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Legal and Regulatory Community Leaves Texans Out in the Cold

The cold weather and power outages that plagued Texas residents and businesses several weeks ago point to some problems in the Texas electricity market. You would think that power companies would want to supply power on an ongoing basis to customers. However, it was discovered through this tragedy, that they have no obligation to do so in periods of emergency. Texas officials believed that utility companies would want to provide services in all types of weather. However, the utility companies had not invested in technology and other support to allow them to produce electricity in subfreezing temperatures. As a result, the nation’s second largest state experienced millions of home and work power outages. When asked why Texas officials did not require the adoption of changes to allow for production in subzero temperatures, they indicated they thought the incentives were there to do so. They believed that utility companies would want to sell at rates that represent peak demand and therefore generate greater revenue. Bill Magness, chief executive of the Electric Reliability Council of Texas (ERCOT) noted that 'high peak prices provide the incentive for producers to keep operating in all weather. Generators that can't produce power when it is most needed risk missing out on windfalls.'

The legal and regulatory community failed to place the proper expectations on the electric companies and allowed them to not invest in systems to support energy production in all types of weather. The utility companies behaved unethically in not investing in these all-weather production systems. The Texas legal and regulatory community behaved unethically in not monitoring utility companies to determine, if indeed, the incentives were driving the desired behaviors which included significant investments in production in extreme cold temperatures. Texas Governor Greg Abbott called upon the legislature to mandate that power generators be required to prepare for extreme weather as experienced in this case and that the state should help fund this initiative. Cold weather states throughout the country are familiar with how to address the issue and have equipped their energy suppliers with the necessary support.

Businesses were unable to operate as they had no power, pipes froze, desperate customers were burning their wooden fences and children's wooden toys, and staying warm in their cars. Deaths occurred due to the extreme hardship people faced attempting to stay warm with no power or water. One family is suing ERCOT and Entergy for the death of their 11-year-old son for failing to take action that could have saved their son's life. The $100 million lawsuit claims that both entities put "profits over the welfare of people" by not following the recommendations to make energy available in all types of climates and temperatures. The lawsuit further states that corrective action was not taken even when knowing in advance what was coming.

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