The last time I did a weather-related blog post was in the aftermath of Hurricane Harvey, which decimated Houston and most of south Texas. Unfortunately, most of the damage to Houston came from a man-made event which was the opening of the floodgates on earthen dams on the westside of Houston. When the dams were originally built in the 1930’s they were 30 miles west of Houston but in 2017, they were simply in west Houston. However, in the intervening 70+ years from construction to Harvey, some 200,000 homes had been built west of these dams and the back up from the 50 inches of rain which Harvey brought caused the dams to be in danger of such catastrophic failure (i.e., breach) the decision was made by the Army Corp of Engineers to sacrifice the needs of the few for the needs of the many.

Even though there was only four days’ notice of the Hurricane, City of Houston and state of Texas officials were able to plan for the disaster and be as ready as they could be, even if they were not prepared for another group (the federal authorities) to make the decision which led to the worst flooding in the history of Houston. Private parties as diverse as the grocery business HEB and the Oklahoma Navy (who knew land-locked Oklahoma had a Navy) delivered badly needed goods and provided lifesaving services to our city. The bottom line was that even though it was a 1,000-year flood event, the federal, state and local government, private parties and individual citizens were prepared and did render assistance.

This week Houston experienced a 100-year winter event. Some two to four inches of snow fell in Houston but we experienced single digit temperatures on Monday and Tuesday nights with those days temperatures remaining below freezing. Unfortunately, it was worse in north Texas with temperatures below zero in many places. In other words, a cold snap (as we would say in Texas) for the ages. As with Hurricane Harvey, these temperatures were forecasted well in advance. Everyone knew they were coming. Many people, including myself and my Girl Guide trained wife had stocked up on food and water.

However, what none of us planned on was the abject failure of the state of Texas power system to stay on during this deep freeze. Here in the great state of Texas we have our own power system, ERCOT. It is run by the state and monitors available power and directs it as needed. The theory was this free-er market hybrid would incentivize power companies to build and maintain sufficient power generating systems to be able to sell it in high-demand time periods. Monday saw the highest power demands ever under the ERCOT system. Unfortunately, this was coupled with a catastrophic failure by energy producers to keep systems operating. Note that I did not say the failure of operators to keep up with demand.

How bad was it? As I write this blog on Tuesday afternoon, a full 33% of the state of Texas is without power. Not Houston or Harris County but the entire state.  Some folks have been without power going on two days now. Faucets inside homes are freezing.

Asleep at the (AI) Switch

The first failure came from ERCOT and its pricing model. As reported by the Houston Chronicle, it was the ERCOT pricing model which primarily led to the severe shortage of power. “On Monday, even as blackouts rolled across the state, power was trading in wholesale power markets far below the $9,000 per megawatt hour cap — as low as $1,200.” This meant that the ERCOT AI incorrectly read that plenty of power was available so there was no need to release or generate additional power for distribution.

A Public Utility Commission spokesman said in a Press Release, “When the ERCOT dispatch system sees prices that are not at the $9000 scarcity cap, it is programmed to ‘think’ that there isn’t scarcity in the market and that some power should be held in reserve instead of releasing it to power the grid.” In other words, “low prices could have meant that available power was not making it to the grid, despite the shortages.”

Compliance Lesson – AI without human oversight can be worse than useless, it can be deadly (10 reported deaths in Houston so far). This is not Skynet becoming self-aware, this is process failure.

We Didn’t Know Cold Weather Could Hurt

Yet it was not simply the inanity of the state of Texas. The power generators seemingly did not perform even the simplest of risk assessments for their mechanical operating systems around cold weather. The first power generating system to go down were the massive wind farms in west Texas. Apparently mechanical operating systems can freeze up (who knew). Before the MAGA hat wearing, Capitol insurrectionists start screaming about the fallacy of tree-loving ESGers; consider that all of Scandinavia (that’s Finland, Sweden, Norway, Denmark which are all tree-loving countries) have extensive wind farms that face much more than one day of temperatures at single digits, yet they do not immediately seize up from freezing.

The next power generator to go down was one of Texas’ two nuclear generators at the South Texas Nuclear Power Plant. Here it was equally a lack of risk management. One of the two reactors, Unit 1, went down because the water storage facilities froze and the pipes taking the water to Unit 1 to keep it cool also froze (no word on whether they burst as well). The highest technology available was not able to discern that the primary safety system in the plant, water, could be subject to a cold weather event. Conversely to the wind farms above, before the concert-going No Nukers start screaming about the dangers of nuclear power, recall that there are (or were) multiple nuclear power plants across the northern US and indeed northern Europe who seem to know how to keep the water pipes from freezing.

Compliance Lessons – If you do not know how to manage risk, benchmark your competitors who do know how to manage risk.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2021

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