By Mark P. Jones, Ph.D.
Fellow in Political Science, Baker Institute
Pablo M. Pinto, Ph.D.
Nonresident Scholar, Latin America Initiative, Baker Institute
Renée D. Cross
Senior Director, Hobby School of Public Affairs, University of Houston
and Kirk P. Watson
Founding Dean, Hobby School of Public Affairs, University of Houston; Former State Senator, Texas
Winter Storm Uri began to hit parts of Texas on Feb. 13, 2021 and – at its peak- left close to 4.5 million homes and businesses without power. The preliminary number of deaths attributed to the storm totals 111 and the storm’s economic toll is estimated to be as high as $295 billion. Over the course of the week of Feb. 14-20, more than two-thirds of Texans lost electrical power, for an average of 42 hours, and primarily due to the power outages, half lost running water for an average of 52 hours, with even more Texans with water lacking access to potable water for almost two days on average.
A little over a month later, on March 25, Warren Buffett’s Berkshire Hathaway BRK.B -0.2% announced a proposal being pitched to Texas lawmakers under which it would build $8 billion worth of power plants to substantially boost the state’s electrical generation reserve capacity and, in doing so, help prevent the type of preventable disaster that afflicted the Lone Star State the week of Feb. 14. A mandatory monthly fee paid by Texas consumers as part of their electricity bill would be the principal method of funding the Berkshire Hathaway project.
The Texas Electrical grid is located entirely within the boundaries of Texas; hence, it is not subject to the regulation of the Federal Electric Regulatory Commission. Two Texas counties are part of the Western Interconnection electrical grid while 29 are part of the Eastern Interconnection grid. The lack of federal oversight allowed Texas policymakers to design an electrical system based on market-based incentives that would promote innovation, competition, and lower prices for consumers. The system seems to have delivered positive outcomes along these dimensions, yet recurring extreme weather events, such as Winter Storm Uri, have exposed a flaw: the system is not resilient to sudden spikes in demand and drops in supply of electric power effected by the fall in temperature, resulting in massive blackouts, and human and material losses.
The central problem facing Texas is identifying solutions that would make the system more resilient. Yet building a resilient electrical system has the typical properties of a public good, which is likely to be undersupplied by the market. A proposal such as Berkshire Hathaway’s with its reliance on building excess reserve capacity requires government action. The catch for Texas policymakers is that despite the broad acknowledgement of the costs of the blackouts and the demand for policy remedies to mitigate the impact of severe weather events, a majority of Texans do not seem to be willing to pay an additional fee to the generators for the required investment in a more resilient electrical infrastructure. Perhaps these Texans do not believe they are the ones, after being left shivering in their homes, to pay an additional price for an investment that generators can make to assure a more resilient electrical infrastructure.
Between March 9-19, the Hobby School of Public Affairs at the University of Houston conducted a survey of 1,500 adults living in the 213 Texas counties (containing 92% of the state’s 29 million population) served by the Texas Electrical grid, which is managed by the Electrical Reliability Council of Texas (ERCOT).
The survey respondents were asked about the extent to which they would support a proposal to allow electricity generators to charge consumers an additional fee to support the maintenance of a more substantial minimum electricity reserve in order to protect the state of Texas from the effects of severe weather affecting its energy supply and delivery. More than half (54%) of those surveyed oppose allowing generators to charge this fee, with 36% strongly opposed and 18% somewhat opposed. Conversely, fewer than one in four (24%) support this fee proposal, 8% strongly and 16% somewhat. The remaining 22% neither support nor oppose the fee proposal to bolster the state’s reserve generation capacity.
This opposition is very bipartisan, with 57% of Republicans, 50% of Democrats, and 58% of Independents all opposing the proposal to allow a company like Berkshire Hathaway charge consumers a fee to support the creation of a larger reserve electrical generation capacity in Texas.
These same Texans were also asked how much more they would be willing to pay on their monthly electricity bill to protect the Texas electrical grid from the effects of severe winter weather by increasing reserve generation capacity and insuring power plants were fully winterized. Half (51%) indicated that they would not be willing to pay any more at all on their monthly bill to achieve these goals. The next most common option selected was $5 more which one quarter (25%) of Texans said they would be willing to pay each month, followed by 14% who indicated they would be willing to pay $10 more monthly, with the remaining 10% spread among those who would be willing to pay $20 more (6%), $30 more (3%), $40 more (0%), and $50 more (1%).
Obviously, far more goes into the decision calculus of state lawmakers when considering a proposal of this magnitude. other than public opinion. And lawmakers also face public demands to resolve problems with the electrical grid that Winter Storm Uri made apparent. That said, the Texas public surveyed in this poll indicated quite clearly that it opposes policies that would require consumers to largely shoulder the burden for boosting reserve electrical generation capacity with the goal of preventing another winter power outage of the magnitude experienced by Texans during Valentine’s Day week of 2021.
This post originally appeared in the Forbes blog on March 29, 2021.