Connecting Past and Future: A History of Texas’ Isolated Power Grid

As Winter Storm Uri wreaked havoc across Texas in February 2021, pundits, politicians and the public reflected on the unique status of the state’s isolated electric power grid. “Texans would be without electricity for longer than three days to keep the federal government out of their business,” former Texas Gov. Rick Perry reportedly told Rep. Kevin McCarthy of California.[1] “It’s all politics,” a former executive of the North American Electric Reliability Corporation quipped to me.[2] And even today, a Wikipedia page on the Texas power grid states, “The Texas Interconnection is maintained as a separate grid for political, rather than technical reasons.”[3] These explanations reflect some of the mythology around electric power in Texas, and some truth. Dwelling on Texas exceptionalism as the primary reason for maintaining an isolated system, however, obscures the legitimate reasons power companies chose to stay in intrastate commerce in the past, and limits consideration of the real opportunities for and challenges of building new interstate links today.

This brief examination of the history of Texas power companies and their decisions regarding these links — called interconnections — offers several important points:

1. Texas companies were not the only ones that chose to avoid federal regulation in the wake of the 1935 Public Utility Holding Company Act (PUHCA).
2. Several Texas companies retained their interstate links despite the introduction of federal oversight in 1935.
3. Individual power companies made decisions about when and with whom to interconnect throughout the 20th century; state governments, in general, did not.
4. Over the decades, power companies, government agencies and other entities have considered the efficacy of building new links between the Texas grid and one of the other two major grids (the Western and Eastern Interconnections) in the continental United States.
5. A recent project to build a link between the Texas grid and the Eastern Interconnection has obtained approval from the state of Texas and the federal government, but still faces challenges from other state, regional and local entities.
6. The isolated Texas grid has offered benefits for Texans by way of expanded renewable power, new transmission infrastructure and operating reliability.
7. Through a surreptitious operation in the 1970s called the “Midnight Connection,” a Texas utility attempted to connect the state’s grid synchronously to the Eastern Interconnection; this was probably the origin of the mythology around the Texas grid.

These points suggest that the building of new interstate ties between the Texas grid and the Eastern and Western Interconnections should be explored with strict regard to economics and reliability, instead of politics. While Texas braggadocio may continue to play a role in the public discourse, Texas power companies, like those elsewhere, are opportunists. Moreover, Texas power customers, like those elsewhere, want reliable, cost-effective and — for many — preferably green power. Practical issues including technical feasibility, the cost of new infrastructure, public acceptance of large-scale transmission lines, and the need to resolve who will pay for what will likely present the biggest challenges to a future of new links between Texas and the rest of the continental United States.

What Is the Texas Interconnected System?

The Texas Interconnected System is one of three large networks that together provide electric power to more than 150 million customers in the continental United States. The Electric Reliability Council of Texas (ERCOT) operates the 52,700-plus miles that make up this system, while individual generators and transmission companies own the physical infrastructure.[4] The ERCOT network serves 90% of the power customers in Texas; power companies linked into either the Eastern or Western Interconnections serve the remaining 10%. The map in Figure 1 illustrates the region served by ERCOT (most of the state, excluding the light gray areas).

Figure 1 — ERCOT Weather Zone Map

 

The network controlled by ERCOT is often called the Texas grid. The term “grid” is a colloquialism that typically refers to the collection of generating facilities and transmission lines that produce electric power and ship it across long distances. The technical term is “bulk-power system.”[5] The term “grid” is also sometimes used to refer to the distribution networks that deliver power to individual customers. In this paper, I will use the terms “Texas grid” or “Texas Interconnected Power System” to mean the bulk-power system controlled by ERCOT, and “ERCOT” to mean the agency itself.

During World War II, Texas power companies organized two large power pools to meet the electricity needs of the defense industries. The two networks, called at various times the South and North Texas Interconnected Systems, the South and North Interconnections, and the South and North Texas Power Pools, linked public and private power companies across the state and operated at top capacity during the war years. After their intensive use during the war, the interconnections served primarily to facilitate assistance between companies during planned and emergency outages.[6] In 1967, the companies linked the two networks together and began consistently referring to them as the Texas Interconnected System. This name is still used to refer to the isolated Texas grid under today’s national regulatory schemes; the Texas grid is also sometimes called the ERCOT Interconnection, as illustrated by the map in Figure 2.

Figure 2 — ERCOT-branded Version of the NERC Interconnection Map

 

The Texas grid operates as a synchronized network of alternating current (AC) facilities.[7] Part of ERCOT’s job is to ensure that the network is stable, e.g., always cycling at or very close to 60 hertz (cycles per second). The network currently has four direct current (DC) ties — two links with the Eastern Interconnection and two links to Mexico[8] — which are used for scheduled and emergency power trades and are not treated as interconnections supporting interstate or international trade. In addition, 19 generators located at four different power plants are switchable, meaning they can deliver power into either the Texas grid or the Eastern Interconnection, but not both at the same time.[9] These switchable generators represent less than 4% of ERCOT’s total generating capacity of 92,000-plus megawatts.

From a regulatory standpoint, the Texas picture is somewhat complicated.[10] The Public Utility Commission of Texas (PUCT) oversees the wholesale and retail markets within the ERCOT region and regulates the location and rates for transmission and distribution lines.[11] The agency also regulates retail rates charged by utilities outside the ERCOT region. The latter utilities, however, participate in markets overseen by the Federal Energy Regulatory Commission (FERC), and their wholesale rates are subject to federal regulation. Additionally, the PUCT participates in transmission planning with states outside the ERCOT region. FERC regulates reliability on all elements of the nation’s bulk-power system, including all parts operated in Texas.[12] To add two more acronyms, the North American Electric Reliability Corporation (NERC) serves as the FERC-designated Electric Reliability Organization (ERO) that develops and monitors reliability standards throughout the bulk-power system.[13] When Texas companies participate in interstate wholesale power markets across AC transmission lines, their wholesale transactions fall under FERC oversight. The federal commission reviews and authorizes cost-based rates in noncompetitive interstate markets and makes rules for competitive interstate markets.[14]

Early Electrification in Texas

The current regulatory and operating structure in Texas developed over many decades, but in the beginning, the state’s power companies functioned with a great deal of autonomy.

Across North America, public and private power companies began lighting, and then further electrifying, homes, businesses and cities in the late 19th century.[15] These activities were regulated through franchise agreements between power companies and city governments until 1907. That year, the states of Wisconsin and New York established regulatory commissions to oversee the service areas and fees charged by power companies. Many investor-owned power companies advocated for state-level regulation because it would end costly competition between companies, and also foreclose the local political shenanigans that had been involved in securing franchise agreements in many cities.[16] By 1920, 44 states had established electric utility regulatory commissions.

Electrification took place somewhat differently in Texas. Early street-lighting companies appeared in Texas cities in the 1880s,[17] but neither the state’s utilities nor the Texas Legislature embraced state-level regulation. Rather, the Legislature made small concessions to communities that sought to control the state’s burgeoning power companies. In 1905, the Legislature granted district courts the authority to settle disputes between utilities and general-law cities.[18] Two years later, general-law cities with populations greater than 2,000 were able to set rates by ordinance. The cities had to ensure that a power company’s costs were covered, with a minimum rate of return of 10%. In 1913, the Legislature granted home-rule cities the authority to regulate utilities, and in 1925, it passed a law requiring utilities to make certain disclosures to assist in rate-setting. In 1931, the Legislature lowered the population minimum to 500 and inverted the 10% rate of return, making it a maximum rather than a minimum. It prohibited rate discrimination in 1935 and eliminated the minimum population size in 1937, allowing cities of any size to regulate utilities.[19] But not until 1975 did the Texas Legislature finally institute state-level electric utility regulation.

In the early years, some Texas power companies had great difficulty financing new power plants and power lines to meet growing customer demand, as was the case for electric companies across the country. For example, Houston Lighting & Power Company (HL&P), which originated in 1882, had a rocky first few decades in Houston involving bankruptcies, mergers and take-overs, frustrations with city government, maintenance challenges and poor investor returns.[20] American Cities Railway and Light Company, a holding company with properties across the South, acquired HL&P in 1906. In 1914, the company entered a profit-sharing agreement with the city of Houston, presumably to bring an end to contentious annual negotiations over rates charged to customers. This agreement, in one form or another, remained in place through the 1940s.[21] By 1920, HL&P was on the brink of receivership, unable to expand its physical facilities quickly enough to meet demand and unable to finance the acquisition of other companies. Electric Bond and Share Company, originally part of General Electric Company and one of the largest utility holding companies in the world, acquired HL&P in 1922.

Across the country, power companies expanded their territories by buying up competitors, failing companies and smaller neighboring companies.[22] Holding companies provided a lucrative mechanism by which a small number of investors could obtain ownership of numerous, faraway power companies without putting much of their own cash at risk. In the mid-1920s, Congress initiated an investigation of holding companies, focusing in particular on Electric Bond and Share, and determined that 20 companies controlled 61% of the industry across North America. Further, the investigation construed the holding companies as pyramids in which a $1 million investment could result in control over more than $370 million worth of power companies.[23] Several of the largest holding companies, including Electric Bond and Share, Middle West Utilities Company, and Stone and Webster (through a subsidiary called Engineers Public Service Company) owned multiple properties in Texas. As such, to understand the current isolation of the Texas grid, it is important to remember that before 1935 — and, indeed, well into the 1940s — many Texas power companies were part of large, multistate holdings that in some cases were interconnected.

Autonomous power companies across the continent also built links to their neighbors’ power plants to increase system reliability, access broader power markets, achieve economies of scale and conserve energy resources — which at that time meant using falling water to the maximum extent possible while minimizing the amount of coal needed to produce the next kilowatt of electricity.[24] These links, or interconnections, allowed the companies to share electric power during planned or emergency outages and to economize by relying first on the power that was least costly to generate and transmit. Until World War II, most of these interconnections operated intermittently; in only a few places did companies exchange power continuously.[25]

Utilities in Texas followed this pattern of expansion in very much the same way. Dallas-area Texas Power & Light Company built the first true interconnection in the state in 1924.[26] In 1926, HL&P started building interconnections to sell excess power, and linked its network of transmission lines to the Gulf States Utilities system just east of Huffman, Texas, in 1927.[27] Gulf States, a subsidiary of Engineers Public Service, operated a power system that stretched from Southeast Texas across Louisiana.[28] The map in Figure 3 illustrates the HL&P interconnections in place by the early 1930s.[29] Note that the line leading from Huffman to Beaumont continues through Orange, Texas, and all the way across the Texas-Louisiana border. A connection between HL&P and Texas Power & Light is also visible near the town of Peters, Texas.

Figure 3 — Houston Lighting & Power Company

 

In similar fashion, many Texas companies built interconnections — some staying in-state and others linking across state lines — to achieve their individual economic and reliability goals.

Thus, by the 1930s, electrification in Texas resembled electrification in many other parts of the country, apart from the regulatory relationships within the state. Across the state, a mix of publicly and privately owned entities provided electrical services. Holding companies dominated the systems with subsidiaries in nearly every major city. Companies such as HL&P built interconnections with neighboring utilities to achieve the benefits of reliability, economies of scale and energy resource management. And many of these interconnected systems operated across state lines.

The Public Utility Holding Company Act, the Federal Power Act and Industry Restructuring

The Public Utility Holding Company Act (PUHCA), passed by Congress in 1935, upended the economic order of electrification in the United States. Through it, Congress targeted companies like Electric Bond and Share specifically because they represented outsized monopoly control of a major economic sector of the country and their broad base of customer-investors had been hit hard by the economic crashes endured during the Great Depression.[30] Though the utilities fought tooth and nail, enlisting the support of newspaper publishers and editors to scare small investors, Congress retained provisions collectively called the “Death Clause” in the final version of the bill.[31] The cartoon in Figure 4 illustrates the type of media pressure the utilities were able to exert.

Figure 4 — Wheeler-Rayburn Bill Death Sentence Comic, July 3, 1935

 

The Death Clause required holding companies to simplify their pyramid structures, sell off their multistate holdings or interconnect their subsidiaries into a single system, and undergo the financial scrutiny of the U.S. Securities and Exchange Commission (SEC). The accompanying Federal Power Act authorized the Federal Power Commission (FPC), which was later replaced by FERC, to regulate wholesale interstate power transactions and order interconnections between utilities when it was in the national interest.

Several of the largest holding companies, including Electric Bond and Share, responded by suing to overturn PUHCA.[32] The lawsuits went all the way to the Supreme Court, which upheld the act in 1938.[33] The SEC began hearing reorganization plans from major holding companies with subsidiaries in Texas in 1940. By this date, Electric Bond and Share still owned 36 subsidiaries in 27 states, including Houston Lighting & Power and five others in Texas. Engineers Public Service Company, formerly part of Stone and Webster, owned 10 subsidiaries with properties in 15 states, including Gulf States Utilities and two others in Texas. Middle West Utilities owned 50 subsidiaries in 16 states, including West Texas Utilities and several others in the state. Of the reorganization plans received from the holding companies, the SEC ruefully reported in 1941, “most of the plans submitted ... although helpful in some respects, amounted to little more than arguments attempting to justify the retention of the existing scattered holdings.”[34]

Throughout the 1940s, the SEC ordered each of the holding companies listed above to reorganize or dissolve. The affected subsidiaries made distinct decisions about interstate versus intrastate interconnections: Electric Bond and Share dissolved, and Houston Lighting & Power became a wholly independent intrastate company in 1943. Engineers Public Service sold off Gulf States Utilities, which continued to operate in both Texas and Louisiana. Middle West Utilities dissolved, but one of its subsidiaries, Central and South West Corporation, registered as a holding company with properties in Texas, Oklahoma and other states. Importantly, as the SEC variously approved registration of holding companies across the country with regionally integrated systems or ordered dissolution, individual utilities elected to either continue or cease their own interstate interconnections.[35]

Two major lawsuits at that time illustrate the reluctance of utilities across the country to subject themselves unnecessarily to federal regulation. In Jersey Central Power & Light Co. v. FPC, the New Jersey utility sought to prove that its link to another utility that periodically transmitted power to Staten Island in New York should not subject it to federal regulation.[36] In another instance, two days before PUHCA went into effect, a Connecticut utility cut all its connections with out-of-state utilities except for one small wholesaler that sent power to Fisher’s Island, technically a part of New York state.[37] In the former case, the court found that the New Jersey utility operated in interstate commerce and was subject to federal regulation. In the latter case, because the Connecticut utility required the wholesaler to cease providing power to Fisher’s Island, the court found it was not subject to federal regulation.

Federal regulation posed legitimate costs and delays to power companies that continued for decades. In 1965, for example, the president of a Utah utility explained the issue at a Senate Commerce Committee hearing:

In 1962, Utah Power & Light, an FPC regulated utility, requested a general rate increase in Utah. After extensive hearings and thorough consideration, the Public Service Commission of Utah granted the request. Utah Power & Light was then required, however, to file the state-approved rates with the FPC. The FPC review cost the company two years and one month in delay, $100,000 in lost revenue, and $64,000 in company expenses, and imposed an onerous burden on its staff before reaching the same result that the state commission had ordered.[38]

While federal regulation imposed additional procedures and costs, companies that chose to remain in interstate commerce found commensurate benefits through their interconnections. In the absence of those benefits, however, it made more sense to end links across state lines.

Houston Lighting & Power’s annual reports offer some evidence of the decision-making that may have taken place. The company sought to avoid any implication of interstate commerce once it was no longer a part of Electric Bond and Share. HL&P had a favorable franchise agreement and cost-sharing contract with the city of Houston and no state-level oversight. In addition, with an expanded customer base and an enlarged system overall, there was no pressing need to continue exchanging power with interstate Gulf States. As the 1931 map in Figure 3 illustrates, before the enactment of PUHCA, the company forthrightly displayed its interconnection point with Gulf States; a service area map included in the 1940 annual report, however, illustrates none of the company’s interconnections.

Interestingly, in its 1945 annual report, the company once again prominently displayed points of interconnection, including one to Gulf States. The war years had changed the calculation.

World War II and Interstate Interconnections

While PUHCA rendered certain decisions about interstate interconnection appropriate in a regional business context, the country’s entry into World War II introduced new considerations. The federal government went to great lengths to ensure sufficient electric power for the war industries. In 1939, the FPC worked with regional power pools to map out power supplies for defense work. In 1941, the commission ordered interconnections between utilities in regions anticipating increased war production activity. Most significantly for Texas power companies, in 1942, the FPC issued an order that relieved utilities of federal regulation if they joined interstate interconnections for the purpose of providing electricity to the war industries.[39] There followed a number of FPC emergency orders directing companies to interconnect, including HL&P and other Texas utilities that were able to supply power to networks in Louisiana, Arkansas and Oklahoma.[40] The effects of both PUHCA, which caused disconnections, and the FPC emergency orders, which caused reconnections, are evident in Howard Ricks Fussell's history of Gulf States, which notes: “The Houston company [HL&P] cut its physical connection [to Baytown, Texas] ... and Gulf States picked up the load by closing the connecting switch to the Houston Lighting and Power transmission line west of Dayton [in Texas].”[41] On the very same page, the company then touts its emergency reconnection with HL&P in 1943.

As previously noted, in the early 1940s, Texas utilities formed power pools in both the northern and southern regions of the state to increase war industry production. While little material from that time is available regarding these groupings, in later publications the utilities variously explained the reasoning behind the pools by citing their own desire to participate in defense work, pressure from defense industries in need of more power, and the role of the federal government in pushing them to form the interconnected systems.[42] In addition, 16 Texas-based companies participated in the Southwest Power Pool, a giant network that stretched from Nebraska to South Texas and from New Mexico to Tennessee.[43] In general, these links were praised for their role in ensuring a sufficient power supply for war production without stinting the needs of domestic customers.[44] More importantly, these wartime interconnections served as a test of the efficacy of interstate links for the Texas utilities.

After the war, the Texas companies abandoned their interstate interconnections, although many kept the infrastructure in place for use in possible emergencies. From 1945 to 1949, for example, the HL&P annual reports continued to display the link with Gulf States.[45] In its 1948 annual report, however, HL&P pointedly told its shareholders that “it operate[d] only within the State of Texas, [wa]s not engaged in interstate commerce in the transmission and sale of electric energy, d[id] not operate any project licensed or subject to license under the Federal Power Act; and ... [wa]s not subject to that Act or the jurisdiction of the Federal Power Administration.”[46] In addition, the companies retained their intrastate links, continuing to share power through the North and South Texas Interconnected Systems.

The FPC’s wartime interconnection orders led to some anomalous configurations not anticipated by PUHCA. During 1944, the SEC held protracted hearings on the question of whether Central and South West Corporation (CSW), formerly part of Middle West Utilities, could be considered a holding company with a single network of integrated subsidiaries.[47] At this point, CSW owned several subsidiaries in Texas, Oklahoma and Louisiana — all of which were interconnected with each other and the Southwest Power Pool.[48] At first, the SEC tentatively concluded that two distinct integrated systems existed — one within Texas and the other crossing into each of the states — because “normal operations did not require substantial coordination of both systems.”[49] After examining operating records, the SEC determined that under PUHCA, CSW was a utility holding company with an integrated network of subsidiaries stretching from Texas to Oklahoma to Louisiana. During the post-war years, two subsidiaries — Central Power & Light and West Texas Utilities — chose to operate within the intrastate Texas Interconnected Systems and ceased sharing power across state lines. The others remained engaged in interstate commerce as part of the Southwest Power Pool. Thus, CSW was a single holding company but with two integrated networks of subsidiaries. The hybrid nature of this holding company later led to a major test of the Texas grid and its autonomy from federal regulation — an episode called “the Midnight Connection.”

The Midnight Connection

On May 4, 1976, system operators at West Texas Utilities “performed a midnight wiring of electrical circuits” with Public Service Company of Oklahoma, entering all the members of the Texas Interconnected System into interstate commerce.[50] As soon as executives at both HL&P and Texas Electric Service Company (TESCo) learned of the clandestine power trade, they ordered their facilities to disconnect from the Texas grid. The executives took this action explicitly to avoid falling under federal regulation against their will. Richard Cudahy, who represented CSW at the time and later documented the case in a 1995 essay, averred that “so eager were the Texas utilities to maintain traditional Texas independence that they memorialized the policy of isolation into a written agreement, binding themselves to intrastate operation.”[51] A cascade of lawsuits and pleadings before regulators followed — and lasted into the 1980s.[52] Early in that decade, both the PUCT and FERC approved plans to link the Texas and Oklahoma CSW subsidiaries with a DC line that, by nature of the technology (controlled and intermittent exchanges of power), did not place the other Texas companies under federal regulation.[53] The attempt to tie the Texas Interconnected System synchronously into the Eastern Interconnection ultimately failed, and reinforced both the perceived reliability of the intrastate grid and Texas companies’ business-driven decisions to remain in intrastate power commerce.

Consider the context in which this surreptitious Midnight Connection took place. By the 1970s, the country had experienced its first major cascading power failure (the 1965 Northeast Blackout); developed a national focus on power networks (with complete National Power Surveys issued in 1964 and 1970); witnessed an attempt at a coast-to-coast grid (1967-1975); and undergone congressional attempts to regulate grid reliability.[54] Within Texas, the Legislature had enacted the Public Utility Regulatory Act, placing the state’s power systems — public and private — under state-level regulation. The Texas power companies had formalized their power pools into a single Texas Interconnected System and had established a new entity, ERCOT, to strengthen cooperation and system reliability. In addition, across the country as well as in Texas, customers were paying more for electricity and were rebelling against increasing rates.[55] CSW, up to that time, had maintained its two separate systems: one within Texas and one within the Southwest Power Pool, with links in place between the two for occasional power exchanges but not for continuous coordination. The SEC still recognized CSW as a single utility holding company.

The events leading up to the midnight connection had been triggered by Oklahoma rural cooperatives and municipal companies that bought power from Public Service Company of Oklahoma. Frustrated by high rates, the cooperatives argued that their cost for electricity could be lower if the Oklahoma company would simply import some power from Texas.[56] Unless CSW reconnected its two networks for continuous power sharing, they claimed, it should not be treated as a single holding company under the PUHCA. To counter this challenge, CSW took numerous steps, including a technical study of continuous synchronous interconnection, before implementing the Midnight Connection. CSW’s plan, evidently, was to not only create a single integrated network of its own subsidiaries, but to also link the entire Texas network into the giant Eastern Interconnection. In doing so, it could legitimately maintain its status as a single holding company and avoid selling off any of its properties.

Of the many lawsuits, countersuits and regulatory hearings that ensued, the judge’s order in the 1979 case of West Texas Utilities v. Texas Electric Service Company provides an especially detailed review of the history of the interconnections among all these companies, their varying stances with regard to interstate operations, the technical and economic considerations at stake, and the nature of the Texas Interconnected System.[57] In this case, the plaintiffs (that is, the two subsidiaries of CSW) alleged that HL&P and TESCo had engaged in a conspiracy through either oral or written contracts to restrict their power trades to intrastate commerce. The plaintiffs sought to restrain this conspiracy. In his ruling, presiding district Judge Robert W. Porter found that no conspiracy existed. An appeal was later dismissed by the 5th Circuit Court of Appeals. Both the plaintiffs’ allegations and Porter’s findings offer insight into the status of the Texas Interconnected System and how it was viewed by participating companies at that time:

1. In the time between the passage of PUHCA and the Midnight Connection, individual companies in Texas made decisions to interconnect with each other and/or with companies in other states on their own, and there was no evidence in the record that any of the companies within the lawsuit had made agreements with each other to permanently avoid interstate commerce.
2. Companies did promise to notify each other in advance should they decide to enter interstate commerce.
3. Historically, all members of the Texas Interconnected System had activated interstate interconnections only in times of emergency.
4. When the North Texas and South Texas Interconnected Systems formed the single intrastate network in 1967, “all of its members operated and wished to continue operating on an intrastate basis.”[58]
5. HL&P, TESCo and other utilities had tested the efficacy of interstate power trades in 1957 and 1968 and found serious reliability issues. They also undertook studies of links between Texas and the Southwest Power Pool. The studies demonstrated reduced reliability with those new links, and in one case the technical expert recommended remaining in intrastate operation.

The thrust of Porter’s opinion indicates that companies like HL&P were not only willing to consider linking the Texas grid to one of the other grids, but that they had investigated and tested the idea in the years between World War II and the Midnight Connection. Without indications that the links would provide a significant economic advantage or greatly increase reliability, however — in fact, finding evidence of decreased reliability — the companies remained committed to their intrastate operations.

For the remainder of the year after the Midnight Connection, the Texas Interconnected System operated as two units.[59] One, which included HL&P and TESCo, remained isolated. The other, which included CSW’s subsidiaries, pursued attempts to operate in synchrony with the Southwest Power Pool, and hence the entire Eastern Interconnection. The links resulted in unreliable operations, and the participants terminated the experiment in January 1977.[60] In related hearings before the PUCT, the companies argued that it would cost approximately $1 billion to build permanent ties between the two power pools. As this evidence suggests, HL&P and TESCo remained committed to the intrastate Texas grid not only because they had resisted the Midnight Connection carried out by CSW, but also because there was no discernible benefit to their power customers or their own corporate bottom lines by doing otherwise.

CSW continued to pursue an advantageous connection between its Texas subsidiaries and its Oklahoma companies. Both FERC and the PUCT approved construction of a DC intertie close to the Texas-Oklahoma boundary. In the wake of the Midnight Connection episode, FERC determined that the nature of DC technology allowed for the participants in the Texas grid to remain outside federal regulation.

Studies and Reports

While power companies built increasingly larger interconnections across the United States during the postwar years, and various entities promoted a national grid, test cases and research reports suggested that not all links served the public good. The most compelling example of the dream of a nationwide grid appeared in the 1964 National Power Survey, which included the map shown in Figure 5.

Figure 5 — Projected Power Changes in 1980

 

The map illustrates some of the same goals at work today — moving power from locations of abundant renewable resources, on a seasonal basis, to load centers. The concept included Texas as both a power recipient and a power provider. While the federal government never moved to realize this vision, agencies and utilities did experiment with large-scale interconnections. The biggest test occurred in 1967, when a task force headed by the U.S. Bureau of Reclamation activated four AC ties between the Eastern and Western Interconnections to create a single coast-to-coast grid.[61] The relatively small links between two giant systems proved problematic, and after eight years of instability, the participants abandoned the ties. The east-west interconnection, however, did not include Texas.

In the late 1960s and throughout the 1970s, various entities examined the value of linking the Texas grid to one of the other interconnections in the United States. A 1968 transmission study by the U.S. Department of the Interior proposed a DC link between the Northwest Power Pool and ERCOT, although long-distance DC transmission was still a relatively young technology at that point.[62] A 1972 FPC study indicated that a traditional AC tie between ERCOT and the Southwest Power Pool could produce a net economic benefit to the public, but the study did not include a cost estimate for building the needed interconnection, nor a detailed technical analysis of the existing and proposed transmission lines. An ERCOT technical review of the report, however, indicated that it would be detrimental from both an economic and reliability standpoint, and a FERC staff review in 1978 offered that an ERCOT link to the Southwest Power Pool would not, in fact, measurably increase reliability.[63] In 1976, the Congressional Research Service forecast measurable benefits from an ERCOT-Southwest Power Pool link and recommended “a definitive study of interconnections between ERCOT and SPP.”[64]

In 1977, the U.S. General Accounting Office (GAO) critiqued reports like these, noting that utility executives generally dismissed FPC recommendations for interconnection unless the links provided measurable economic benefits to the utilities themselves.[65] Further, utilities and regional pool representatives complained to the GAO that they had not been included in the research process, and federal researchers lacked the expertise and familiarity with regional systems to assess the true costs and benefits. In the 1972 ERCOT-Southwest Power Pool example, ERCOT noted that the FPC had failed to assess the technical work and physical investment needed within the Texas grid for it to operate synchronously with the much larger Eastern grid. The GAO called for interconnection studies to address the greater public good afforded by new projects, including resource conservation, environmental protection, and consideration of national emergencies and national defense. The U.S. Department of Energy echoed these findings in 1980.[66]

Apart from the Midnight Connection episode, participants in the Texas grid maintained reliable operations throughout the 1970s. A FERC report described the organization of the power pool, which included a technical committee that defined operating practices to maximize reliability.[67] Member companies retained autonomous control of their physical infrastructure and exchanged power with each other through bilateral agreements. The interconnections among the companies provided for emergency and backup power, but not continuous exchanges.

For the most part, with a generating fleet largely dependent upon natural gas until the late 1970s, operating costs across the state were uniform, and there was little basis for economy exchanges. As late as 1980, individual companies managed their own dispatch, coordinated through seven control areas, with the Texas Interconnected System itself operating two system security centers. The FERC report forecast tighter coordination and increased economy exchanges as utilities statewide shifted from natural gas to coal-fired and nuclear-powered plants.[68] The report also noted that “If ERCOT and [Southwest Power Pool] are interconnected with high-capacity transmission ties, bulk power economy in both regions could be improved through increased coordination.”[69] Thus, federal agencies recommended interconnection as a means of improving business results, but not to increase reliability.

In its 1990 corporate history, HL&P offered that “the reason [for resisting the Midnight Connection] was simple. HL&P and most other utilities in Texas argued that if they interconnected with utilities in neighboring states, they would then be engaged in interstate commerce and subject to regulation by the Federal Power Commission.”[70] This was, according to the corporate history, “a very typical Texas independence.” Cudahy’s lively 1995 essay “The Second Battle of the Alamo” certainly argues that the yearning for independence alone accounted for the vehemence with which HL&P and TESCo fought against links to the Eastern Interconnection. But the isolation of the grid also made sense from business and technical perspectives.

ERCOT: From Reliability Advice to System Operation

Texas utilities organized ERCOT in 1970 as part of a nationwide effort by power companies to address reliability concerns while protecting their relative autonomy from federal oversight. Historically, power companies had exercised responsibility for system reliability by adhering to voluntary standards set by regional groups and eventually national associations.[71] Following the 1965 Northeast Blackout, Congress held hearings to address the incident and discuss ways to prevent future widespread power failures, including legislation that would require federal oversight of the reliability of the nation’s power systems. The power companies, however, resisted this new type of regulation. Working with the FPC and others, they formed the National Electric Reliability Council (NERC, a predecessor to today’s North American Electric Reliability Corporation) in 1968 to institute uniform, yet voluntary, reliability measures across the country. The Texas Interconnected System was one of the 12 original signatories. The owners of bulk-power generation and transmission facilities that composed the Texas Interconnected System, along with municipal companies, rural cooperatives and state agencies, formed ERCOT to improve reliability through “the planning, operation and restoration of member electric power systems.”[72] Moreover, ERCOT participants “committed to providing service solely in the Texas intrastate market,” as it was understood at that time that an interconnection of manageable size ensured “maximum reliability [and] effective communications and required coordination.”[73]

As the Texas Legislature introduced new rules regarding the state’s power systems, the role of ERCOT evolved. While the 1975 approval of the Public Utility Regulation Act (PURA) established the PUCT and its oversight of rates and market entry, ERCOT continued as a private coordinating entity. The utilities turned over operation of their interconnected system to ERCOT in 1981.[74] In 1990, ERCOT incorporated as a not-for-profit corporation with the limited purpose of promoting reliability, including through coordinated operations.[75] Following the passage of amendments to PURA in 1995 that established a competitive wholesale power market, the PUCT made ERCOT the independent system operator of Texas in 1996, an entity that would assure non-discriminatory access to the grid. The 1999 amendments to PURA resulted in additional statutory responsibilities for ERCOT, including management of the wholesale power market, customer switching in a competitive retail power market, and establishment of a stakeholder process.

According to one study, the restructured wholesale and retail markets, over the long term, afforded ERCOT retail customers reduced power costs.[76] ERCOT expanded in size and duties in the years thereafter, although not without scandal, operating challenges and criticism from multiple quarters.[77] Nonetheless, under the agency’s increasingly tight control of grid operations, customers in Texas have avoided a cascading power failure for the past 52 years.

Texas enjoys two distinct advantages with an isolated grid — one technical and the other organizational. The technical advantage stems from system operation standards that are uniform across the nation but implemented in a distinct way in Texas. The organizational advantages relate to the ability of the Texas Legislature to effect change on the grid, especially to its infrastructure.

All power systems in the United States today rely on operating standards established by NERC to ensure system stability. One of these standards requires that subsystems within each interconnection — called balancing authorities — assure stable frequency within their geographic areas and zero difference between planned and actual power exchanges with the neighboring area. Deviations in planned versus actual power exchanges or frequency result in system instability, which, if the deviations are severe enough, will cause a power failure. In the 2016 map in Figure 6, the three main U.S. interconnections are depicted, and within each are circles indicating the balancing authorities. Note that the Texas Interconnected System has only one balancing authority — ERCOT.

Figure 6 — U.S. Electric Power Regions

 

Within each interconnection, each balancing authority must coordinate with its adjacent balancing authority to achieve stability, as described above. This is accomplished by maintaining an area control error (ACE) of zero using the following equation, both within the control computers and on the part of the human system operators:

The first part of the right side of the ACE equation (P_actual – P_sched) reflects the difference between actual power trades across a link between two systems and scheduled power trades. 10β is a variable that allows one area to provide support to another area for the purpose of restoring stability should there be frequency deviation. The third segment, (f_act – f_sched), reflects the actual frequency measured on the network versus the planned frequency (typically 60 hertz). When the linked systems maintain an ACE of zero, the overall interconnection is stable.

ERCOT, however, has a lesser task than other balancing authorities — and thus a technical advantage — since the Texas Interconnected System does not synchronously exchange power with any neighboring system and consequently has no adjacent balancing authorities with which to coordinate. As a result, ERCOT system operators monitor for frequency deviations, but are not at all concerned about deviations in power exchanges.[78]

The organizational advantage of the isolated Texas grid is exemplified by the Competitive Renewable Energy Zone (CREZ) initiative.[79] In 2005, the Texas Legislature increased goals for the addition of renewables, especially wind power, to the generating fleet for the Texas grid.[80] In addition, to alleviate bottlenecks on the state’s existing transmission infrastructure and further incentivize investment in wind generation, the Legislature called for the creation of CREZs and the construction of new power lines. The law required the PUCT to delineate priority areas for wind development and, with the new power lines, create corridors to link those areas to the heart of the grid. Within nine years, developers doubled the state’s installed wind generation capacity, and transmission line owners added 3,600 miles of high-voltage lines. With only one legislature voting on the plan, and only one regulator overseeing implementation, the initiative moved relatively swiftly, despite challenges from multiple stakeholders. By comparison, similar efforts across the country involving multiple states, and in one case a Canadian province, have been stalled for years.

The DC Alternative for Texas

Recent studies have offered a plethora of scenarios for achieving a greener power system with greater reliance on renewables and less pollution.[81] Proposals to link areas with great wind and solar potential to centers of use, however, often bypass Texas, ostensibly due to the seemingly impenetrable wall around the isolated Texas grid.[82] Other proposals have indicated the potential for connecting windy and sunny regions of Texas to markets in other states without addressing the technical, political and regulatory steps that would be required.[83] Similarly, although technological advances suggest that AC links between the major grids may be more viable than they were in the 1960s and 1970s, a recent technical assessment focused solely on reconnecting the Eastern and Western Interconnections.[84]

In a detailed high-level study by the National Academies of Sciences, Engineering, and Medicine, engineers considered how the use of DC technologies might trigger reconfiguration of the North American grids.[85] They suggested that two different approaches might emerge. One would expand use of high-voltage DC ties between the East, West and Texas grids to allow increased power sharing across much wider regions. Through the other approach, the three big grids would break into smaller units, each with tighter control to minimize cascading disruptions, but with DC links to facilitate continued power exchanges. Recall that for the isolated Texas grid, FERC allows DC interstate ties, which do not trigger federal regulation.

One project has already proposed to take advantage of the opportunity presented by DC technology. Initiated more than a decade ago, the Southern Cross Transmission project envisions a high-voltage DC transmission line extending from eastern Texas to eastern Mississippi. In 2014, FERC issued a final order to connect the ERCOT transmission system providers with the proposed Southern Cross DC terminal at the Texas border.[86] In the order, FERC expressly stated that ERCOT and its member entities would retain their independence from FERC jurisdiction.[87] In addition, the PUCT approved the construction of a power line to link the Texas grid to the Southern Cross terminal, and ordered ERCOT to undertake a number of measures to ensure the stability and reliability of the Texas grid after the line’s activation.[88] Notwithstanding these approvals, the project also requires review from other regulators in Louisiana and Mississippi and acquiescence from landowners and other interest groups located along the route of the power line.[89]

Facing the Realities of the Isolated Texas Grid

As this brief history illustrates, the power companies operating on the Texas grid may be fiercely independent — but this does not sufficiently explain why they have preferred to remain on the isolated Texas Interconnected System for so many decades, while other companies in the state have chosen to participate in interstate grids. In the first place, Texas utilities were not the only ones that sought to evade federal regulation after the passage of the 1935 Public Utility Holding Company Act by ending interstate ties. In addition, not all Texas utilities ended interstate ties, and to this day several of them are federally regulated, including Entergy Texas, which serves areas north and east of Houston; Southwestern Electric Power Company, which primarily serves East Texas; El Paso Electric, which serves areas including and surrounding El Paso; and Southwestern Public Service, which serves the Panhandle region. In general, these are the successors to companies located near the state border that had strong interconnections to operations in surrounding states.

Decisions about interstate interconnections were not made by state legislatures, governors or voters; rather, they were business decisions made by individual utilities, driven by economics, geography and concerns about reliability. Utilities linked to the Texas grid, state and federal agencies, and transmission system operators have periodically investigated building AC interconnections — but have repeatedly encountered technical issues related to reliability and stability. Meanwhile, a recent project designed to link the Texas grid to the Eastern Interconnection through a DC transmission line has already received approval from the PUCT and FERC but is encountering the same opposition that other large-scale energy infrastructure projects have met across the country from state, regional and local entities. On the other hand, the isolated Texas grid has delivered progress toward certain goals: the addition of renewables, development of the wind industry, construction of transmission lines and, for a period of time, reduced costs for ratepayers in the competitive retail market.

The mythology around the isolated grid probably dates back to the Midnight Connection, in the wake of which many theories about Texas utilities’ choices were offered and challenged in courts, law reviews and the press. There is a kernel of truth to the assertion that some Texas utilities have been driven by a desire to be independent of federal regulation. But their decision to remain on the Texas grid is more closely linked to longer-term trends to protect business interests, preserve internal system reliability and avoid extra costs associated with additional levels of government oversight.

More importantly, advances in the use of DC technologies between grids offer opportunities to reevaluate the commitment to isolation. To date, the implementation of DC ties has not precipitated federal regulation of participants in the Texas grid, and further, DC ties may offer sufficient economic opportunities to those companies to make new layers of regulation palatable. The challenges of building large-scale energy infrastructure cannot be ignored, however. Even if new links promise access to new markets for Texas generators and access to backup power during emergencies, in addition to requiring utilities to provide emergency backup power on the other side of the state line, the physical infrastructure itself will sit on properties and in communities that may not welcome it.

To rationally tackle the question of whether and how to end the isolation of the Texas grid, engineers and policymakers should look beyond Texas braggadocio. The exceptionalism of the Texas grid has served its stakeholders well in many ways for many years, but broader considerations related to the public good and public acceptance, environmental need, and economic sense are what will determine whether they will embrace a new scenario for their electric power future.

Endnotes

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[1] Kevin McCarthy, “What’s Up in Texas,” The Starting Line (blog), February 17, 2021, https://www.republicanleader.gov/whats-up-in-texas/.

[2] Former North American Electric Reliability Corporation executive in private conversation with author, February 23, 2021.

[3] Wikipedia, s.v. “Texas Interconnection,” accessed January 28, 2022, https://en.wikipedia.org/wiki/Texas_Interconnection#cite_note-1.

[4] ERCOT manages the flow of electric power to more than 26 million customers. Electric Reliability Council of Texas, “About ERCOT,” https://www.ercot.com/about.

[5] The North American Electric Reliability Corporation (NERC) defines “bulk-power system” as “(A) facilities and control systems necessary for operating an interconnected electric energy transmission network (or any portion thereof); and (B) electric energy from generation facilities needed to maintain transmission system reliability.” NERC, Glossary of Terms Used in NERC Reliability Standards, updated March 29, 2022, (Atlanta: North American Electric Reliability Corporation, 2016), https://bit.ly/3eDMvXf.

[6] R. J. Costello, Letter to Michael S. Greene, Vice President, TU Electric, and attached “History and Description of ERCOT Region,” August 31, 1990, Electric Reliability Council of Texas. Attachment undated, but produced no later than 1983.

[7] Electric current is either direct or alternating. Direct current (DC) electrons move in only one direction. Alternating current (AC) electrons move back and forth at a very high speed. In the United States, the vast majority of the elements on our power system use AC, at a standard rate of 60 hertz (cycles per second). This means that everything from your generator to the outlet in your kitchen must operate at 60 hertz. With transformers, we convert DC to AC, and vice versa. Technical innovations dating back to 1954 allow for connections between large power pools using DC transmission lines, with transformers at each end of the line. For a discussion of these technologies, see Julie Cohn, The Grid: Biography of an American Technology (Cambridge, MA: MIT Press, 2017), 16–20, 210–12, 35–37 notes 11–23, 99 notes 119–22.

[8] ERCOT, ERCOT DC-Tie Operations, Version 3.0 Rev 13, ERCOT (Texas, July 31, 2020).

[9] ERCOT, Report on the Capacity, Demand and Reserves in the ERCOT Region, Summer Summary: 2002-2031, Electric Reliability Council of Texas (Austin, TX, 2021), https://www.ercot.com/files/docs/2021/12/29/CapacityDemandandReservesReport_December2021.xlsx.

[10] For a detailed discussion of the federal and state regulatory histories and the roles of PUCT and ERCOT through the early 2000s, see Houston Advanced Research Center Institute for Energy, Law & Enterprise, Guide to Electric Power in Texas, Third Edition, Houston Advanced Research Center, Institute for Energy, Law & Enterprise, University of Houston Law Center (Houston, TX, January 2003).

[11] Public Utility Regulatory Act, Title II: Texas Utilities Code (As amended), September 21, 2021; Public Utility Commission of Texas, “About the PUCT: Mission & History,” accessed January 31, 2022, https://www.puc.texas.gov/agency/about/mission.aspx.

[12] For a brief explanation of the Federal Energy Regulatory Commission’s authority regarding electric power, please see Adam Vann, “The Legal Framework of the Federal Power Act,” (Washington, D.C.: Congressional Research Service, 2020), https://crsreports.congress.gov/product/pdf/IF/IF11411.

[13] North American Electric Reliability Corporation, “About NERC,” accessed February 14, 2022, https://www.nerc.com/AboutNERC/Pages/default.aspx.

[14] Federal Energy Regulatory Commission, “What FERC Does,” accessed May 25, 2022, https://www.ferc.gov/what-ferc-does.

[15] For good overviews of early electrification in North America, see Thomas Parke Hughes, Networks of power: electrification in Western society, 1880-1930 (Baltimore: Johns Hopkins University Press, 1983); Jill Jonnes, Empires of Light: Edison, Tesla, Westinghouse, and the Race to Electrify the World, 1st ed. (New York: Random House, 2003); David E. Nye, Electrifying America: Social Meanings of a New Technology, 1880-1940 (Cambridge, MA: MIT Press, 1990).

[16] Harold L. Platt, The Electric City: Energy and the Growth of the Chicago Area, 1880-1930 (Chicago: University of Chicago Press, 1991).

[17] Origin and History of Houston Lighting & Power Company, Houston, TX: Houston Lighting & Power, 1940); Vance Gillmore, And Work was Made Less … A Brief History of Texas Electric Service Company (Fort Worth, TX: Texas Electric Service Company, 1976); Robert H. Gregory, Municipal Electric Utilities in Texas, ed. University of Texas The Bureau of Municipal Research, Municipal Studies, (Austin, TX: The University of Texas Press, 1942).

[18] Gilbert B. Reschenthaler, "Some Aspects of the Economic Performances of Private Electric Utility Companies in Texas" (Ph.D. University of Texas, 1969). General-law cities in Texas have limited powers granted by the state. Home-rule cities are those that have adopted a charter to define the powers and duties of the local government. Texas voters amended the state constitution in 1912 to allow for the establishment of home-rule cities. TML Legal Department, Alphabet Soup: Types of Texas Cities, Texas Municipal League (Austin, TX, December 2017), https://www.tml.org/DocumentCenter/View/244/Types-of-Texas-Cities-PDF.

[19] Gregory, Municipal Electric Utilities in Texas; Reschenthaler, "Some Aspects of the Economic Performances of Private Electric Utility Companies in Texas."

[20] Bill Beck, At Your Service: An Illustrated History of Houston Lighting and Power (Houston: Houston Lighting and Power Company, 1990); Origin and History of Houston Lighting & Power Company.

[21] Houston Lighting & Power Company: Annual Report, 1940, Houston Lighting & Power Company (Houston, TX, June 16, 1941). See also Annual Reports for 1942-1950.

[22] Platt, The Electric City: Energy and the Growth of the Chicago Area, 1880-1930. Platt describes in detail how Samuel Insull drove this process throughout the Chicago region in the early 1900s.

[23] Hughes, Networks of Power: Electrification in Western Society, 1880-1930, 391-92. Control of Power Companies, (Washington, D.C.: Government Printing Office, 1927).

[24] Julie Cohn, "Utilities as Conservationists? The Paradox of Electrification During the Progressive Era in North America," in Green Capitalism? Exploring the Crossroads of Environmental and Business History, ed. Hartmut Berghoff and Adam Rome (Philadelphia, PA: University of Pennsylvania Press, 2017).

[25] Cohn, The Grid: Biography of an American Technology.

[26] Robert L. Johnson, Texas Power & Light Company: 1912 - 1972 (Texas Power & Light Company, 1973), 60.

[27] Howard Ricks Fussell, A History of Gulf States Utilities Company, 1912 - 1947, vol. 11 (Houston: Texas Gulf Coast Historical Association, 1967), 35.

[28] Fussell, A History of Gulf States Utilities Company, 1912 - 1947, 11. Gulf States was part of a conglomerate formed by Stone and Webster Inc. comprising two holding companies and four operating companies. Gulf States held a charter in Texas that allowed for operations in Louisiana.

[29] Beck, At Your Service: An Illustrated History of Houston Lighting and Power, 155.

[30] Philip J. Funigiello, Toward a National Power Policy; the New Deal and the Electric Utility Industry, 1933-1941 (Pittsburgh: University of Pittsburgh Press, 1973); William Lasser, Benjamin V. Cohen: Architect of the New Deal (New Haven, CT: Yale University Press, 2002).

[31] Funigiello, Toward a National Power Policy; Thomas K. McCraw, TVA and the Power Fight, 1933-1939 (Philadelphia: Lippincott, 1971).

[32] U.S. Securities and Exchange Commission, Second Annual Report of the Securities and Exchange Commission: Fiscal Year Ended June 30, 1936, 139 (Washington, DC: Government Printing Office, 1937). More than 100 companies had participated in 45 lawsuits against PUHCA by the end of 1935. In turn, the SEC filed suit against Electric Bond and Share and 14 other holding companies during the same year. And the list goes on. For a short summary of these cases, see Wikipedia, s.v. "The Public Utility Holding Company Act," Wikipedia, updated January 30, 2022, accessed February 7, 2022, https://en.wikipedia.org/wiki/Public_Utility_Holding_Company_Act_of_1935.

[33] SEC, Fourth Annual Report of the Securities and Exchange Commission: Fiscal Year Ended June 30, 1938,  (Washington, D.C.: Government Printing Office, 1939).

[34] SEC, Seventh Annual Report of the Securities and Exchange Commission: Fiscal Year Ended June 30, 1941, 73 (Washington, D.C.: Government Printing Office, 1942).

[35] A. Robert Thorup, "Electric Range War in Texas: A Case Study in Federal-State Energy Regulation," George Washington Law Review 48, no. 3 (March 1980): 397–401. Thorup notes that several large utilities sought to avoid federal regulation by selling off interstate operations (p. 398). A corporate history of Community Public Service Company, a utility serving communities in Texas, New Mexico and other states, forthrightly describes efforts in 1935 to sell off holdings that would subject the company to federal oversight; SEC inquiries into jurisdiction over the company in 1938; FPC assertion of jurisdiction in 1943; and company reorganization in 1944 to comply with federal rules. Bennett L. Smith, Community Public Service Company: Its History, People, and Places (Fort Worth, TX: Bennett L. Smith, 1975), 104–25.

[36] Jersey Central Power & Light Co. v. FPC, 319 U.S. 61 (1943).

[37] Connecticut Light & Power Co. v. FPC, 324 U.S. (1945).

[38] Exemption of Certain Public Utilities from Federal Power Commission Jurisdiction Hearings on S.218 Before the Senate Commerce Comm., 89th Cong., 1st Sess. 279-280 (1965) (statement of E. Allen Hunter, president of Utah Power & Light Company). Quoted in Thorup, "Electric Range War in Texas: A Case Study in Federal-State Energy Regulation," 409, fn 129.

[39] "F.P.C. Waives Policy on Power Connections," New York Times, October 17, 1942.

[40] Opinions and Decisions of the Federal Power Commission, With Appendix of Selected Orders in the Nature of Opinions, ed. Federal Power Commission, vol. 2 (Washington, D.C.: Government Printing Office, 1943); Opinions and Decisions of the Federal Power Commission, With Appendix of Selected Orders in the Nature of Opinions, vol. 3 (Washington, D.C.: Government Printing Office, 1944).

[41] Fussell, A History of Gulf States Utilities Company, 1912 - 1947, 11, 82n27.

[42] Houston Lighting & Power Company: Annual Report, 1943, Houston Lighting & Power Company (Houston, TX, March 15, 1944); Houston Lighting & Power Company: Annual Report, 1944, Houston Lighting & Power Company (Houston, TX, March 1, 1945); Houston Lighting & Power Company: Annual Report, 1945, Houston Lighting & Power Company (Houston, TX, March 15, 1946); Beck, At Your Service: An Illustrated History of Houston Lighting and Power; Fussell, A History of Gulf States Utilities Company, 1912 - 1947, 11; Johnson, Texas Power & Light Company: 1912 - 1972; Smith, Community Public Service Company: Its History, People, and Places.

[43] S. B. Morehouse, "Inter-system power coordination in Southwest region," Electric Light and Power 23, no. 12 (1945): 63-64. The participating Texas companies listed in this article include Texas Power & Light Company, Texas Electric Service Company (East), Brazos River Conservation and Reclamation District, Southwestern Power Administration (a federal agency), Dallas Power & Light Company, West Texas Utilities, Texas Electric Service Company (West), Lower Colorado River Authority, Austin Municipal Water, Light, and Power Department, San Antonio City P. S. Board, Central Power & Light Company, Houston Lighting & Power Company, Sinclair Refining, Dow Magnesium and Dow Chemical.

[44] Julie Cohn, Matthew Evenden, and Marc Landry, "Waterpowers: The Second World War and the Mobilization of Hydro-Electricity in Canada, the United States, and Germany," Journal of Global History 15, no. 1 (2020).

[45] Houston Lighting & Power Company: Annual Report, 1945; Houston Lighting & Power Company: Annual Report, 1946, Houston Lighting & Power Company (Houston, TX, March 15, 1947); Houston Lighting & Power Company: Annual Report, 1947, Houston Lighting & Power Company (Houston, TX, March 26, 1948); Houston Lighting & Power Company: Annual Report, 1948, Houston Lighting & Power Company (Houston, TX, February 10, 1949).

[46] Houston Lighting & Power Company: Annual Report, 1948, 34.

[47] Securities and Exchange Commission: Decisions and Reports, Volume 18, January 1, 1945 to April 26, 1945, 296 and following. (Washington, D.C.: Government Printing Office, 1950).

[48] Southwestern Light & Power Company, Public Service Company of Oklahoma, Oklahoma Power and Water Company, West Texas Utilities Company, Pecos Valley Power & Light Company and Central Power and Light Company.

[49] Securities and Exchange Commission: Decisions and Reports, Volume 18, January 1, 1945 to April 26, 1945, Short, 298.

[50] West Texas Utilities Company and Central Power and Light Company v. Texas Electric Service Company and Houston Lighting and Power Company, No. CA3-76-633-F, 470 F. Spp. 798, Northern District of Texas (1979).

[51] Richard D. Cudahy, "The Second Battle of the Alamo: The Midnight Connection," Natural Resources & Environment 10, no. 1 (Summer 1995): 57. There are no details in the text and no footnote to indicate when this document was created and signed, who signed it or where it might be found. The statement may refer to actions taken after the passage of PUHCA in 1935, agreements related to the establishment of a single Texas grid in 1967 or the establishment of ERCOT after that. I have not succeeded in locating a document like this.

[52] Cudahy, "The Second Battle of the Alamo: The Midnight Connection"; Thorup, "Electric Range War in Texas: A Case Study in Federal-State Energy Regulation." The following agencies and courts addressed aspects of this incident at various points during the years following the connection: the U.S. Supreme Court, the U.S. Fifth Circuit Court, the U.S. Texas Northern District Court, the Nuclear Regulatory Commission, the U.S. Department of Energy, the Securities and Exchange Commission, the Federal Power Commission (later the Federal Energy Regulatory Commission) and the Public Utility Commission of Texas.

[53] Docket 4414, Examiner’s Report: Procedural History, Public Utility Commission of Texas  (1982).

[54] Cohn, The Grid: Biography of an American Technology. A cascading power failure is one in which there is an “uncontrolled successive loss of System Elements triggered by an incident at any location. Cascading results in widespread electric service interruption that cannot be restrained from sequentially spreading beyond an area predetermined by studies.” Glossary of Terms Used in NERC Reliability Standards, Updated  June 28, 2021,  (Atlanta, GA: North American Electric Reliability Corporation, 2016), https://bit.ly/3eDMvXf.

[55] U.S. Department of Energy, Energy Information Administration, "State Energy Data System (SEDS): 1960-2019 Complete, Prices and Expenditures, 1970-2019," ed. U.S. Department of Energy Energy Information Administration (2021). https://www.eia.gov/state/seds/seds-data-complete.php?sid=US#CompleteDataFile.

[56] Some of the cost discrepancies were related to two fuel issues — natural gas prices were rising, but some utilities, such as HL&P, had long-term contracts in place that protected their operating costs while others, like CSW, did not. In addition, other companies, like TESCo, had been developing lignite resources within Texas, or establishing access to coal from Wyoming and Utah. CSW’s subsidiaries within the Texas grid enjoyed lower costs as a result, while those participating in the Southwest Power Pool experienced rising costs. Thorup, "Electric Range War in Texas: A Case Study in Federal-State Energy Regulation."

[57] West Texas Utilities Company and Central Power and Light Company v. Texas Electric Service Company and Houston Lighting and Power Company, No. CA3-76-633-F, 470 F. Spp. 798, Northern District of Texas. The Fort Worth National Archives holds the records for this case, containing thousands of pages of documents. Future research on this topic will include review of these records.

[58] West Texas Utilities Company and Central Power and Light Company v. Texas Electric Service Company and Houston Lighting and Power Company, No. CA3-76-633-F, 470 F. Spp. 798, Northern District of Texas, 808.

[59] Thorup, "Electric Range War in Texas: A Case Study in Federal-State Energy Regulation," 424–26; Docket 14, Amended Final Order: The Application of Houston Lighting and Power Company, et al., for Reconnection of the Texas Interconnect System, signed July 11, 1977, Public Utility Commission of Texas, https://interchange.puc.texas.gov/Documents/14_1_784770.pdf.

[60] Amended Final Order: The Application of Houston Lighting and Power Company, et al., for Reconnection of the Texas Interconnect System, signed July 11, 1977, 4. In this Amended Final Order, the PUCT found that synchronous operation between the portion of the Texas grid that remained interconnected with the Southwest Power Pool was “unsatisfactory for [West Texas Utilities] and all companies interconnected with them because of the wide power swings and delayed stabilization time after an outage.”

[61] Julie Cohn, "When the Grid was the Grid: The History of North America’s Brief Coast-to-coast Interconnected Machine [Scanning our Past]," Proceedings of the IEEE 107, no. 1 (2019).

[62] National Power Grid System Study - an Overview of Economics, Regulatory, and Engineering Aspects: A study prepared by the Congressional Research Service at the Request of Lee Metcalf, Chairman, Subcommittee on Minerals, Materials and Fuels of the Committee on Interior and Insular Affairs, United States Senate, 296, letter from Robert Partridge, National Rural Electric Cooperative Association, to Senator Metcalf (Washington, D.C.: US Government Printing Office, 1976).

[63] National Power Grid System Study - an Overview of Economics, Regulatory, and Engineering Aspects: A study prepared by the Congressional Research Service at the Request of Lee Metcalf, Chairman, Subcommittee on Minerals, Materials and Fuels of the Committee on Interior and Insular Affairs, United States Senate, Short, 18, 121-22; Staff Report on Electric Reliability Council of Texas Interconnection and Reliability Evaluation,  (Fort Worth, TX: Federal Energy Regulatory Commission, Office of Electric Power Regulation, Fort Worth Regional Office, 1978). The FERC staff report noted that ERCOT already had such a substantial operating reserve, attributable in part to the shift to coal and nuclear generation then underway, that interconnection offered negligible additional benefit.

[64] National Power Grid System Study - an Overview of Economics, Regulatory, and Engineering Aspects: A study prepared by the Congressional Research Service at the Request of Lee Metcalf, Chairman, Subcommittee on Minerals, Materials and Fuels of the Committee on Interior and Insular Affairs, United States Senate, Short, 23.

[65] Problems in Planning and Constructing Transmission Lines Which Interconnect Utilites,  (Washington, D.C.: U.S. General Accounting Office, 1977).

[66] The National Power Grid Study,  (Washington, D.C.: United States Department of Energy, 1980).

[67] Power Pooling in the United States: External Review: Staff Report, XIV-9-XIV-19 (Washington, D.C.: Federal Energy Regulatory Commission, 1980).

[68] Energy Supply and Environmental Coordination Act of 1974, Energy Policy and Conservation Act of 1975. 

[69] Power Pooling in the United States: External Review: Staff Report, Short, XIV-19.

[70] Beck, At Your Service: An Illustrated History of Houston Lighting and Power, 338.

[71] Cohn, The Grid: Biography of an American Technology; David R. Nevius, The History of the North American Electric Reliability Corporation: Helping Owners, Operators, and Users of the Bulk Power System Assure Reliability and Security for More Than 50 Years (Atlanta, GA: North American Electric Reliability Corporation, 2020).

[72] Costello, Letter to Michael S. Greene, Vice President, TU Electric, and attached “History and Description of ERCOT Region”, 4, page 1 of attached "History and Description of the ERCOT Region."

[73] Ibid.

[74] R.A. “Jake” Dyer, The Story of ERCOT: The Grid Operator, Power Market & Prices Under Texas Electric Deregulation, The Steering Committee of Cities Served by Oncor & the Texas Coalition for Affordable Power (Texas, February 2011), http://tcaptx.com/downloads/THE-STORY-OF-ERCOT.pdf.

[75] “Articles of Incorporation of Electric Reliability Council of Texas (A Non-Profit Corporation),"(Austin, TX: Office of the Secretary of State, 1990).

[76] Peter Hartley, Kenneth B. Medlock, and Olivera Jankovska, Electricity Reform and Retail Pricing in Texas, Center for Energy Studies, Rice University’s Baker Institute for Public Policy  (June 2017), https://www.bakerinstitute.org/research/electricity-reform-and-retail-pricing-texas/. Others offer a different analysis; for example, see Edward A. Hirs III, "Deliberate Inaction: Root Causes of Texas Power Failure Yet to Be Addressed," Houston Chronicle, February 14, 2022.

[77] For example, see Dyer, The Story of ERCOT: The Grid Operator, Power Market & Prices Under Texas Electric Deregulation; Edward A. Hirs III and Paul W. MacAvoy, "Texas suffers from Soviet-style electricity distribution system," Houston Chronicle, February 22, 2013.

[78] When I asked a system operator at ERCOT what she focuses on when she comes to work each day, she wrote out the complete ACE equation, then struck through the first segment. Personal visit to ERCOT, February 2013.

[79] Julie Cohn and Olivera Jankovska, 2020, Texas CREZ Lines: How Stakeholders Shape Major Energy Infrastructure Projects, https://doi.org/https://doi.org/10.25613/261m-4215.

[80] The Texas Legislature first set goals in 1999. With a favorable geography for wind power, and both state and federal tax incentives, the wind industry quickly exceeded the goals, and the Legislature took up the topic again in 2005.

[81] Aaron Bloom, Interconnections SEAM Study, National Renewable Energy Laboratory (Ames, Iowa, 2018); Rob Gramlich and Jay Caspary, Planning for the Future: FERC’s Opportunity to Spur More Cost-Effective Transmission Infrastructure, Americans for a Clean Energy Grid (Arlington, VA: Americans for a Clean Energy Grid, January 2021), https://cleanenergygrid.org/wp-content/uploads/2021/01/ACEG_Planning-for-the-Future1.pdf; Eric Larson et al., Net-Zero America: Potential Pathways, Infrastructure, and Impacts, interim report, Princeton University (Princeton: Princeton University, December 15, 2020), https://netzeroamerica.princeton.edu/img/Princeton_NZA_Interim_Report_15_Dec_2020_FINAL.pdf; NASEM, The Future of Electric Power in the United States, National Academies of Sciences, Engineering, and Medicine (Washington, D.C.: The National Academies Press, 2021); Avi Zevin et al., Building a New Grid Without New Legislation: A Path to Revitalizing Federal Transmission Authorities, Center for Global Energy Policy (New York: Columbia University, December 2020), https://www.energypolicy.columbia.edu/research/report/building-new-grid-without-new-legislation-path-revitalizing-federal-transmission-authorities.

[82] For a recent example, see Bloom, Interconnections SEAM Study.

[83] For a recent example, see Larson et al., Net-Zero America: Potential Pathways, Infrastructure, and Impacts, interim report.

[84] Thomas J. Overbye et al., "Stability Considerations for a Synchronous Interconnection of the North American Eastern and Western Electric Grids" (55th Hawaii International Conference on Science Sciences (HICSS), Lahaina, HI, January 2022).

[85] NASEM, The Future of Electric Power in the United States, 66–72.

[86] 147 FERC ¶ 61,113, Final Order Directing Interconnection and Transmission Service, Issued May 15, 2014

[87] Ibid., 8.

[88] Docket 45624, Order on Rehearing, Public Utility Commission of Texas (2017); Docket 45624, Revised Order Creating and Scoping Project, Public Utility Commission of Texas (2017).

[89] Edward Klump, "What a $2B Texas project says about U.S. quest for a CO2-free grid," E&E News, October 28, 2021.

 

 

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