Overhaul of ERCOT board could replace experts with political appointees

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During February’s deadly winter storm, Gov. Greg Abbott and many state lawmakers quickly criticized the Electric Reliability Council of Texas because several members of its large governing board reside outside Texas.

Many of the out-of-state board members are experts in the electricity field, but resigned following criticism of the agency’s oversight of the state’s main power grid during the storm that left millions of Texans without electricity for days in freezing temperatures.

State lawmakers are now trying to change the way ERCOT is governed by requiring members to live in Texas and giving more board seats to political appointees — changes that experts say may do little to improve the power grid.

One former board member who resigned after the storm, Peter Cramton, criticized legislation for politicizing the grid operator’s board.

“These people would be political types without electricity expertise,” he told The Texas Tribune.

The Texas House has already approved House Bill 10, which would remove independent outside voices on the ERCOT board and replace them with five political appointees. The governor would appoint three of those people, while the lieutenant governor and speaker of the House would each appoint one. None of the appointees would be required to be electricity experts. The only requirement is that appointees live in Texas.

Senate Bill 2, which has cleared the upper chamber, would give the governor five ERCOT board member appointments.

Politicians previously have not had such direct involvement in the ERCOT board, whose members are currently selected in a variety of ways. Some are chosen by ERCOT’s own nominating committee. Others are appointed by companies and consumers participating in the electricity market, with members representing various power sources.

The political appointees replace what are now called “unaffiliated members,” who mostly served as outside expert voices. The other board members currently represent regions across the state that make up the ERCOT grid as well as nonvoting members such as the chair of the Public Utility Commission, which oversees ERCOT.

Some power grid experts have said in legislative testimony, at industry events and in interviews that they don’t see how giving more power to the political class — and making minor tweaks like requiring all board members reside in Texas — could improve the grid operator.

“From the consumer standpoint, we really depend on those unaffiliated directors to make decisions that are in customers’ interest and in the interest of the overall health of the ERCOT market,” Katie Coleman, who represents Texas Industrial Energy Consumers, said at a recent industry conference.

On Monday, the Senate Jurisprudence Committee took up — but did not vote on — HB 10, the lower chamber’s high-priority legislation to change ERCOT’s governance. State Sen. Nathan Johnson, D-Dallas, raised concerns about the bill.

“We represent to the public that ERCOT is an independent agency, and yet under the various options we have before us between the two chambers, we’re appointing members politically,” Johnson said. “Doesn’t that undermine the notion of independence of ERCOT?”

State Sen. Charles Schwertner, R-Georgetown, acknowledged that “having political appointees has pluses and minuses.”

“Sometimes having a political appointee has the added advantage of understanding the political process,” Schwertner said. “Obviously the downside is they’re political appointees looking after the political interests of those that appoint them.”

ERCOT is overseen by the PUC. That entity already has political appointees: All three board members are appointed by the governor. Abbott had appointed all three members of the PUC who were in place leading up to and during the deadly winter storm. All three resigned after the storm.

On Monday, Schwertner argued in favor of HB 10 and asked for his colleagues’ support.

“After the Valentine’s Day storm and failure of our electric system, many Texans were alarmed to learn that many members of ERCOT’s board were not residents of Texas and were not experiencing many of the same hardships as many of our fellow Texans were suffering at that time,” Schwertner said. “Further, many legislators were frustrated by the lack of accountability on the board, especially regarding the members of the board that would be unaffiliated members.”

Cramton, the former ERCOT board member, is also an economics professor at the University of Cologne in Germany and an expert in electricity market design. He was one of the unaffiliated ERCOT board members who mostly served as outside expert voices.

“I doubt you could find an expert anywhere that would say eliminating the independent experts from the ERCOT board was an improvement,” Cramton said.

Another provision of both chambers’ legislation requires all board members to reside in Texas, which would prevent experts like Cramton from sitting on the ERCOT board in the future.

“I cannot imagine how this change could improve resilience to winter storms,” Cramton said.

Former PUC Chair Pat Wood, speaking at a recent industry conference alongside Coleman, echoed some of Coleman’s and Cramton’s concerns.

“You had the independent voice there to check market participants,” Wood said.

Caitlin Smith, an energy adviser in Austin and an ERCOT expert, raised concerns about political appointees who aren’t subject matter experts having access to critical information.

“If you’re looking at information and you don't understand what it's saying, I think that increases the risk of that critical information,” Smith said. “That’s for both keeping the grid on and preventing things like Enron.”