Rick Perry's Home State Doesn't Want Him Taking Over Its Grid

(Bloomberg) -- The independent Texas power grid, long a source of state-wide pride, is facing an unprecedented threat.

The grid that serves 24 million Texans has been free of government control for decades because it’s largely self-contained. That autonomy is now being tested by Mexico’s growing power ties with the U.S. and the risk that electricity supplies originating in Texas could end up in other states, thereby triggering federal oversight.

The state’s top utility regulator -- who’s expressed alarm that the grid could lose its ability to govern itself -- plans to take up the issue during a trip to Washington next month. Unless a waiver is granted, the grid operator may end up taking the drastic step of severing transmission ties with Mexico to safeguard its cherished freedom.

“It’s kind of a Texas attitude I guess,” said Peter Hartley, a professor of energy economics at Rice University in Texas. “They don’t want the federal government telling them what to do.”

Hands Off

The grid’s independence has been a staple of Texas since before Rick Perry, now Energy Secretary, was governor. It dates all the way back to the Federal Power Act of 1935, which marked the first attempt at regulating interstate power lines. Utilities in Texas banded together and agreed that they wouldn’t send any electricity outside of the state, thereby guaranteeing their freedom.

Now the fear is that grid upgrades in Mexico and a separate project in Arizona could endanger the Texas grid’s jealously-guarded independence. The risk that power originating in Texas could find its way to California or Arizona via Mexico, or the other way around, has already put the state’s Public Utility Commission on alert.

DeAnn Walker, who heads up the Texas PUC, ordered the grid last month to take preventative steps “in the event that the jurisdiction of ERCOT is at risk,” as the operator is known. The issue is on the agenda for when she meets the nation’s top energy regulators in Washington in February.

The grid operator -- known formally as the Electric Reliability Council of Texas Inc. -- is working with the regulator “and other utilities to help determine the next course of action,” said Leslie Sopko, a spokeswoman. FERC spokeswoman Celeste Miller declined to comment.

Organizations like the Texas Association of Manufacturers and utilities have also come out in favor of maintaining the status quo.

"The state’s ability to set electric policy has provided businesses with reliable, reasonably-priced energy, which is critical to manufacturers’ competitiveness," Tony Bennett, its president, said by email. The association supports “whatever actions are necessary to protect the state’s authority” over the grid.

To contact the reporter on this story: Ryan Collins in Houston at rcollins74@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Stephen Cunningham, Margot Habiby

©2018 Bloomberg L.P.