this amount of generations. Somehow, we had to get down to that level. If people hadn't conserved, we might have had to turn off more Texans, and that would have been bad. So really, it did help a lot.

LESLIE SOPKO: OK, the next question is from Maya Shea from ABC 13 in Houston. What do you say to Texans who have lost family members, homes, and livelihood? They are angry, and they think ERCOT should pay. Also, do you believe ERCOT should be treated as a private company or a public entity?

BILL MAGNESS: As far as the first part, you know, we share the sadness and grief that came to our state with this event. Certainly, the electric outages were a huge part. Before that, we were seeing wrecks on the highways with ice. We were having water system issues. Certainly, it's just been a very, very difficult period for the state.

And I think as far as should ERCOT pay, I guess what I'd say to you is we're going to continue to try to explain the event, what we saw, what we did, the actions we took, and we're subject to policymakers, and leaders, and how they want us to operate. And if they're saying that there's something that's really got to change from looking at the totality of what we did, we'll certainly try to change it or take any other action we're told to do to manage the issues that they're seeing. Is there a second part of that, Leslie?

LESLIE SOPKO: No, you covered them both. Thank you. The next question, I'm not sure you can answer, but I'll read it. I realize it's still early, but can you give us any sense of how much an additional cost it would be for generators to winterize their facilities to the degree that would be needed to withstand another extreme cold weather event, like the one we saw this week?

BILL MAGNESS: Yeah, that's data we don't really have. We don't run power plants or operate them. We don't winterize them, so it's not a part of the business that we go out and do. So I don't think we could really provide anything all that useful in that.

LESLIE SOPKO: OK, the next question from Eva Ruth, Moravec. How does ERCOT leadership think the federal government responded to this crisis? Was it sufficient and/or expected?

BILL MAGNESS: Well, to be honest, I can tell you about the federal response that we were engaged in. I'm sure as this event is going on, while we've been focusing on getting the power back on, there have been other parts of the tragedy caused by the weather that you might be referring to. But I don't really have information on those. We did ask the United States Department of Energy for an emergency order. Governor Abbott encouraged us to get out there and get I think especially Senator Cornyn were instrumental in helping us achieve very quickly, I think, basically, within 24 hours, and what that allowed was for federal rules to be set aside just for the time that we were in emergency conditions, which gave a lot of the-- or something. I don't know how many.

I don't know the number. We'll get that data as we investigate, but generation units to run at full power if they were able. So that certainly was useful, and we appreciate the Department of Energy's cooperation in making that happen and making it happen extremely fast.

I know our legal counsel, our general counsel was in conference calls at midnight and 1:00 AM, working through the language on that, and getting it done. And I certainly appreciate Governor Abbott and his administration in pushing that through, so that was helpful. That was the main federal involvement that we are aware of in the part of the process that we're involved in.

LESLIE SOPKO: OK, the next question from the Montgomery County Gazette. Can you walk us through when you will be presenting something to the legislature regarding this event?

BILL MAGNESS: Yes, there are two legislative hearings, one in the Texas Senate and one in the Texas House, set for next Thursday. So we will be presenting at both of those hearings.

LESLIE SOPKO: OK, the next question from Texas Monthly. It seems that other states, including Oklahoma and New Mexico, suffered the same weather as Texas, but with only a tiny fraction of the outages. Is there something Texas can learn from those states about how to run a reliable grid?

BILL MAGNESS: You know, honestly, we haven't had the time to look much further than the work we've had to do here, but we'll certainly investigate what we're seeing all over the country. I think when our regulator, the NAERC, the reliability regulator comes in, certainly, it's something they'll look at. But I think, if there's lessons learned from any of our neighboring power areas, it's something we'll certainly look at and try to improve from.

LESLIE SOPKO: OK, I think you may have addressed us, but we're still getting questions. So I will ask it. Since you were working off of a 2011 and 2018 emergency plan that failed, going forward, how will you plan to have enough cushion or reserve in a winter storm to avoid this?

BILL MAGNESS: I guess let me back up a little bit. Because when we talk about 2011 and 2018, 2011 was when we saw what's been the worst weather up until this week, winter weather in Texas. So we've sort of set it is a marker for, well, we know it can get this cold. We know we can see these kind of conditions and then fed that into the computer models and everything that we do when we look at forecasting and planning.

In 2018, we saw some very severe or significant weather that year that rivaled 2011 a little bit. But the system managed to go through it, and we felt like some improvements had been made across the system since 2011 and were encouraged by that. So it wasn't that there were models, I guess, or market structures, or anything that 2011 and 2018 were not ways of managing the system.

The system is managed according to law and regulation, federal and state. And those regulations are updated at certain intervals, and we implement those. So I think we were operating the system we believe according to those mandates, and I don't think there was really a 2011 or 2018 plan that I'm aware of that's any different.

LESLIE SOPKO: OK, next question. When the governor ordered the natural gas operators to stop sending natural gas out of the state, how much impact did that have on a comeback?

BILL MAGNESS: That's something that, I think, you probably need to talk to the gas generators about. Because those supplier relationships between the gas and the gas generators, they're the ones that are going to know what they received. I think, certainly, opening up more supplies as the governor tried to do definitely could have had a significant impact on the ability of these generators who came back, and recovered, and helped us get out of emergency conditions certainly could have helped them absolutely. But we just don't have the data to measure that.

LESLIE SOPKO: OK, next question from Matt Degroote. What was the purpose of raising megawatt prices? I know you said you hadn't seen evidence generators were holding power, but did you all search for evidence of that?

BILL MAGNESS: Raising megawatt prices. Well, I guess I'll start in with the way that the wholesale pricing-- this isn't retail and user customer pricing. But the way the wholesale pricing of power works in ERCOT, generally, is that we pay more when we have scarcity conditions.

So on a day when there's no scarcity whatsoever, prices will be lower. But as the conditions get tight and we realize we're needing more power on the system, then the computer systems that run this are programmed to automatically send out a new price signal that says, this is what you get paid if you produce now. So plants that are not wanting to run at one price level will wait for that other price signal to tire, and then they'll come on. And I think when the public utility commission has set up the rules for how scarcity pricing works and evolved them over time, they've seen that when we get to the higher levels of scarcity pricing, it's very effective.

Because not only do the generators pay attention, because there's an incentive to do so. But they pay attention. Because, if you say you're going to produce at that price and you don't, there's significant financial consequences for it. So that scarcity pricing mechanism is what we sort of rely on generally. So as you see those prices in the wholesale market get higher, it's usually going to be related to the fact that we had tight conditions, and that's the incentive we want to make sure people have to respond.

LESLIE SOPKO: OK, next question. A state lawmaker says these issues aren't new. We saw them in 2011. How hard will you and ERCOT push to make sure changes are made to keep this from happening again?

BILL MAGNESS: Well, we do not want this to happen, again, and any effort, wherever it happens, we're happy to participate in figuring out solutions that keep us from this sort of thing. The fundamental physical fact that you do not want your-- as Dan's been saying, you know, your supply and demand, they get too out of balance. And avoiding a blackout that can last weeks, months, we don't really know how long. It all depends on the conditions that get uncontrolled.

That's a fundamental tenet, because it's just too difficult to try to repair one of those, if you don't to, if you have controls that can keep it from happening. So I think that's going to be a fundamental objective. But then, I think, this phenomenon we saw here having to reduce demand, such that, as we've talked about, outages couldn't rotate. Because the number of outages was as large as it was to contain the problem. I think that's certainly something that people need to be creative, including us, be creative and think about how to manage that.

Because ++ that was one of the big challenges here in Texas was we had told people about rotating outages, but then they could rotate. And then it's like, well, what's going on here? And that's certainly part of the frustration and difficulty of it. But until that number of megawatts have been put in outage, it wasn't clear that was going to be a problem. But once the transmission providers had to implement it, it was a very big problem.

LESLIE SOPKO: OK, the next question is from Eleanor with the Fort Worth Star Telegram. Governor Greg Abbott has called on state lawmakers to mandate the weatherization of power generators. Is this something ERCOT supports, and what specific measures would you all like to see implemented for weatherization?

BILL MAGNESS: I think it was a really productive step to get the legislature to direct the legislature, encourage them to look at that right away on an emergency basis. Because we have been through an extraordinarily difficult-- we're still going through Texas in the power, water, and all these areas an extraordinary emergency situation. And it's worth getting on the question of, how do we prevent this in the future right away? So I think suggesting that we look at those weatherization rules is a great idea. I think the specific measures, it kind of comes back to-- we were talking about it in earlier questions, where we don't run power plants.

We don't pretend to know what's the best thing to do in a particular kind of wind turbine, gas turbine, nuclear plant. There are experts in that, and they work at the power plants in Texas. Those are the ones who got out in the middle of the night to fix the plants and got us back in business. So I think, really, working with those folks who have the expertise on the specific measures-- that part, you asked about. --I think is really a good place to look and determine what makes the most sense.

LESLIE SOPKO: OK, another follow up from Texas Monthly. Had there been a full blackout of the sort ERCOT was working to avoid, what would the procedure have been for resuming power from that? Please walk us through the steps that would have been involved.

BILL MAGNESS: I'm going to let Dan handle that, it's a process called Black Start, and I'll tell you that we have never had to do it in Texas. It's had to be done in other regions, but I'll let Dan kind of walk through our process on it.

DAN WOODFIN: Although we absolutely hope that never happens, we actually have a plan in place to restart the system if it ever went black. And actually, we drill on that plan with the transmission operators and generation operators once a year. So it would be very painful, as Bill has been saying, but there is a plan to do it. And it starts with starting up diesel generators at specific power plants around the state.

Those are used then to energize lines or to energize certain other power plants and then gradually adding load customers around the power plant starting to energize transmission lines, and customers around power plants, and building it out from each of these 12 sites around the state, starting to build out. There's a whole lot of switching of transmission lines that has to go on. You have to open all the breakers in a substation and then close in on a particular path, close in on another path. Ultimately, over time, you link all 12 of these islands together.

And then once you get those, you have to open other lines, and start to add more load back, and add more generation back. And it's just an incredibly difficult process and takes time. And at all points in time, you're having to balance. Because as you add each generator back, you're adding you're adding load. You've got to inch up, inch up, inch up and maintain that balance all the time, so the generators don't trip offline. And what we've seen in some of the simulations is that what happens, there will be a go back.

You'll actually start to build the system back, and then that island will trip back out. And then you have to go inch back up, again, and gradually, you get the whole system built back. And there are other things that will trip generators up too. You've got to maintain the voltage on the system, and I'm kind of being a nerdy engineer here. But to describe just how difficult that is, it's a process, although, we have a plan for it just in case. We don't ever want to do it.

BILL MAGNESS: It requires a lot of personnel being out at places, and doing physical connections, and doing all this when the power is not on. And it's icy in this case, and it's icy in this case, if we had to start that process this week. So it's not a simple process, but there is one. And again, that's why we drill on it in case we ever get into that situation, but that's exactly the kind of thing we wanted to avoid early Monday morning.

LESLIE SOPKO: Yeah, from Mark Watson at Plats, how low did the frequency dip on Monday morning? He saw that it might have gone as low as 59.3.

DAN WOODFIN: It was a hair above 59.93, yeah.

BILL MAGNESS: 59.3.

DAN WOODFIN: I'm sorry, 59.33, or 59.32, or something like that.

BILL MAGNESS: And it's supposed to be at 60, and there's not a very big tolerance. It's not like it was at 60. Well, why didn't you just go to 30? You might explain, actually, like you said 59.3 is low. So let's put that in some context. What would have happened if they had gone to 59.1, 58?

DAN WOODFIN: Yeah, if that frequency goes down too far, then generating units aren't designed to operate at those frequencies. So if let that supply imbalance, the generators start tripping loads up here, generators start tripping load-- you have to get the load down to that level and keep it balanced. As generators continue to trip, if that frequency gets too low, that in and of itself actually causes more generators to trip offline, which makes the frequency go lower and more generators trip.

Well, it's called a cascade, so there is a safety net, where some of that load shit would have happened automatically. But if you continue to lose generators or you lose too much potentially too fast before that automated load shed happens, the safety net might not have fought it. So that's really kind of the process of what could have happened.

BILL MAGNESS: The other thing is 59.3 is low, but it's been there because of the speed of the activity, as you were saying, just like the question earlier about why didn't we go into energy emergency alert so fast. It was the dynamics of the system were shifting so fast with this horrendous weather coming in, generators dropping off, and as the weather came in, the load continuing to increase. So it was that combination of things going very quickly that took it down there, but that's when they had to act.

DAN WOODFIN: And ultimately, as I said earlier, as generation tripped offline, that's all the load we can serve. There is nothing you can do to serve more load if that's all the supply you've got. So supply continued to decrease as these generators tripped off. It's physics. You can't serve more loads than the amount of generation that's available on the system. So for whatever reason, these generators were tripping offline. We talked a lot about the reasons.

You still serve more loads than the amount of supply you've got. It's just physically impossible. So regardless of what the mechanism is by which the load gets, whether it's us doing it in a controlled way the way we did, whether it's the safety net tripping the load off, or whatever, you're going to get down to the level that you've got generation to serve it. And for as long as you only have that amount of generation, you can't serve more load. So that's really part of the problem.

BILL MAGNESS: I mean, it's kind of like if you said you plan to take a 50 mile drive. The gas you had in your car would only get you 10. You're taking a 10 mile drive. I mean, so if we had done nothing when we saw that much generation come off, we would have tripped into all these problems Dan talked about. But if we'd done nothing, there still would have been an enormous amount of outages. Because, if the only available generation at that point in that night was-- I don't know. --say, 45,000 megawatts. Don't quote me on the number, but it was that much. Then we could serve demand up to 45,000 megawatts, but the demand was much higher. So one way or the other--

DAN WOODFIN: If everybody was hooked up, if all the lines and consumers were in demand, it would have been much higher.

BILL MAGNESS: Yeah, so that's a limit on the system.

LESLIE SOPKO: OK, we're about it 11:30, so I think what I'll do is I'll just go ahead and try to ask maybe two more questions. And then, Bill, if you want to make any final remarks before we conclude that call, I will turn it over to you for that. The next question that I'm seeing is, depending on what you find in those RFI investigations, who has the regulatory power to take action on the findings?

DAN WOODFIN: Yeah, I think we'll have to-- I don't know if there is any one. It depends on what the finding is, I guess. If there are things-- the North American Electric Reliability Council, or NAERC, has lots of reliability standards for all the different operating entities in the electric systems, generators, transmissions, ERCOT all have to meet. So if there's something that happens that was in violation of one of those standards, then NAERC and the Federal Energy Regulatory Commission would have regulatory authority over that. If there's something that folks did that was in violation of the ERCOT protocols, that would be the public utility commission and the legislature that would have kind of a regulatory oversight over things that are violations of the protocols. So I think those are the two real entities there.

- Yeah, well, I should add, too, since we're talking about request for information, RFI. We ask those to get information too. I mean, it's not so much to find violations on our part. Because when there's events like this, there are market participant groups made up of experts. Many of which have tons of experience, particularly in our market.

And we take these event analysis to them, and they're even more technical than he's talking today, and go into tremendous detail about what we saw. So people rely on us to have the ability to gather everyone's information, and when it's confidential, keep it confidential, but still be able to make these examination and do the lessons learned. And we participate in that.

But we have market participants, who are generators, transmission providers, retail providers, all across the board who are meeting regularly in difficult times and good times. Because the market continues to shift and evolve, and we really rely on our relationships with them to develop better practices. So as Dan's saying, I mean, if information ends up being a violation of a federal or state standard, well, that's something somebody has to deal with in the federal or state standard. But we want the information anyway, because it builds the data set. It lets us do analysis and make the kind of improvements that we've been talking about.

LESLIE SOPKO: OK, I may ask two more. What is the distinction between ending the rotating outages and ending emergency operations? What is returning to normal operations mean?

BILL MAGNESS: There are certain things we ask for when we are in an emergency level one, for example, that are not rotating out. Basically, the way the energy emergency alert levels work is you're getting down into, you know, it could be a dangerous position, so you do things. We have programs, where there are certain entities that receive a payment to take their load off voluntarily, right?

It's called emergency response service. And when we give them the call when we're in an energy emergency alert level two, then they're obligated, and there's big penalties if they don't. And they're obligated to come off the system voluntarily to help get the supply and demand in balance. There's something called load resource, which, again, is another demand side set of resources that we take off the system.

So each one is-- requesting conservation, for example, is an EEA level request. So there are things that we do instantaneously once we get into one of those levels, and often, we've been in EEA before and then dropped back. We've been in EEA two before and dropped back into regular operations. So they really do help resolve problems before you get into the worst outcome, but that's sort of the structure of how it goes. And I know there was a second part of that one that I'm not getting into.

LESLIE SOPKO: I think the question was, what does it mean to return to normal operations?

BILL MAGNESS: Sorry, yes. That's it. So when we talk about normal operations, we're not asking for any of those out of market responses, like we need you to conserve, or we want you to voluntarily reduce your load. All of those mechanisms are tools.

They're tools that we have in place for when we need them to try to protect the system. So we're basically saying, we think the conditions now are like they were a week ago, like they were two weeks ago, where you're not noticing anything about your electricity. Because the system is stable. Generation is able to serve at the level demanded by demand or load.

You know, there's nothing to see here. There's nothing we're asking people to do. And in ordinary operations, well, I should add-- I want to be sure to add, as Dan just pointed out, we're still having people returned to service, right? We are not asking for additional load shed.

We're not asking for additional measures. But just to be sure I'm clear, the transmission providers out there who are getting people back into service are still at work, at work on restoring the last of the rotating outages that are still out, as well as working on things that have nothing to do with rotating outages, but were storm damage, like ice or other issues. I want to be real clear on that. It doesn't mean that part's over. That's still underway.

But typically, in ordinary operations, what we mean is ERCOT, as the grid operator, is not asking people to do these things to protect the integrity of the grid. So really, what goes on most of the time is we are watching the balance of the system and managing issues as they come up, like if a transmission line goes out of service and we have to readjust, how the electricity is flowing. We're working with them on that. If a generator unit that's large drops off and threatens the balance, even though it may not threaten entire reliability, we work on that, and how to replace that.

So we're constantly, 24/7, managing various types of issues on the system, and they're with generation. They're with load. For example, one of the ones we've been challenged with over the past 10 years now is intermittent resources that are different than other resources on the system.

We've had to learn how to balance with some resources that are on, and then off, and then on. And we can't really control them, like you can a traditional machine, like a coal plant, or a nuclear, or a gas plant. So we're constantly monitoring, measuring, doing all those things. But most days, it's completely in the background, because the system is stable.

Everybody's doing what they need to do, and the transactions that manage the market are private transactions in a marketplace, where people have profit motives, where people are limited by the things we need to serve the system. I mean, that's basically why. You know, you really only hear from us-- the general public only hears about ERCOT if it's bad news. Because we're the ones who do have to step in and direct that things happen to make those worse things not happen.

So that's what we did this week. Now that we're in ordinary operations, we're hoping that we stay there for quite a while. And we can just manage the challenges on the system that exists every day, but not manage the kind of challenge that had such a cataclysmic effect as we've seen all over the state and continue to see.

LESLIE SOPKO: OK, well, thank you, Bill and Dan. And I know several of you have messaged me about wanting to see those operations messages that went out prior to the storm hitting. If you go to the homepage of the ERCOT website, ercot.com, and then you scroll down to the bottom of the page, you'll see a market communication button.

And down there, you can select operations messages, and from there, you can pull up all of the messages and notices that we sent out prior to this event hitting us. I think with that, we will conclude this call, and we appreciate you taking the time to listen in. And I think Bill might have one more final remark, so Bill?

BILL MAGNESS: I'm sorry. I didn't mean to interrupt. Just since we're emerging from emergency operations, I think this will be the last of these updating calls, and I'd just like to personally thank everybody who has participated in watching these. Like everything else, how we communicate will be subject to review and discussion.

And if we haven't done that effectively, I mean, that's certainly on us. But I really appreciate everybody who's taken the time to get these updates, I hope they provided useful information as we work through this crisis and hope it's made it at least more understandable, if not more acceptable, that we've been in this. So I just want to thank everybody for keeping up with this and as we try to keep the public informed, so thanks.