Texas Takes Change: New Rules for Grid Resiliency

Winter Storm Uri exposed critical weaknesses in the resilience of Texas’s transmission system. To address this, the Public Utility Commission has introduced a new rule that allows utilities to upgrade their infrastructure and recover costs. Utilities can now submit detailed System Resiliency Plans outlining their proposed resilience upgrades and cost recovery strategy. If approved the Utility can implement a “resiliency cost recovery rider”, adding an extra charge to consumer bills to finance these upgrades. These plans can be implemented over a three-year period. This article will dive into the financial, technical, and compliance requirements of these new resiliency plans.??

?? Technical Measures for Resilience?

• Resiliency Measures: Utilities must include strategies like infrastructure hardening, modernizing facilities, undergrounding lines, and lightning and flood mitigation (Section 25.62(c)(1)(A)-(J)).?

• Evaluation Metrics: Each measure must have a metric to evaluate its effectiveness, ensuring utilities can demonstrate benefits (Section 25.62(c)(3)(A)-(B)).?
• Evidence of Effectiveness: Plans must provide quantitative, performance-based evidence or independent expert validation of each measure’s effectiveness (Section 25.62(c)(2)(A)(ii)).?

• Risk Identification: Utilities must detail each type of resiliency event and associated risks to clearly define qualifying circumstances (Section 25.62(c)(2)(C)(i)).?

?? Financial Considerations?

• Resiliency Cost Recovery Rider: Utilities can recover costs through RCRR, allowing recovery outside base-rate proceedings (Section 25.62(f)(1)).?

• Deferral as Regulatory Asset: Utilities can defer distribution-related costs for recovery in base-rate proceedings, including depreciation and carrying costs (Section 25.62(f)(2)).?

• Systematic Approach: Plans must be systematically implemented over at least three years, detailing capital costs and O&M expenses (Section 25.62(c)(3)(E)).?

• Reconciliation: Resiliency-related costs recovered through rates are subject to reconciliation to ensure they are reasonable and necessary, with any unreasonable amounts refunded (Section 25.62(f)(3)(A)).?

?? Compliance and Reporting?

• ?Notice and Intervention: Utilities must notify relevant stakeholders, including municipalities and retail electric providers. The intervention deadline is 30 days from notice completion (Section 25.62(d)(1)).?

• Commission Review: The PUC will review and decide on resiliency plans within 180 days of filing. A procedural schedule will be set to meet this deadline (Section 25.62(d)(4)).?

• Annual Reporting: By May 1 each year, utilities must file a report on implementation status, incurred costs, and effectiveness evaluations (Section 25.62(g)(1)).?

• Record Maintenance: Utilities must keep records related to the resiliency plan for five years and provide updates upon request by commission staff (Section 25.62(g)(4)).?

?? EPE’s Insights – For Utilities?

• Independent Expert Validation: Ensure your resiliency plans are backed by independent expert validation. This adds significant credibility and weight to your proposals and demonstrates to the committee that you have conducted a rigorous and objective assessment of your strategies.?

• Deferring Costs as Regulatory Assets: Take advantage of deferring distribution-related costs as regulatory assets. This approach spreads financial impacts over time, aligning with long-term planning and reducing immediate financial strain, thereby ensuring sustainable investment in essential infrastructure upgrades.?

• Balancing Capacity Expansion and Resilience: Leverage the opportunity to submit resiliency plans to balance enhancing physical resilience with capacity expansion. Grid Enhancing Technologies that mitigate the effects of extreme temperatures can serve dual purposes—boosting grid resilience and supporting capacity growth, providing a comprehensive solution to two critical issues.?

• Case in Point - Oncor’s $3.4B Plan: Oncor Electric Delivery has set a precedent by filing a comprehensive $3.4 billion System Resiliency Plan with the Public Utility Commission of Texas. This plan includes $2.9 billion in capital expenditures and $520 million in operations and maintenance, focusing on wildfire mitigation, cybersecurity, and infrastructure modernization over three years starting in 2025. Oncor’s strategic investments, which also address significant growth in their service territory, underline the importance of robust planning and proactive investment in grid resilience.?

Let's build a stronger, more resilient Texas grid!?

Link to Ruling: 25.62 ?