Paying for Energy Peaks: Learning From Texas' February 2021 Power Crisis

23 Transactions: Tenn. J. Bus. L. 463 (2021-2022), 2022

SMU Dedman School of Law Legal Studies Research Paper No. 564

13 Pages Posted: 8 Aug 2022

See all articles by Colleen Baker

Colleen Baker

University of Oklahoma, Michael F. Price College of Business

James W. Coleman

Southern Methodist University - Dedman School of Law

Date Written: 2022

Abstract

From February 14–19, 2021, winter storm Uri blanketed Texas with extreme cold. Tragically, the severe temperatures overwhelmed the state’s power system. Texas’ power grid ended up more than 20 Gigawatts short of the electricity Texans needed – more power than all of California produces on an average day. Over two-hundred lives were lost and an estimated $295 billion in damage resulted. Yet many had long regarded Texas’ electric power system, and its regulation, as a model for others. What happened? That question is the focus of this article. This article first provides an overview of the severe power outages in February 2021 and the regulation of Texas’ electric power system, explaining why Texas is on the forefront of challenges that will grow more prominent as the world transitions to cleaner energy. Next, it discusses competing electric power business models and their regulation, including why many had long viewed Texas as a model of wise electricity regulation, and why the problems revealed by winter storm Uri will only grow more pressing for not just Texas but the entire world as it transitions to more reliance on electricity and a power grid supported by natural gas and renewables. It concludes by discussing Texas’ path forward and the broader lessons of this crisis for business lawyers and others. The tremendous economic losses of this episode attest to the importance of business lawyers having a basic understanding of their clients’ energy dependencies, the risks that significant power problems could present to their businesses, and the ability to advise them as they seek to mitigate such vulnerabilities.

Keywords: Electric grid, Texas, Electric power-plants, Electric power outages, Winter storm URI – 2021, Grid reliability, Natural gas, Supply and demand, Energy policy, Energy security, Electricity regulation, ERCOT, Electric Reliability Council of Texas, Seasonal power demands, Texas power operators

JEL Classification: K23, K32, Q21, Q31, Q40, Q41

Suggested Citation

Baker, Colleen M. and Coleman, James W., Paying for Energy Peaks: Learning From Texas' February 2021 Power Crisis (2022). 23 Transactions: Tenn. J. Bus. L. 463 (2021-2022), 2022, SMU Dedman School of Law Legal Studies Research Paper No. 564, Available at SSRN: https://ssrn.com/abstract=4182707

Colleen M. Baker

University of Oklahoma, Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

James W. Coleman (Contact Author)

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

HOME PAGE: http://www.smu.edu/Law/Faculty/Profiles/Coleman-James-W

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