The Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) recently completed a report on Winter Storm Elliot (Inquiry into Bulk-Power Systems During December 2022 Winter Storm Elliot). Over Christmas week in 2022, 500,000 North Carolinians and 100,000 South Carolinians suffered from blackouts during exceedingly cold temperatures. The loss of power was due to a cascading failure of fossil fuel assets—gas lines and plants alike.
Monopoly utilities are incentivized to build the most expensive assets for which they can get approval, all at ratepayer expense. Profit margins also motivate them to reduce new renewable energy development, despite the fact that renewables are the least-cost electric generation.
Frequently, these monopolies will cite reliability as a reason to avoid clean energy investment, ignoring cheap energy storage and implying that fossil fuel assets are always reliable.
However, as the FERC graph above shows, failures across the Winter Storm Elliot footprint were overwhelmingly fossil fuel assets:
- 63 percent Gas
- 24 percent Coal / Lignite
- 4 percent Oil / Distillate Oil
Several things were striking about this failure in the Carolinas:
- The cold snap was not sudden, but had been predicted for nearly two weeks by meteorologists. No one should have been surprised.
- While there was stress on power supply throughout the East and Midwest, actual blackouts were limited mainly to government regulated monopoly territories.
- The same utilities that had massive blackouts in their regulated (monopoly) territories did not have blackouts in the states where they operate in markets.
- In addition, monopolies had represented to regulators and the public that they were fully prepared for deep freezes.
- Duke Energy and other monopolies blamed nearby markets such as PJM rather than taking responsibility. If companies like Duke had simply been members of a market, they would have been entitled to the market’s energy. Markets have an obligation to provide power to their members first, so non-market monopolies are not first in line to accept power.
While monopoly utilities have received light scrutiny from state regulators, the FERC/NERC report shows where specific failures occurred. The document calls for independent technical reviews of the causes of mechanical and electrical generation outages as well as new federal and state legislation or regulations to increase gas infrastructure reliability. Meanwhile, Southeastern monopolies have used their Winter Storm Elliot failures to grab more rate based expenditures, calling for dramatically higher electricity reserve margins supported by new gas plants—which would take years to get online.
Legislators and regulators should establish greater accountability for utilities’ gas assets as FERC recommends—but they should also push for energy diversification, competition, and greater regional cooperation.
Renewables plus energy storage provide cheaper energy and can be built in a fraction of the time it will take for new gas plants to come online. It’s already clear that solar and onshore wind are the least expensive sources of electricity. Decision makers in the Carolinas should require the acceleration of these inexpensive power sources paired with energy storage, which is ideal for handling Summer and Winter peaks.
Competitive procurement is another critical tool for protecting ratepayers. Centralized, monopoly generation often runs over budget and over schedule. Requiring competition to provide electric generation brings prices down and challenges the self-interested assumptions of monopolies.
Finally, greater regional cooperation can protect ratepayers’ wallets and their power flow. Neighboring markets will deliver monopolies’ power if those monopolies become part of the club, whether that’s fully joining a nearby entity or working out special agreements that fall short of RTO participation. Ratepayers in the Carolinas can have more reliable power faster if monopolies will make use of the technologies and markets that already exist.