The Texas Energy Reliability Council

Report to the 88th Texas Legislature

Disclaimer: Pursuant to Texas Government Code Chapter 418.309(c) information created by The Texas Energy
Reliability Council is not subject to Texas Government Code Chapter 551 (Open Meetings) or Chapter 552 (Public
Information).
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I. LETTER FROM THE CHAIR

Dear Members of The Texas Legislature:

As Chair of the Texas Energy Reliability Council (“TERC”), I respectfully submit this report for your
consideration pursuant to Texas Government Code section 418.310. The Texas Energy Reliability Council
was established to ensure that the energy and electric industries in this state meet high priority human needs
and address critical infrastructure concerns; and enhance coordination and communication in the energy and
electric industries in this state. The council’s general duties are to foster communication and planning to ensure
preparedness for making available and delivering energy and electricity in this state to ensure that high priority
human needs are met and critical infrastructure needs are addressed. Additionally, the council was charged
with fostering communication and coordination between the energy and electric industries in this state.

I am pleased with the advancements TERC has made since Senate Bill 3 (87th, Regular) was enacted in June
of 2021. This report will highlight the many actions TERC and its agency partners have put into place and
operationalized as a direct result of the members’ deliberations and recommendations. This report also focuses
on the current reliability and stability of the state’s electricity supply chain, offering recommendations on
methods to strengthen the electricity supply chain in Texas and to decrease the frequency of extended power
outages caused by disasters. As you have designed it, TERC is not a regulatory body; TERC cannot enact
legislation, nor enforce any laws, rules, or state agency regulatory policies. TERC was charged with
providing recommendations to the Legislature for your consideration and I am proud of the collaborative
work that has been achieved.

Each member of TERC has been fully invested in the Council despite their other full-time duties to the state
and their respective businesses. As Chair, it is apparent to me that every member understands the gravity of
the issues at hand and the job they were appointed to do. I would like to thank each appointee, former and
current, and our state agency leaders and expert staff, for their hard work and dedication. The successes
detailed in this report are a direct result of the members, and I am grateful for their diligent work. Personally,
I am incredibly honored to have been assigned to serve as Chair.

TERC does not end with the submission of this report. We will continue to meet and to report back to the
Legislature to ensure high priority human needs are being met and critical infrastructure concerns are
addressed. We will continue to enhance coordination and communication between the energy and electric
industries in this state. The changes you made last session, and those our partners have implemented, have
put us in a better position now to face disasters than we have been in before. TERC will continue to work
towards the goals and duties set forth by the Legislature, and we look forward to continued conversation,
collaboration and coordination with you and your offices.

Sincerely,

W. Nim Kidd
Chairman, Texas Energy Reliability Council

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 II. TABLE OF CONTENTS

I. LETTER FROM THE CHAIR………………………………………………………………..…2

II. TABLE OF CONTENTS…………………………………………….………………………….3
III. EXECUTIVE SUMMARY………………………………………………………………………4
IV. MEMBERSHIP…………………………………………………………………………………. 7
V. ENSURE THAT THE ENERGY AND ELECTRIC INDUSTRIES IN THIS STATE MEET
HIGH PRIORITY HUMAN NEEDS AND ADDRESS CRITICAL INFRASTRUCTURE
CONCERNS …………………………………………………………………………………….8
a. CRITICAL DESIGNATIONS………………………………………………………...8
b. WEATHERIZATION…………………….………………………………………..….9
c. CYBERSECURITY…………………………………………………………..………11
VI. ENHANCE COORDINATION AND COMMUNICATION IN THE ENERGY AND
ELECTRIC INDUSTRIES IN THIS STATE………………………..…………………………13
a. ENERGY INDUSTRY COORDINATION CALLS…………………………...……13
b. LOAD SHED & GAS CURTAILMENT COORDINATION………………………13
c. SUPPLY CHAIN MAPPING COMMITTEE………………………………………..15
VII. A REPORT ON THE RELIABILITY AND STABILITY OF THE ELECTRICITY SUPPLY
CHAIN IN THIS STATE…………………………………………………………...…….…….16
a. 2022 WINTER OPERATIONS………………………………………………...…….16
b. 2022 SUMMER OPERATIONS……………………………………………………...17
c. LOOKING FORWARD……………………………………………………………..17
d. MARKET REDESIGN………………………………………………………………18
VIII. RECOMMENDATIONS……………………………………………………………………….21
a. RECOMMENDATIONS SUMMARY..….…………………………...………....……21
b. SCOPE OF TERC ANALYSIS AND RECOMMENDATIONS……………………25
c. DEFINING HIGH PRIORITY HUMAN NEEDS AND CRITICAL
INFRASTRCUTRE…………………………………………………………………..30
d. PROTECTING HIGH PRIORITY HUMAN NEEDS AND CRITICAL
INFRASTRUCTURE………………………………..………………………………..36
e. SERVICE PRIORITIZATION…………….………………….…………………38
f. WEATHERIZATION ……………………….………………….…………………...42
g. DATA AND METRICS……………………….………………..…………………….44
IX. APPENDDIX…………………………………………………………..………………………51

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III. EXECUTIVE SUMMARY

The Texas Energy Reliability Council (TERC) was established by the 87th Texas Legislature to “ensure
that the energy and electric industries in this state meet high priority human needs and address critical
infrastructure concerns,” and “enhance coordination and communication in the energy and electric
industries in this state.” 1 The Council’s general duties outlined are to “foster communication and
planning to ensure preparedness for making available and delivering energy and electricity in this state
to ensure that high priority human needs are met and critical infrastructure needs are addressed.” 2
Furthermore, “The council shall foster communication and coordination between the energy and
electric industries in this state.” 3

TERC is comprised of state agency representatives and members of private industry. Its 25 members
include 7 state agency partners and 18 private sector appointees. S.B. 3 allows for state agency partners
to designate a person from the member’s agency to represent the member in any meeting. 4

State Agency Partners:

• Chief of the Texas Division of Emergency Management as Chair

• Chairman of the Railroad Commission of Texas
• Presiding officer of the Public Utility Commission of Texas
• Chief executive of the Office of Public Utility Counsel
• Presiding officer of the Texas Commission on Environmental Quality
• Chair of the Texas Transportation Commission
• Representative of the Electric Reliability Council of Texas Independent System Operator,
appointed by the Governor
Private Sector Appointees:

• Five persons to represent participants in the natural gas supply chain in this state, appointed
by the Railroad Commission of Texas
• Five persons to represent the electric industry, appointed by the Public Utility Commission of
Texas
• Three persons to represent energy sectors not otherwise represented on the Council,
appointed by the Public Utility Commission of Texas
• Five persons to represent industrial concerns, appointed by the Governor

While S.B. 3 states, “After its initial meeting, the council shall meet at least twice each year at a time
and place determined by the Chief,” the Council found it necessary to meet more often. 5 TERC has

1 Tex. Gov’t Code § 418.302.

2 Tex. Gov’t Code § 418.308.
3 Id.
4 Tex. Gov’t Code § 418.303.
5 Tex. Gov’t Code § 418.306.

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held 16 full council meetings. Its initial meeting with the full Council was held on October 25th, 2021.
TERC has met at least once a month since its initial meeting, including two meetings in November
2021, January 2022, and September 2022. In lieu of a full meeting in June, TERC held an open house
event at the State Capitol to engage with industry partners and solicit feedback and engage community
stakeholders. The purpose of the event was to solicit input as to what TERC should consider as part
of its confidential deliberations. While the event saw good attendance, only three groups submitted
input for the Council’s consideration.

In addition to TERC’s 16 full council meetings, and 1 public event, different committees and work
groups met an additional 15 times. The Council organized into two work groups (temporary) that
began and concluded their work ahead of the 2022 winter season, and three standing committees that
continue to meet.

• The Immediate Needs Work Group met four times to put into action recommendations ahead
of winter to meet high priority human needs, address critical infrastructure concerns, and
enhance coordination in our energy and electric industries.
• The TERC Charter & Bylaws Work Group worked to create the rules by which the Council
shall operate.
• The Communications Committee has met three times to enhance coordination and
communication in the energy and electric industries in this state.
• The Supply Chain Committee has met four times to discuss methods to strengthen the
electricity supply chain in this state and to decrease the frequency of extended power outages
caused by a disaster in this state.
• The Recommendations Committee has met five times to research and write the report
required by Texas Government Code Chapter 418.310.
TERC saw the necessity of operationalizing communication improvements ahead of this past winter
and identified key areas that our state agencies could carry out action within existing authority. Here
are a few collaborative steps TERC has already taken to ensure that the energy and electric industries
in this state meet high priority human needs and address critical infrastructure concerns, and to
enhance coordination and communication in the energy and electric industries in this state:

• Coordinated efforts between the Railroad Commission of Texas and the Public Utility
Commission of Texas to align rules regarding critical natural gas facilities and entities
• Facilitated meetings between state agency partners to address roles, responsibilities, and
expectations for their representatives in the State Operations Center (“SOC”)
• Involved TERC members in Emergency Support Function (“ESF”) brief-outs and National
Weather Service (“NWS”)/Texas Division of Emergency Management (“TDEM”) weather
updates and operational updates during weather events
• Compiled a comprehensive online winter weather resource page, creating a single resource for
Texans to find information
• Instituted industry-wide, daily coordination calls leading up to and during severe weather
threats to have a real-time, operational impact (12 of these calls have occurred during five
weather events)

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 • Added an emphasis on cybersecurity to ensure cyber threats to high priority human needs and
critical infrastructure are considered
• Studied the cause and frequency of natural gas force majeure events during extreme weather
conditions by issuing information requests to certain natural gas and electric industry market
participants.
It is worth noting that Texas experienced nine significant weather events throughout 2022. This
includes four cold weather events and five warm weather events. The cold weather events were
experienced over January 1-2, January 20-23, February 2-5, and February 23-26, while the warm
weather events occurred during May 13-20, May 28-30, July 7-12, July 28-29, and August 2-4. These
events are discussed later in the report. Throughout the entire year, Texas experienced no transmission
issues.

S.B. 3 also requires public utilities and gas providers to provide to the Council any information related
to a disaster requested by the council. 6 On January 18th, 2022, TERC requested information related to
the issuance of force majeure notices associated with the adverse weather event that occurred over
the weekend of January 1, 2022. This has been the only request TERC has issued and information
received has been kept confidential in accordance with Texas Government Code section 418.309.

Finally, TERC is required to submit to the legislature a report on the reliability and stability of the
electricity supply chain in this state. “The report must include recommendations on methods to
strengthen the electricity supply chain in this state and to decrease the frequency of extended power
outages caused by a disaster in this state.” 7 This report is due in November of each even-numbered
year. The following report is submitted to the legislature in accordance with Texas Government Code
section 418.310. This report will first discuss the work TERC has accomplished thus far in ensuring
that the energy and electric industries in this state meet high priority human needs and address critical
infrastructure concerns and enhancing coordination and communication in the energy and electric
industries in this state. The remainder of the report will cover the reliability and stability of the
electricity supply chain in this state, followed by the Council’s recommendations to the legislature on
methods to strengthen the state’s electricity supply chain.

6
Tex. Gov’t Code § 418.309.
7
Tex. Gov’t Code § 418.310.

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IV. MEMBERSHIP

State Agency Partners

W. Nim Kidd, TERC Chair, Chief, Texas Division of Emergency Management, Present
Wayne Christian, Chairman, Railroad Commission of Texas, Present
Peter Lake, Chairman, Public Utility Commission of Texas, Present
Chris Ekoh, Interim Public Counsel, Office of the Public Utility Counsel of Texas, Present
Jon Niermann, Chairman, Texas Commission on Environmental Quality, Present
J. Bruce Bugg, Jr., Chairman, Texas Transportation Commission, Present
Pablo Vegas, President, Electric Reliability Council of Texas, October 2022 – Present
Brad Jones, Interim President, Electric Reliability Council of Texas, September 2021 – October 2022

Railroad Commission of Texas Appointees

Graham Bacon, October 2021 – Present
Jason Herrick, October 2021 – Present
Grant Ruckel, October 2021 – Present
Keith Wall, October 2021 – Present
Danny Wesson, October 2021 – Present

Public Utility Commission of Texas Appointees

Samuel Siegel, Dispatchable Electric Energy, February 2022 – Present
Lori Simpson, Dispatchable Electric Energy, October 2021 – February 2022
Liz Jones, Transmission and Distribution Utilities, October 2021 - Present
Cathy Webking, Retail Electric Provider, October 2021 – Present
Tom Hancock, Municipally-Owned Utility, October 2021 – Present
Clif Lange, Electric Cooperatives, October 2021 – Present
Robert Helton, June 2022 - Present
Thomas McAndrew, October 2021 - Present
Pat Wood III, October 2021 - Present
Charlie Hemmeline, October 2021 – May 2022

Governor Greg Abbott Appointees

Nate Murphy, Motor Fuel Producer, September 2021 – Present
Edward Stones, Chemical Manufacturers, September 2021 – Present
George Presses, September 2021 – Present
Jon Taylor, September 2021 – Present
Melissa Trevino, September 2021 – Present

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V. ENSURE THAT THE ENERGY AND ELECTRIC INDUSTRIES IN THIS STATE
MEET HIGH PRIORITY HUMAN NEEDS AND ADDRESS CRITICAL
INFRASTRUCTURE CONCERNS

CRITICAL DESIGNATIONS

One of the major issues identified from the 2021 winter storm was the lack of coordination between
natural gas and electric generators. House Bill 3648 (87th, Regular Session) addressed this issue by
requiring the Public Utility Commission of Texas (“PUCT”) and the Railroad Commission of Texas
(“RRC”) to work together to ensure that power stays on to the natural gas infrastructure that serves
electric generation. On November 30, 2021, PUCT and RRC separately adopted rules to codify H.B.
3648 and establish new regulations for electric utilities and natural gas entities to ensure critical natural
gas facilities are appropriately identified. TERC was a helpful venue to help facilitate that coordination
with input from industry experts.

The PUCT rule requires the Electric Reliability Council of Texas (“ERCOT”) as well as all electric
utilities, including municipally-owned utilities and electric cooperatives, in the state of Texas to receive
critical customer information from critical natural gas facilities. In December 2021, PUCT established
a market directory of utility email addresses for the provision of this information that will be
maintained on its website. The rule provides standards regarding the provision and confidentiality of
critical customer information for electric utilities. It also addresses the prioritization of critical natural
gas facilities for load-shed and restoration planning during an energy emergency event. A utility must
incorporate critical natural gas facilities into its load-shed and restoration planning. PUCT released a
“Guidance Document for Power Delivery and Restoration During Energy Emergencies” to advise
the rules prioritization requirements in January 2022. PUCT staff anticipates a second phase
rulemaking reviewing critical load standards and processes to begin in 2023 after critical gas facilities
are incorporated into load shed planning, and a more comprehensive prioritization review for all types
of critical loads can commence.

The RRC rule establishes critical designation criteria and timelines for operators of critical natural gas
facilities to provide information to the electric utility. During an energy emergency, critical gas facilities
may be prioritized during electric utility load-shed and restoration planning for purposes of continued
power delivery. An operator of a critical natural gas facility must provide critical customer information
to the utility from which it receives electric delivery service. RRC also adopted forms for the
acknowledgement of critical customer/critical gas supplier designations and for a critical designation
exception application. Initial filings, including submissions to the utility and ERCOT, were due
January 15, 2022. Operators must update and refile with all parties by either September 1, 2022, or 30
days following the date the map is produced by the Texas Electricity Supply Chain Security and
Mapping Committee (“Mapping Committee”), whichever is later. Beginning in 2023, the form will be
updated bi-annually by March 1 and September 1 of each year.

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WEATHERIZATION

To ensure critical infrastructure is protected from extreme weather events, the RRC adopted a weather
emergency preparedness standards rule, 16 Tex. Admin. Code § 3.66 (“Rule 3.66”), at its August 30,
2022 open meeting. Rule 3.66 became effective on September 19, 2022. Rule 3.66 was adopted to
implement changes made by S.B. 3. Generally, the rule requires certain gas supply chain facility
operators and gas pipeline facility operators to “implement measures to prepare to operate during a
weather emergency” pursuant to S.B. 3.

As S.B. 3 specified, Rule 3.66 applies to certain gas supply chain facility operators and certain gas
pipeline facility operators. Gas supply chain facilities subject to Rule 3.66 are facilities that are (1)
included on the Electricity Supply Chain Map; and (2) designated as critical by the Commission in 16
Tex. Admin. Code § 3.65, the critical designation of natural gas infrastructure. Gas pipeline facilities
subject to Rule 3.66 are facilities that are (1) included on the Electricity Supply Chain Map; and (2)
directly serve a natural gas electric generation facility operating solely to provide power to the electric
grid for the ERCOT power region or for the ERCOT power region and an adjacent power region.

Rule 3.66 requires that by December 1st of each year, a gas supply chain facility operator or a gas
pipeline operator to implement weather emergency preparation measures intended to ensure the
sustained operation of the facility during a weather emergency. The rule lists the weather emergency
preparation measures that are required, which include providing training on weather emergency
preparations and operations to relevant operational personnel and consideration of the risk to the
health and safety of employees and protection of the environment.

Importantly, weather emergency preparation measures also require weatherization of the facility using
methods a reasonably prudent operator would take given the type of facility, the age of the facility, the
facility’s critical components, the facility's location, and weather data for the county or counties in
which the facility is located. The RRC will periodically publish weatherization practices on its website
and may include weather data developed for the RRC by the State Climatologist.

Gas supply chain facility operators and gas pipeline operators must additionally implement weather
emergency preparation measures intended to correct known weather-related forced stoppages that
prevented sustained operation of a facility because of weather emergencies in the past. The rule defines
what is considered a weather-related forced stoppage and what constitutes sustained operations during
a weather emergency.

Rule 3.66 also requires a “Weather Emergency Readiness Attestation” be submitted to the RRC by
December 1 of each year. The attestation must be prepared by an authorized representative of the
operator or under the authorized representative’s supervision and direction and must attest that the
operator implemented the weather emergency preparation measures. It must also include an
attachment describing all activities the operator engaged in to implement the requirements, including
a description of the weatherization methods use to weatherize the facility. The first attestation is due
December 1, 2022.

Per S.B. 3, the RRC will inspect facilities to ensure compliance with Rule 3.66. The inspections will
generally stem from one of two places: (1) a regular inspection of the facility conducted in accordance
with RRC’s inspection schedule; or (2) an inspection scheduled in response to a weather-related forced

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stoppage notification filed under the new rule. In accordance with S.B. 3, if a gas supply chain facility
or gas pipeline facility experiences repeated weather-related forced stoppages or major weather-related
forced stoppages, upon notice from the Commission, the operator shall contract with a person with
related experience to assess the facility’s weather emergency preparation measures, plans, procedures,
and operations.

Violations of Rule 3.66 are issued on a facility level. The operator of a facility with an alleged violation
will be issued a notice of violation and given the opportunity for a hearing. If the RRC determines
that a gas supply chain facility operator has violated Rule 3.66, and the violation is not remedied within
a reasonable amount of time, the RRC is required to notify the Office of the Attorney General of
Texas, who will initiate a suit to receive a penalty for the violation. For a gas pipeline facility violation,
the RRC will determine whether it is a violation, and if so, will also assess the appropriate penalty.

The new rule also includes a penalty classification table in subsection (g)(1). S.B. 3 required the RRC
to establish a classification system to be used by a court for Rule 3.66 violations. The penalty
classification tables includes a range of penalties that may be recovered for each class of violation
based on a variety of factors that are listed in the table. The highest class of violations will be eligible
for a penalty exceeding $5,000 and maximum penalty allowed is $1,000,000 for each offense.

On October 26, 2021, the PUCT approved new rule 16 Tex. Admin. Code §25.55, which required
owners of generation resources in the ERCOT power region and owners of certain transmission
substations in the ERCOT power region to take certain actions to prepare for winter 2021-2022.
Those actions included repairing any equipment that broke during the February 2021 winter storm
and implementing best practices weather emergency preparations as identified by the North American
Electric Reliability Corporation (“NERC”) following the February 2011 winter weather event and the
PUCT’s own consultant in a report issued in 2018. Such measures included installation of insulation,
wind breaks, and heaters; regular inspection during the winter months; and training for all on site
personnel.

On September 29, 2022, the PUCT approved the second phase of the weather emergency preparation
rules. The revised rule requires owners of generation resources and transmission substations in the
ERCOT power region to prepare their facilities for both winter weather operations and summer
weather operations. Additionally, the rule requires these owners to maintain the current preparation
standards in 16 Tex. Admin. Code § 25.55 for winter 2022-2023, and then beginning in 2023, take
additional measures to prepare the facilities to be able to operate during sustained hot and cold
weather. Finally, the revised rule requires ERCOT Inc. to prepare a weather study at least once every
five years that reports on certain weather parameters in each of the ten weather zones located in the
ERCOT power region. The updated weather study may require owners of generation resources or
transmission facilities to take additional actions to prepare their sites for increasingly cold or hot
weather.

CYBERSECURITY

During the March 9, 2022, Senate Committee on Business and Commerce hearing, TERC was tasked
with examining how critical infrastructure was protected from cybersecurity concerns.

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On the federal level, the Transportation Security Administration has the authority over pipeline
infrastructure security. On May 7, 2021, Colonial Pipeline, an interstate oil pipeline system, suffered a
ransomware cyberattack that impacted computerized equipment managing the pipeline.

Subsequent to the event, on May 28, 2021, the Transportation Security Administration issued a Security
Directive for Enhancing Pipeline Cybersecurity (“First Directive”) for pipeline owners and operators that are
deemed critical. The First Directive expired on May 28, 2022. The First Directive required the pipeline
owners and operators to:
• Report all cybersecurity incidents to the Department of Homeland Security Cybersecurity and
Infrastructure Security Agency (“CISA”) within 12 hours;
• Designate a primary and alternative Cybersecurity Coordinator, at the corporate level, who is
accessible 24/7 to TSA and CISA; and
• Conduct a cybersecurity vulnerability assessment and provide a report of this assessment to
TSA and CISA within 30 days.

On July 19, 2021, the TSA issued a Security Directive Pipeline-2021-02: Pipeline Cybersecurity Mitigation
Actions, Contingency Planning, and Testing (“Second Directive”). The Second Directive was sent directly
to designated pipeline owners and operators and is restricted from public disclosure. Broadly, the
directive requires pipeline owners and operators to:
• Implement immediate mitigation measures to protect against cyberattacks using guidelines
published by the National Institute of Standards and Technology and recommendations from
CISA;
• Develop a cybersecurity contingency and recovery plan; and
• Conduct a cybersecurity architecture design review by a third party.

There are also numerous guidelines, standards, and voluntary programs. Examples follow:
• CISA manages a Pipeline Cybersecurity Initiative (“PCI”) to enhance cyber resilience of the
nation’s pipeline system. However, participation in the PCI is voluntary.
• The National Institute of Standards and Technology (“NIST”) provides very detailed guidance
for conducting risk analyses that can be adapted to oil and natural gas facilities. 8
• In 2022, CISA, the Federal Bureau of Investigation (“FBI”), and the Department of Energy
(“DOE)” jointly published a Cybersecurity Advisory relating to the hacks, titled “Tactics,
Techniques, and Procedures of Indicted State-Sponsored Russian Cyber Actors Targeting the
Energy Sector,” which details campaigns conducted by state-sponsored Russian actors,
outlines techniques, tactics, and procedures used by hackers, and provides a variety of
mitigation strategies for energy sector entities to protect their own networks from similar
attacks.
• American Petroleum Institute (“API”) members are actively engaged with governments to
strengthen collaboration on cybersecurity and to determine appropriate public policy. 9 API
believes that the private sector should retain autonomy and the primary responsibility for
protecting companies’ assets against cyber-attacks. API supports voluntary collaboration and

8 See NIST Special Publication 800-30 (“Guide for Conducting Risk Assessments”) and NIST Special Publication 800-
82 (“Guide to Industrial Control Systems (ICS) Security”).
9See American Petroleum Institute: Cybersecurity available at, https://www.api.org/news-policy-and-issues/cybersecurity.

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 information sharing between the private sector and governments to protect critical
infrastructure and the intellectual property of the oil and gas industry from cyber-attacks.
• Other standards:
o ISA-99 (Industrial Automation & Control Systems Security).
o ISA/IEC 62443-4-1/2 (Industrial Network & System Security).
o WIB M-2784 (Process Control Domain – Security Requirements for Vendors).
o NIST 800-82 (Guide to Industrial Control Systems).
o ISO 27002 (Enterprise Cyber Security).

The state has cybersecurity laws and rules developed by the Department of Information Resources
(“DIR”), and those laws are in effect to protect the state, state assets, and state contractors from
cybersecurity threats.

Intrastate pipelines are required by federal regulations to maintain safe operations at all times.
Intrastate pipelines are also subject to the federal regulation regarding incident reporting, which could
include a cybersecurity attack. While the regulation does not specifically refer to cybersecurity attacks,
it does include a reporting provision for “an event which is significant in the judgment of the
operator.”

For the electricity industry, in 2021, the PUCT conducted its first cybersecurity focused Tabletop
Exercise (“TTX”) with regulated electric utilities in collaboration with the DOE and the National
Association of Regulatory Utility Commissioners (“NARUC”). The TTX is a discussion-based
exercise where partners work through a simulated cybersecurity incident to identify emergency
response capabilities. NARUC partnered with the PUCT in a pilot to test the newly developed
Cybersecurity Tabletop Exercise Guide for state commissions.

In 2022, PUCT has executed two remote TTXs. A two-day in-person cybersecurity symposium has
also been scheduled for November to conduct the PUCT’s first biennial TTX and training event for
utility Information Technology (“IT”), Cybersecurity workforces, and executive leadership.
Additionally, the Cybersecurity Monitor established by S.B. 936 (86R) has conducted several quarterly
security meetings since 2021. The discussions focus on cybersecurity information sharing as well as
best business practices for establishing and maintaining cybersecurity programs in the face of current
threats.

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VI. ENHANCE COORDINATION AND COMMUNICATION IN THE ENERGY AND
ELECTRIC INDUSTRIES IN THIS STATE

ENERGY INDUSTRY COORDINATION CALLS

To foster communication and coordination between the energy and electric industries, TERC
instituted industry-wide, Energy Industry Coordination (“EIC”) calls daily leading up to potential
severe weather events and throughout weather events. The purpose of these calls were to disseminate
pertinent information from our state agency partners and the TDEM meteorologist to private industry
and to prompt resource requests from the private sector. These calls provided a practical way to link
private sector to state agencies such as the Texas Department of Transportation (“TxDOT”) for quick
action to avoid problems experienced in previous weather events. These calls consist of the PUCT,
RRC, Texas Commission on Environmental Quality (“TCEQ”), ERCOT, Office of the Public Utility
Council of Texas (“OPUC”) and TxDOT as well as members of all sectors of the energy industry,
including gas producers, electric generators, and industrial users. These calls are operated by the SOC
and twelve of them have been held so far, all during winter weather events; we did not experience a
warm weather event this summer that required an EIC call. Those call dates were:

• January 21, 2022

• February 1, 2022 – February 5, 2022
• February 22, 2022 – February 25, 2022
• March 10, 2022 – March 11, 2022

LOAD SHED & GAS CURTAILMENT COORDINATION

An important component of the electricity supply grid is ensuring the energy and electric industries
coordinate to make sure generators have the fuel they need to produce electricity. S.B. 3 required the
PUCT to take action to reduce the effect of fuel-supply disruptions in winter. In response to this
directive, the PUCT initiated the development and procurement of a Firm Fuel Supply Service
(“FFSS”) to pre-purchase power from generators that is both dispatchable and able to operate
continuously for several days during extreme winter conditions. The resources capable of providing
this service must have either on-site fuel storage, dual-fuel capability, or fuel supply arrangements that
ensure delivery.

PUCT directed ERCOT staff to initiate a revision request process to create the requirements for FFSS
upon adoption of the phase one market design blueprint. ERCOT drafted protocols focusing on
components that require accommodation in its Settlement and Billing system, since those components
require the longest lead time to design. Protocols were adopted by the ERCOT Board of Directors
and subsequently approved by the PUCT in March 2022. Additional requirements regarding FFSS
technical requirements and qualifications were to be reflected in the request for proposal (“RFP”).

In March 2022, PUCT opened a project to solicit comments from stakeholders regarding the contract
term, resource eligibility, quantity, cost, and method of procurement. Ultimately, PUCT
Commissioners made the decision to procure the FFSS in two phases so that ERCOT may procure
power from existing resources in the ERCOT fleet before winter 2023. The initial contract duration

13
in the ERCOT request for proposal is for one year, though subsequent winter FFSS contracts will be
of a longer duration and include a wider set of eligible resources once the Commission defines contract
term requirements.

The initial ERCOT RFP seeks to procure between 3,000 and 4,000 megawatts (“MW”) of power from
resources that meet the performance and technical criteria, allocating up to $54 million for contracts
with a contract obligation period of November 15, 2022, through March 15, 2023. FFSS Competitive
Offers were due September 1, 2022. The FFSS contract will include substantial performance penalties
clawing back or withholding FFSS Standby Fees for resources not available to deploy dying hours in
which ERCOT issues a Winter Weather watch.

The FFSS will continue to be refined, and future procurements are expected to consist of longer
duration contracts for multiple seasons and to broaden the resource eligibility by setting out the
requirements for fuel delivery contracts. PUCT’s expectation is that broadening the pool of resources
will incentivize additional resources to meet the capability and contracting requirements and larger
amounts of power may be contracted.

The RRC adopted a curtailment standards rule, 16 Tex. Admin. Code § 7.455 (“Rule 7.455”), at its
April 12, 2022 open meeting. Rule 7.455 became effective on September 1, 2022. Generally, the rule
governs the delivery and sale of natural gas by gas utilities during a curtailment event when a gas utility
curtails its firm customers. When a gas utility subject to the RRC’s jurisdiction is experiencing a
curtailment event, it must curtail deliveries to customers in accordance with the priority list contained
in subsection (c). A curtailment event occurs on a gas utility pipeline when the gas utility determines
that its ability to deliver gas may become inadequate to support continuous service to firm customers
on its system and it reduces deliveries to one or more firm customers.

The RRC issued an order in the 1970s regarding gas utility curtailment standards. In anticipation of
increased natural gas demand and natural gas transportation demand, the RRC issued an Emergency
Order prior to Winter Storm Uri elevating deliveries to power generation customers as the second
highest priority after human needs customers. Importantly, Rule 7.455 cemented this prioritization;
the rule prioritizes firm deliveries of natural gas to human needs customers and local distribution
companies (“LDCs”) that serve human needs customers and firm deliveries of natural gas to electric
generation facilities. “Human needs customers” is defined in the rule and includes residences,
hospitals, and locations where people may congregate during an emergency. “Electric generation
facilities” is likewise defined broadly to capture all generation facilities that may be contributing power
to the grid such as bulk power system assets, co-generation facilities, distributed generation, and
backup power systems.

The rule does not apply to deliveries to interruptible customers because deliveries to customers
pursuant to interruptible contracts is not a curtailment event by definition. A gas utility interrupts
deliveries to those customers pursuant to mutually agreed upon contracts and/or tariffs prior to a
curtailment event.

Rule 7.455(e) requires all gas utilities to file updated tariffs with the RRC to reflect the new curtailment
standards and priorities. A gas utility that desires to utilize a curtailment plan that differs from Rule
7.455 may file its own plan with the Commission for approval pursuant to subsection (d), although an
individual curtailment plan must include the same first three priorities that are listed in Rule 7.455. A

14
gas utility must give notice to its customers of its intent to utilize an individual curtailment plan and
those customers are afforded the opportunity to request a hearing.

SUPPLY CHAIN MAPPING COMMITTEE

S.B. 3 also created the Mapping Committee and tasked the group with mapping the state’s electricity
supply chain, identifying critical infrastructure sources within the supply chain, establishing best
practices to prepare facilities to maintain service in an extreme weather event, and designating priority
service needs in case of such event. Formed in Summer 2021 and meeting monthly, the mapping team
is composed of staff from PUCT, RRC, ERCOT, and TDEM. S.B. 3 designated the electricity supply
chain and security database, including the supply chain map, confidential.

The electricity supply chain map utilizes information provided by PUCT, RRC, ERCOT, electric
utilities, and operators of natural gas infrastructure to identify critical natural gas infrastructure
required for the delivery of natural gas to natural gas dependent electric generating facilities and
connects the critical infrastructure to the electric distribution and transmission system. The map
viewer includes TDEM regions and districts, electric transmission and distribution lines, substations,
electric generating facilities, electric service area boundaries, natural gas pipelines, compressor stations,
processing plants, underground storage facilities, and real-time weather information. TDEM, PUCT,
and RRC staff with experience during emergency events and SOC activations provided actionable
feedback regarding the information displayed on the map. End users will be able to access 24/7
emergency contact information, owner and operator information, and unique identifying information.

In April 2022, the mapping team completed a robust initial electricity supply chain map that visually
displays the underlying geodatabase. An overview of the map viewer was provided to TERC, various
legislators and staff, ERCOT, and the PUCT Commissioners in May 2022. The mapping committee
will continue to refine the geodatabase, compiling data into a single, reliable dataset, and testing the
map throughout 2022.

15
VII. A REPORT ON THE RELIABILITY AND STABILITY OF THE ELECTRICITY
SUPPLY CHAIN IN THIS STATE

2022 WINTER OPERATIONS

During the 2022 winter, Texas experienced four weather events, with three SOC activations. Freezing
temperatures hit a majority of the state over January 1 and 2, 2022. During January 20-23, 2022,
Governor Abbott increased readiness of the SOC and TERC held its first EIC call. Between February
2-5, 2022, Governor Abbott visited the SOC three times to provide an update to the public and issued
a disaster declaration in 17 counties; five EIC calls were held. Over February 23-26, 2022, Governor
Abbott increased the readiness of the SOC and four EIC calls were held. Throughout the duration of
these weather events, Texas experienced no major transmission issues.

In preparation for the 2022 winter season ERCOT performed weatherization inspections detailed
above. CEOs were required to certify their equipment was weatherized and ready to perform. ERCOT
also took a more conservative operating approach by bringing more generation online sooner if it was
needed to balance supply and demand. On-site fuel supply availability was reviewed for many
generators.

During the 2022 winter season, the maximum peak demand was 68,954 MW, which is 858 MW less
than the February 2021 demand of 69,812 MW. Wind and solar outputs were higher than in 2021
including the impact of additional installed capacity.

The RRC inspectors conducted more than 4,800 field site visits to observe on-site preparations for
winter 2021-2022 at natural gas facilities beginning in October 2021. Over 200 RRC staff from the
Critical Infrastructure Division (“CID”), the Oil and Gas Division, and the Oversight and Safety
Division participated in this effort. RRC staff witnessed optimized weatherization techniques at each
unique location across the state’s diverse geography and geology.

The sites visited consisted of over 22,000 wells comprised of approximately 2,703 producing gas wells,
14,353 producing oil wells, 5,784 injection or service wells, and 526 processing plants and other
pipeline facilities that directly and non-directly serve gas-fired generators. Additionally, RRC
conducted site visits to 100 percent (37) of the state’s intrastate underground natural gas storage
facilities.

Throughout each activation of the SOC, there were no major disruptions to the natural gas supply
chain and the RRC participated in up to three briefings each day. These briefings included status
updates, operational assessments, and event tracking based on weather conditions. The participants
included major industry operators, other State of Texas agencies including PUCT, TCEQ, TxDOT,
and TDEM as well as representatives from TERC, ERCOT, and elected state officials. RRC staff
observed significant improvements in communications and coordination among state agencies,
industries, and local resources.

2022 SUMMER OPERATIONS

During the summer of 2022, multiple records for peak demand were broken and reestablished. During
May 13-20, 2022, ERCOT issued an operating condition notice (“OCN”), the first of four levels of
16
communication issued in anticipation of a possible emergency condition. From May 13-16, 2022,
ERCOT also issued an Advanced Action Notice (“AAN”) to request generator owners delay or cancel
outages. ERCOT also issued an OCN for May 28-30, July 7-12, July 28-29, and August 2-4. There
were no Energy Emergency Alerts (“EEAs”) declared this summer. The previous all-time peak
demand record for the ERCOT power region was set in August 2019 at 74.8k MW. This summer,
that record was broken several times and hit a new all-time peak demand record of 80,038 MW on
July 20th. Again, no transmission issues were experienced.

A new unofficial weekend peak demand record of 77,359 MW also was set on July 9th. Wind and solar
outputs were higher than in 2021 including the impact of additional installed capacity. ERCOT had
approximately 4,100 MW of additional installed solar capacity going into summer 2022 compared to
the amount of installed solar capacity in 2021. There were 2,573 total Reliability Unit Commitment
(“RUC”) effective Resource-hours in summer 2022, which was higher than the 2,114 Resource-hours
during summer 2021; this was slightly fewer than the 51 unique Resources committed during summer
2021. Real-Time Load-Weighted Hub Average prices in the summer of 2021 were higher than during
the previous two summers. The RRC continued normal operations during the summer. The agencies,
PUCT & RRC, continued regularly scheduled coordination meetings, and no requests of assistance
were made by PUCT or ERCOT. The RRC monitored ERCOT notices and was not notified of any
natural gas issues during Summer 2022, RRC was on standby to assist if necessary.

LOOKING FORWARD

Looking towards this upcoming fall and winter, ERCOT expects to have sufficient generating capacity
to serve the expected peak demand of 64,928 MW through the end of November. 10 ERCOT
anticipates having 94,492 MW of resource capacity available during fall peak demand hours, which
includes 5k MW of additional planned utility-scale solar capacity and 2.6k MW of operational battery
storage resources, which includes 23k MW of planned additions. 11

The RRC’s weather emergency preparedness standards rule, Rule 3.66, became effective on September
19, 2022. RRC continues preparations to address future weather events, and RRC CID Staff are
prepared to review the Weather Emergency Readiness Attestation required to be filed by Rule 3.66
with the Commission on December 1, 2022.

CID is well on track to staff the newly formed division across the state. Regional staff includes
approximately 63 field inspectors and field staff. Each CID inspector is to complete hands-on
weatherization technical training upon hiring. The Commission also contracted with three vendors
to assist the Commission in weatherization inspections, rulemaking, training, and developing
weatherization best practices.

CID plans to complete a minimum of 7,000 statewide weatherization inspections for the upcoming
winter in FY23. Inspectors verified through first-hand observations that the Texas natural gas industry
made tremendous and diligent efforts to prepare for upcoming winter season. Based on site visits,

10 See Seasonal Assessment of Resource Adequacy for the ERCOT Region (SARA) Fall 2022 available at,
https://www.ercot.com/files/docs/2022/09/06/SARA_Fall2022.pdf.
11 Id.

17
operator surveys, and continuous discussion with industry, the natural gas assets in the state are better
prepared for extreme winter weather conditions. Communication is key during weather related
emergencies and the state is positioned and prepared to respond through these ongoing efforts.

Phase II of the PUCT’s winter weather readiness rule will be in effect, and ERCOT is preparing its
Weatherization and Inspection to begin the inspections under that rule. These preparations include
hiring more staff and holding workshops with the Resource Entities and electric utilities about the
upcoming winter inspections. Phase I of the new Firm Fuel Supply Service product has been
developed and awarded. The service period will begin in November this year.

MARKET REDESIGN

A major effort to increase reliability and stability going forward has been PUCT’s market redesign
efforts. As part of its implementation of S.B. 3, the PUCT is conducting a review of ERCOT market
design fundamentals and taking a phased approach in adopting reforms to address both market
incentive and equipment failures exposed during Winter Storm Uri. PUCT has investigated proposals
seeking to incentivize both the preservation of existing dispatchable electric generation resources and
investment in additional dispatchable generation capacity, including resources with enhanced fuel-
security capabilities such as on-site storage or dual-fuel ability that can operate continuously in extreme
heat and cold. Opportunity for public comment has been extensive; PUCT has received 344 individual
submissions to date, consisting of thousands of pages of technical input.

PUCT undertook a series of extensive public work sessions beginning in late Summer and continuing
throughout the Fall of 2021. These full-day sessions consisted of testimony from utility experts,
ERCOT operators, weather experts, former regulators, and stakeholders from the full spectrum of
market segments in ERCOT – wholesale, retail, transmission, and consumers. Brattle Group was
engaged as the PUCT consultant in support of the market redesign efforts. These sessions culminated
in the December 2021 adoption of a two-phase blueprint for ERCOT market redesign that codified
incremental changes adopted by the Commission as well as expanded market reforms.

Phase I of the Blueprint includes shorter-term market enhancements and changes prioritized by the
PUCT to improve reliability in ERCOT. Phase I will incentivize existing dispatchable generation by
improving price signals and operational reliability along with enhancing ancillary services. Specific
enhancements adopted under Phase I include:

• Modify the Operating Reserve Demand Curve (“ORDC”). The ORDC is a scarcity pricing mechanism
that allows wholesale prices to increase when the reserve margin of additional generation
resources available in real-time is shrinking. Its purpose is to incentivize an economic and
efficient response from both generators putting power on the grid and consumers that can
respond by reducing their consumption. The ORDC changes included reducing the offer cap
from $9,000/MWh to $5,000/MWh and changing the Minimum Contingency Level (“MCL”)
to 3,000MWs, which will help signal scarcity pricing sooner before the ERCOT reserve margin
becomes dangerously low. ORDC related changes were implemented January 1, 2022 in
anticipation of the 2022 winter season.
• Demand Response. PUCT directed ERCOT to pursue technical upgrades and improvements to
price signals that will allow more consumers of all size to participate in demand response such
18
 as moving from zonal to nodal pricing and accommodating customer load aggregations
(virtual power plants). PUCT and ERCOT Staff are currently working with stakeholders on
an Aggregated Distributed Energy Resources (“DER”) Pilot to test impacts of small-scale
DER aggregation in the ERCOT market targeting an early 2023 go-live.
• Emergency Response Service (“ERS”) Reform. ERS is an emergency demand response program that
ERCOT procures and implements. Phase I adopted two critical decisions to enhance ERS
including re-allocating funds within the program to ensure enhanced readiness for extreme
winter weather and moving up deployment, consistent with the changes to the ORDC, to
ensure the emergency measure is utilized before the grid reaches the MCL and enters
emergency conditions. The PUCT originally moved the timeline for deployment up by
through a good cause exception order in Fall 2021. ERS rules increasing the budget, codifying
the good cause exception, and modifying the program year were adopted by the PUCT in
August 2022.
• Fast Frequency Response Service (“FFRS”). PUCT ordered ERCOT to move forward with the new
ancillary service product that will serve as a fast-responding regulation service able to quickly
and predictably respond to changes in the grid frequency. These frequency changes can
become more common as the diversity of the ERCOT fleet increases.
• Loads in Non-Spinning Reserve Service. PUCT ordered ERCOT to move forward with the
expansion of the existing ancillary service product to allow for non-controllable load resource
participation.
• Firm Fuel Product. In response to directives in S.B. 3, PUCT ordered the development and
procurement of a FFSS to pre-purchase power from generators that is both dispatchable and
able to operate continuously for several days during extreme winter conditions. The initial
FFSS resources will be procured for a one-year contract term while the PUCT determine
future eligibility and term requirements for an expanded program. Amendments to the
ERCOT Settlement and Billing system needed to facilitate FFSS were adopted in March 2022.
The first ERCOT RFP seeking to procure between 3,000 and 4,000 MW of power from
existing resources for winter 2023 was issued in September 2022.
• Voltage Support Compensation. PUCT ordered ERCOT to develop a product to compensate
resources for voltage support services to help maintain grid stability as inverter-based
resources enter the market.
• ERCOT Contingency Reserve Service (“ECRS”). PUCT ordered ERCOT to accelerate the
development of the ECRS product to provide the grid operator an additional operational
reliability tool for managing increased variability and ramping issues due to high renewable
generation penetration. ECRS is scheduled to go live in 2023.

Phase II of the blueprint will involve long-term market design reforms to promote the supply of
dispatchable generation and develop a backstop reliability service. Phase II of the Blueprint consist of
market enhancements that the PUCT and stakeholders must further develop, with the ultimate goal
of ensuring there are sufficient reserves in ERCOT even in extreme circumstances and stimulating the
demand for dispatchable generation in the long-term. In May 2022, PUCT engaged Energy and
Environmental Economics, Inc for outside market design consulting services to quantitatively model
future capacity and demand scenarios. The consultant will provide its analysis on the existing proposals
along with recommendations on modifications to the concepts in late 2022. Implementation is
expected to take at least one year from the adoption of any additional market reforms. Specific
enhancements under consideration in Phase II include:

19
• Load Side Reliability Mechanism. PUCT is considering the adoption of a load-side reliability
mechanism such as a Load Serving Entity (“LSE”) Obligation or Dispatchable Energy Credits
(“DECs”) program. These proposals would place a financial responsibility on the LSEs (Retail
Electric Providers, municipally-owned utilities, and electric cooperatives) to help ERCOT
maintain a reliable grid. Load-side proposals seek to ensure that LSEs have procured enough
power and the right type of power to meet their customers’ and the grids needs across a range
of scenarios. The load-side mechanisms also provides an additional forward price signal to
generators to encourage investment in dispatchable resources. Any load-side reliability
mechanism should be designed with clear performance standards, dynamic sizing, and be
proportional to ERCOT system needs. It should also establish regular resource testing and
certification standards that value or qualify a resource based on its capability. Load-side
proposals should be built on existing ERCOT frameworks such as the Renewable Energy
Credit platform to the extent practicable.
• Backstop Reliability Service (“BRS”). PUCT is considering a BRS product to provide an additional
cushion of generation and serve as a last line of defense in emergency resource adequacy
conditions. BRS would be designed to meet specific reliability needs, such as seasonal net load
variability, that are not expected to be met by ERCOT’s real-time and ancillary services
markets. The service would procure qualified dispatchable generation resources to serve as an
insurance policy - held outside the usual real-time market - to help prevent emergency
conditions. BRS design should consider deployment that does not negatively impact real-time
energy prices and an annual procurement period to provide a forward price signal. Costs would
be allocated to load. BRS will be analyzed in conjunction with other long-term market design
enhancements and developed through a framework that would allow maximum expedited
implementation by ERCOT.
• Hybrid Models. PUCT may consider various features from a load-side reliability mechanism
proposal or the Backstop Reliability Service to determine whether they can complement each
other to provide long-term grid reliability benefits.

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VIII. RECOMMENDATIONS

A. RECOMMENDATIONS SUMMARY

TERC believes that through a robust meeting schedule, industry coordination and broad sharing of
information, it has met its legislative mandate to “(1) ensure that the energy and electric industries in
this state meet high priority human needs and address critical infrastructure concerns; and (2) enhance
coordination and communication in the energy and electric industries in this state.” 12 TERC provides
a systematic forum for cross-industry communication and collaboration, with participation by
representative members, agencies, and other interested stakeholders and is well situated to identify
and discuss potential risks.

Going forward, TERC recommends continued operation of the council. We also recommend that
TERC should not be the sole place for cross-industry collaboration, and that continued ongoing
dialogue and collaboration by various state agencies, such as the PUCT and RRC should continue.
Other recommendations are listed in the section below. The report includes a mix of direct
recommendations for legislature consideration, as well as recommendations for additional areas of
study to be conducted by various Agencies or upon direction by the legislature.

SCOPE OF TERC ANALYSIS AND RECOMMENDATIONS

TERC believes that the current agency jurisdiction over Texas market participants is appropriate.
TERC recommends that agencies like the PUCT and RRC, who are responsible for overseeing and
regulating most of the electricity supply chain, utilize and exercise the jurisdiction that presently resides
with each agency.

DEFINING HIGH PRIORITY HUMAN NEEDS AND CRITICAL INFRASTRUCTURE

TERC has identified several high priority human needs and critical infrastructure (together, “HNCI”)
sectors that merit further study and, potentially, could merit additional regulatory and legislative
treatment given their criticality to the state and to supporting existing HNCI sectors, summarized in
the chart below.
TERC Focus Critical Sectors

12 Tex. Gov’t Code § 418.302.

21
Given the different priorities, jurisdictional scope, legislative mandates, and agency missions reflected
in the different state and federal definitions for HNCI, a sector simply appearing in several different
definitions is not sufficient for it to be deemed “critical” or “high priority human needs” under
TERC’s expanded definition. Other considerations include:

• Emphasizing the four CISA “lifeline” sectors as having already been deemed particularly
important to protect during emergencies, and especially depended upon by other critical
infrastructure sectors. This would add weight to transportation, water, energy, and
communications.
• Apart from CISA’s definition, we should prioritize any additional sectors that support other
sectors. Food is an example that is not in CISA’s definition but supports several other sectors,
especially during emergencies.
• Special weight should be put on sectors that are “high priority human needs” since the
legislature has distinguished those from “critical infrastructure,” the focus of all the existing
definitions. This would weigh water, healthcare & public health, and food & agriculture higher.
• Finally, since TERC in its current form was established by S.B. 3, we should give weight to
the sectors specifically identified by the legislature to be represented in TERC, namely
chemical, energy, and transportation.

Combining these rules yields the following six sectors as “TERC Focus Critical Sectors” in TERC’s
recommendation. TERC believes that in addition to the two “Tier 1 Critical” sectors, Electricity and
Gas, which have been the focus of existing rules and legislation, these additional six sectors Energy
(other than electricity and gas), Water, Transportation, Communications, Food, and Healthcare, merit
special attention as being particularly critical to maintain operational during times of emergency.

TERC recommends that policymakers consider these sectors expressly for future study, including as
appropriate future legislation and regulation. While the interaction of gas and electric service is the
current focus, future rules and laws ought to consider targeted expansion and specific treatment of
the additional critical infrastructure and human needs sectors that we have identified as “TERC Focus
Critical Sectors.”

PROTECTING HIGH PRIORITY HUMAN NEEDS AND CRITICAL

INFRASTRUCTURE

To minimize the disruptions of gas supply to high priority human needs customers, Texas, through
the PUCT, ERCOT, and RRC, should provide market incentives for market participants to improve
resiliency by having fuel redundancy that could include multiple pipeline interconnections or alternate
fuel capabilities. Market incentives to promote use and development of storage facilities could provide
meaningful gas supply during temporary production declines (which should be less impactful as a
result of weatherization requirements) and adequately address the receiving entity’s needs, including
mitigation against gas price volatility.

Advancements in natural gas production and transportation continue to be made throughout the value
chain of delivering needed energy to the end-user. For example, many natural gas pipeline compressor
stations providing fuel to power generation are now driven by zero emission electric motors. During

22
extreme weather events, the ability to rely on natural gas already in the pipeline or by pipeline
connected storage as a fuel source provides greater reliability in the delivery of gas through critical
pipeline infrastructure. The natural gas transmission industry and its customers are encouraged to
continue to develop and support diversified pipeline-fueled backup for electric motors to drive critical
compression needs.

The PUCT and ERCOT should continue to assess the effectiveness of credit requirement
enhancements made post-Winter Storm Uri, and consider the need for additional enhancements, to
ensure sufficient financial assurance and ensure confidence in the market and incentivize additional
investment. Credit policy should be agnostic of broader policy considerations but reflective of the
underlying risk—with an assessment of the types of collateral, performance or behavioral mitigation
(e.g., winterization or fuel supply), and other elements of the credit methodology. The PUCT,
ERCOT, and RRC should also study the evolution of power and infrastructure needs as demand and
supply change. Further, they also should determine how best to ensure industrial process safety needs
are appropriately included in high priority human needs and critical infrastructure.

SERVICE PRIORITIZATION
Refinement or reprioritization of the customers described in Sections C, D, and E must be made
by a much broader community of customers and service providers at the PUCT. Texas ought to
encourage transmission level customers to engage in confidential discussions in which they share
information with their interconnecting utility. Doing so can help to streamline voluntary load
reductions at the transmission level during firm load-shed events. Throughout operations outside
of a firm load-shed event, compensated demand response continues to be a reliable tool for grid
management and can quickly be expanded as necessary.

WEATHERIZATION

During a weather emergency, it is essential to continue critical operations and communication. To

that end, TCEQ should have the ability to issue waivers to prioritize these services over regulatory
limits.
The PUCT and RRC should ensure that implemented weatherization requirements are maintained
and audited. Regulations should be reviewed, and based on assessments, the PUCT and RRC should
consider revising weatherization rules as new data becomes available and technology deems
appropriate. The PUCT and RRC should remain apprised of any applicable NERC Standards
regarding weatherization.

DATA AND METRICS

Though the authority of these agencies to request data is expansive, TERC members have discussed
weather certain data and information would improve system reliability. This includes additional
sharing of information between the natural gas industry and the RRC, such that the RRC has increased
visibility into potential risks.

23
Agency Coordination Overview:
• The PUCT and RRC are working together on information sharing solutions.
• The PUCT and RRC will continue to explore and define the processes for sharing planned
maintenance information between gas and electric industries and ERCOT.
• TERC recommends:
o Agency participation during SOC activations to include planning, training, and
exercising
o The Texas Emergency Management Council continue to lead industry calls while
preparing and responding to potential weather events and disasters
o The regulatory agency directors continue to coordinate directly
o The regulatory agency directors continue to coordinate directly in efforts to enhance
communication.
o Agencies continuing to evaluate opportunities to address stability and reliability
through the rule making process like RRC and PUCT have done through the
weatherization, gas curtailment rules, critical designations, etc.
o The RRC should continue to inspect statewide weatherization and provide regular
updates to TERC

Further assessment of power generation reliance on the natural gas industry can be supplemented
through a PUCT assessment of power plant fuel usage and procurement. Specifically, the PUCT
should assess fuel usage and procurement practices, including power plants contracted for
transportation and storage, contracted volumes, jurisdiction of the pipelines and storage facilities (e.g.,
intrastate or interstate facilities), and the types of contracts (e.g., firm, interruptible, other delivered
supply arrangements, etc.). The PUCT should also assess power plant fuel procurement practices for
natural gas during the winter. Information can be published on an aggregated and confidential basis,
and TERC, along with the PUCT, ERCOT, and the RRC should then study this data to assess whether
residual fuel security issues exist in the market.

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B. SCOPE OF TERC ANALYSIS AND RECOMMENDATIONS

Regulation of Electricity Supply Chain Inputs in Texas

There are multifaceted inputs to the electricity supply chain that are regulated in Texas. 13 Regulations
governing various facets of the industries that comprise the electric supply chain are not promulgated
in a single agency or entity.

Natural Gas Pipelines and Exploration Facilities

Oil and gas facilities that produce and supply natural gas to gas-fired electric generating units are
generally regulated by the RRC, which promulgates and enforces rules relating to oil and gas
exploration and production. Air emissions, wastewater discharges, and other discharges by gas-fired
electric generating units and oil and gas exploration facilities are regulated by the TCEQ, which
promulgates and enforces environmental protection rules, including rules implementing federal
pollution programs.

Intrastate pipelines in Texas that carry and transport natural gas to gas-fired electric generating units
are subject to RRC safety regulations. Interstate pipelines are subject to the jurisdiction of the Federal
Energy Regulatory Commission (“FERC”) and the Pipeline and Hazardous Materials Safety
Administration (“PHMSA”). FERC regulates interstate pipelines and PHMSA establishes pipeline
safety regulations.

Thermal Fuel Sources

The RRC establishes regulations for coal, lignite, and uranium surface mining. Coal-fired generating
units that are not located at or near the mouth of a coal mine primarily receive coal through the rail
system. Railroads in Texas are regulated by the TxDOT and the Federal Railroad Administration.
Nuclear power plants, which use uranium as their fuel source, are regulated by the United States
Nuclear Regulatory Commission. Further, the TCEQ regulates air emissions, wastewater, and other
discharges to waters in the state, and industrial and hazardous waste management associated with all
mining activities.

Electric Power

With respect to electricity, the PUCT primarily regulates the conduct, functions, and rates for electric
Transmission and Distribution Utilities (TDUs) in Texas. 14 The PUCT has been granted the authority
to “regulate and supervise the business of each public utility within its jurisdiction.” 15 However, the
PUCT is also charged with developing rules relating to the certification, registration, and reporting
requirements for most other entities 16 that make up the electricity supply chain in Texas. The PUCT
exercises authority over generators of electricity (including independent power generation companies,
qualifying facilities, co-generators, municipally-owned utilities, and electric cooperatives), power

13 This discussion does not include an exhaustive list but instead discusses the inputs that significantly contribute to
electric reliability.
14 See generally Public Utility Regulatory Act, Tex. Util. Code Ann. §§ 11.001-66.016 (“PURA”).
15 PURA § 14.001.
16 See PURA §§ 39.351-358.

25
marketers (entities buy and sell the electric energy at wholesale), transmission service providers
(“TSPs”) and distribution service providers (“DSPs”) (for electric utilities), and load-serving entities
(“LSEs”) that provide electric service to retail customers. LSEs include retail electric providers
(“REPs”), municipally-owned utilities, and electric cooperatives, are the entities primarily responsible
for communicating with customers during emergency events. The ERCOT market also contains
private use networks (“PUNs”). PUNs are electric networks in ERCOT where load is not directly
metered by ERCOT. 17 This typically arises when both generation and load exist behind a single meter.
ERCOT models and “sees” the PUN in its system on a net load/generation basis. 18 While the PUCT
has jurisdiction over the generation in this PUN, the PUN does not grant the PUCT any additional
powers over the load.

When enacting the Public Utility Regulatory Act (“PURA”) the Texas Legislature established a
universal regulatory scheme with respects to much of the electric market in Texas. 19 The PUCT
therefore has wide ranging powers to govern and regulate market participants in the ERCOT, 20 and
vertically integrated utilities in the other, non-ERCOT power regions in Texas. 21 Throughout Texas,
market participants are bound by both PURA and the PUCT’s Substantive Rules. The PUCT’s powers
broadly include site regulation for transmission and generation projects, as well as setting retail rates
for vertically integrated utilities in Texas for customers in Southwest Power Pool (“SPP”),
Midcontinent Independent System Operator (“MISO”), and the Western Electricity Coordinating
Council (“WECC”). 22

With respect to the ERCOT power region, the PUCT is the state agency that has been charged with
the obligation to “adopt and enforce rules relating to the reliability of the regional electrical network
and accounting for the production and delivery of electricity among generators and all other market
participants.” 23 The PUCT has complete oversight over ERCOT, the ERCOT markets, the ERCOT
Protocols and other rules adopted by ERCOT. 24 Market Participants in ERCOT are bound by
ERCOT Protocols and other ERCOT binding documents in addition to PUCT rules and PURA. 25
Texas Reliability Entity, Inc. (“Texas RE”) performs the regional entity functions described in the
Energy Policy Act of 2005 for the ERCOT region, as mandated by the delegation agreement with the
NERC. The delegation agreement was approved by the Federal Energy Regulatory Commission
(“FERC”). Texas RE is authorized by NERC to develop, monitor, assess, and enforce compliance
with NERC Reliability Standards within the geographic boundaries of the ERCOT region. Midwest
Reliability Organization (“MRO”), SERC and WECC provide analogous services as Texas RE for the
portions of Texas in SPP, MISO and WECC respectively.

17
ERCOT Protocols sec 2.1.
18
ERCOT Protocols 10.3.2.4.
19
PURA § 31.001; In re Entergy Corp., 142 S.W. 3d 316, 322-23 (Tex. 2004).
20
PURA § 39.151.
21
See e.g., PURA §§ 39.401-410.
22
SPP, MISO, and WECC have been granted their authority by the North American Electric Reliability Corporation (“NERC”) and/or
FERC.
23
PURA § 39.151(d).
24
PURA § 39.151.
25
PURA § 39.151(j).

26
Water & Wastewater Utilities

Though the Texas Legislature transferred the economic regulation of water and sewer utilities from
TCEQ to the PUCT in 2013, the regulation of air emissions, wastewater, and other discharges to
waters in the state, 26 and industrial and hazardous waste management activities associated with gas and
coal fired electric generating units remains under the jurisdiction of the TCEQ. The TCEQ has
promulgated and enforces pertinent rules, including rules implementing federal pollution programs.
TCEQ’s rules include requirements for certain pre-construction and operating permits.

Scope of TERC Report

The Texas Legislature directed TERC in Sections 418.302 and 418.310 of the Texas Government
Code to submit this report outlining TERC’s findings about the stability and reliability of the electricity
supply chain and recommendations to strengthen it. The products, assets, and systems of the following
types of entities are in the scope of TERC’s analysis because each plays an essential role in the
electricity supply chain, the production, transportation, and conversion of natural gas to electricity,
and the delivery of electricity to electric load to meet human needs:

• Transmission and distribution interconnected dispatchable generation, including gas-fired

electric generating units, coal-fired generating units, and nuclear generation
• TDUs
• TSPs and DSPs
• REPs and LSEs
• Load
• Natural gas wells, compressor stations, processing facilities, and storage facilities.
• Natural gas utilities
• Pipelines (intrastate and interstate)

A review of the regulations of the state agencies that have jurisdiction over these products, assets, and
systems, including the PUCT, RRC, and TCEQ, is also within the scope of TERC’s analysis.

“Load” is included in the scope of TERC’s analysis. “Load” is typically used to refer to the demand
for electricity to be consumed on the system at a given point in time. In recent years, Texas has
experienced an influx of new residents and businesses. As the population in Texas continues to
increase, so does load. With increases in load, the ERCOT region experiences increases in demand
during all periods of time, especially during seasonal peaks and extreme weather events. For example,
ERCOT set an all-time peak demand of 80,038 MW in July 2022 and an all-time winter peak demand
of 69,812 MW in February 2021 during Winter Storm Uri, with a total load estimated to be in excess
of 76,000 MW had load shed not occurred during Winter Storm Uri. 27 ERCOT estimated that peak
demand during Winter Storm Uri without load shedding could have reached nearly 77,000 MW. To
put the size of ERCOT’s peak load into context, the California ISO (“CAISO”) record peak is 52,061
MW. These increases in demand due to increased load, and coupled with seasonal weather conditions,

26House Bill 1600 and Senate Bill 567, of the 83rd Texas Legislature, Regular Session.
27See The Timeline and Events of the February 2021 Texas Electric Grid Blackouts Available at,
https://www.puc.texas.gov/agency/resources/reports/utaustin_(2021)_eventsfebruary2021texasblackout_(002)final_07
_12_21.pdf.

27
demonstrate the need for more dispatchable generation, especially during the summer and winter
seasons.

“Load” may also refer to a residential customer, small commercial customers, or a large commercial
or industrial customer, as the end-user consumes the electricity. Under Texas law, all load is treated as
firm load unless, the customer has agreed to be interrupted under some circumstances, a local area is
subject to load curtailment for system reasons, or the PUCT has directed otherwise. In the ERCOT
market, there are some loads that are willing to, and capable of, changing their demand in response to
an instruction from ERCOT. Loads that agree to change their demand pursuant to ERCOT
instructions may participate in the real-time energy market and ancillary services markets as Load
Resources or as ERS providers. Customers may provide demand response through their LSE on an
unpaid, voluntary basis.

LSEs, including REPs, are also included in the scope of TERC’s analysis because these entities buy
power at wholesale to provide retail service to end-use customers. Though REPs are prohibited by
statute from owning generation, some LSEs, such as certain distribution cooperatives and municipally-
owned utilities, own generation resources to serve their customers. During emergency situations,
regardless of the amount of wholesale energy procured by LSEs, ERCOT may need to shed load in
order to maintain a balance between generation and load on the grid.

Power generators, and specifically gas-fired generators, are also included in the scope of TERC’s
analysis because they produce and supply electric energy to the ERCOT market or to other non-
ERCOT power regions of Texas. Though generation is often characterized by the type of fuel or fuel
alternative that is used to produce electricity, generators fall into one of two categories—dispatchable
or non-dispatchable. A subset of non-dispatchable resources are considered intermittent resources.

Dispatchable generation is available to the system on demand, and can be controlled by human action,
while the availability of intermittent resources may be dependent on the weather in order to generate
electricity. Though intermittent resources are required to weatherize in the ERCOT power region
pursuant to the weatherization standards recently adopted by the PUCT, 28 these standards only serve
to reduce the probability of a weather-related outage of these resources and will not result in these
resources being dispatchable. In S.B. 3, the Texas Legislature stressed the need for, and importance
of, improving reliability in ERCOT by incentivizing the development of dispatchable generation to be
available for dispatch before and during emergency conditions. Therefore, this report primarily
focuses on the electricity supply chain with respect to dispatchable generation in accordance with these
directives. Some generation, such as battery storage, is dispatchable for limited periods of time.

Though many of the entities and industries in the electric supply chain fall within the scope of TERC’s
analysis, several categories of market participants and entities that may participate financially at
ERCOT fall outside the scope because they do not play a role in the physical electricity supply chain.
Some participants that may fall outside the scope of this report include Congestion Revenue Right
(“CRR”) Account Holders, who are compensated or charged for transmission congestion in the
ERCOT market; 29 Independent Market Information System Registered Entities (“IMREs”), entities

28 Rulemaking to Establish Electric Weatherization Standards, Project No. 51840, Order Adopting New 16 TAC § 25.55 as

Approved at the October 31, 2021, Open Meeting.

29 ERCOT Nodal Protocols, Section 2, Definitions and Acronyms (Jun. 1, 2022).

28
that register with ERCOT solely to access the Market Information System Secure Area; 30 power
traders, who buy, sell, speculate, and trade on the Intercontinental Exchange or other trading
exchanges; energy managers/brokers who provide advice and/or services to assist customers in
selecting a REP or a product offered by a REP; 31 and electricity aggregators who join customers
together into a purchasing unit to negotiate the purchase of electricity from a REP. 32

Entities involved in the provision of raw water, potable water, or surface water, and the corresponding
regulatory requirements that apply to these entities are also outside the scope of TERC’s evaluation.
Though the provision of water to customers is critical to certain types of electric generation and to
meet human needs, entities that furnish water to customers must comply with their own separate set
of statutory obligations with respect to emergency operations. Indeed, S.B. 3 amended the Texas
Water Code to require retail public utilities, exempt utilities (including certain municipal utilities), or
providers or conveyors of potable or raw water service to, among other things, utilize on-site electrical
generation or distributed generation facilities to ensure that these entities can remain operational
during emergencies and continue to provide service to customers. 33

Expansion of Jurisdiction in Texas

TERC believes that the current agency jurisdiction over Texas market participants is appropriate.
TERC recommends that agencies like the PUCT and RRC, who are responsible for overseeing and
regulating most of the electricity supply chain, utilize and exercise the jurisdiction that presently resides
with each agency.

30 Id.
31 16 TAC § 25.112.
32 16 TAC § 25.5(8).
33 See Tex. Water Code §§ 13.1394 and 1395.

29
C. DEFINING HIGH PRIORITY HUMAN NEEDS AND CRITICAL
INFRASTRUCTURE

TERC was established among other things to “ensure that the energy and electric industries in this
state meet high priority human needs and address critical infrastructure concerns.” 34 This legislative
mandate guides all of TERC’s activities, including the scope of this recommendation report, meaning
that TERC must ensure its recommendations help the energy and electric industries in the state to
meet HCNI. In this context, the statutory definition raises the following questions:

• What are current approaches in Texas law and regulation for defining HNCI?
• Do any of those definitions need to be changed?
• What additional services or products, if any, should be identified as HNCI?
• What rule or standard should be used?
• To what extent can or should we borrow from other HNCI definitions?
This section of TERC’s report concludes that, in post-Uri activities, the PUCT and RRC have rightly
focused their treatment of HNCI on the gas and electric sectors and their interdependencies. 35 As a
shorthand we can call these two sectors “Tier 1 Critical Infrastructure.”

We summarize existing PUCT and RRC regulatory activities regarding HNCI, and do not recommend
they be revisited at this time, apart from the ongoing processes at the respective agencies. Looking to
the future, we identify several other HNCI sectors that merit further study and, potentially, could
merit additional regulatory and legislative treatment given their criticality to the state and to supporting
existing HNCI sectors.

Current Landscape: Tier 1 Critical Infrastructure

TERC’s enabling statute contains three key categories of entities to define and evaluate. “Energy
industry” and “electric industry” are to be considered together for how they are serving the third
category – “high priority human needs” and “critical infrastructure concerns.” HNCI is not defined
in S.B. 3, so TERC looked to other definitions of these crucial terms.

While the PUCT and RRC have both taken a host of actions post-Uri, their identification of critical
infrastructure and high priority human needs has focused in three interrelated areas. As directed by
S.B. 3 Section 17, the PUCT, TDEM, ERCOT, and RRC have worked together to create the Supply
Chain Map that incorporates both electricity and gas assets in the state, identifying “critical
infrastructure facilities that make up the state’s electricity supply chain, including electric generation

Tex. Gov’t Code § 418.302.

34

See 16 TAC § 3.65 - Railroad Commission of Texas Criticality Definition; 16 TAC § 25.52 - Public Utility Commission Criticality
35

Definition; Tex. Nat. Res. Code Ann. § 81.073; Tex. Util. Code Ann. § 38.074.

30
plants and the natural gas facilities that supply fuel to power the plants.” 36 The initial Supply Chain
Map includes more than 65,000 total facilities, and includes facilities such as natural gas powered
electricity generation plants, electrical substations, gas processing plants, gas compressor stations,
underground gas storage, oil and gas well leases, and saltwater disposal wells. The Supply Chain Map
also includes more than 21,000 miles of gas transmission pipelines and 60,000 miles of electrical
transmission lines. The map will be refreshed at least twice a year.

In addition to the joint mapping effort, each regulatory agency has promulgated its own criticality
rules. On the electricity side, the PUCT promulgated a new rule in 16 Tex. Admin. Code § 25.55
requiring a number of weather emergency preparedness actions for generation entities and
transmission service providers in the ERCOT region. The PUCT has since adopted “Phase II” version
of 16 Tex. Admin. Code § 25.55 which repeals the original rule and create new preparation standards
for both winter and summer seasons. The PUCT also adopted changes to 16 Tex. Admin. Code §
25.52 requiring critical natural gas facilities to provide certain information to their electric utilities to
incorporate this information into their load-shed and restoration planning. On the gas side, the RRC
has implemented S.B. 3’s directive to designate certain natural gas facilities and associated entities as
critical customers or critical gas suppliers by issuing 16 Tex. Admin. Code § 3.65 The RRC has
proposed changes to Tex. Admin. Code § 3.65 to simplify language, clarify the energy emergency
definition, and refine the process for critical designations. The RRC has also adopted, new 16 Tex.
Admin. Code § 3.66 to implement S.B. 3’s requirements to adopt rules regarding weather emergency
preparedness standards covering certain natural gas facilities on the Supply Chain Map. Additionally,
although not required by S.B. 3, the RRC adopted a rule that prioritized human needs customers such
as gas LDCs, hospitals, as well as gas-fired power generation plants as the top two priorities for firm
gas delivery. This rule cemented human needs and power generation as the two priorities in a
curtailment event, which was elevated through a Commission Emergency Order prior to Winter Storm
Uri. This rule applies to jurisdictional gas owned by intrastate gas utilities and to the transportation
capacity of intrastate gas utilities. Texas’ Transmission and Distribution Utilities have also worked
cooperatively and on a voluntary basis with important critical load customers they serve to better
identify points of criticality and service priorities to emphasize during emergency load shed.

TERC recognizes PUCT’s and RRC’s regulatory efforts post-Uri, which meet the goals of Senate Bill
3 and will harden the state’s power and gas production delivery infrastructure against certain weather
events. These laws and regulations are currently either early in the implementation phase or under
consideration and TERC does not recommend changes to them, including their treatment of
criticality, at this time.

Additional Study: TERC Focus Critical Infrastructure

Many lessons were observed and learned during the response to Winter Storm Uri. The Texas
Legislature’s creation of and directives to the Texas Energy Reliability Council demonstrates Texas’
prioritization of evaluating and understanding the electric and energy industries codependence. TERC

36TRRC and PUCT Joint News Release, Apr. 29, 2022, available at
https://www.puc.texas.gov/agency/resources/pubs/news/2022/042922-Joint-RRC-PUC-Map-press-release.pdf.

31
concurs that this action is appropriate and warranted. 37 The next step, however, is to widen the focus
to other HNCI sectors. The creation of “TERC Focus Critical Sectors” will explore how the electric
and natural gas industries, which have already received their own set of regulations, can further serve
to meet high priority human needs and critical infrastructure.

TERC recommends studying how sectors other than the electric and energy industries should be
incorporated in a broader HNCI definition. Although the RRC and PUCT have rightly focused on
electricity and energy, the statute makes HNCI a separate category of critical assets that are served by
and dependent upon the electric and energy industries. Yet any definition cannot be overbroad
because it is clear the legislature intended to focus on assets that were truly critical infrastructure or to
high priority human needs. Thus, some definitions that are commonly called “critical infrastructure”
in the other areas of law or regulation may be inappropriate here. For instance, critical infrastructure
rules and definitions that may be used in the cyber context 38 may not be useful in the context of S.B.
3. Criticality must be defined from an electrical and energy perspective.

Accordingly, TERC recommends consulting other definitions of human needs in critical infrastructure
to arrive at a TERC specific definition drawing upon the wealth of available definitions in state and
federal law. There are many different federal and state regulatory and statutory approaches directly or
impliedly defining critical infrastructure and high priority human needs. TERC’s investigation of these
various regimes is summarized in Appendix 1. Synthesizing the various state and federal definitions
of critical infrastructure reveals patterns of sectors that are identified across many different definitions
(for instance, energy, transportation, and water), which helps identify some sectors that ought to be
given more weight. The below table is indicative of an interpretation of various laws, rules, and

37See generally FERC - NERC - Regional Entity Staff Report: The February 2021 Cold Weather Outages in Texas and the
South-Central United States.
38See, e.g., National Institute of Standards and Technology's (NIST) Framework for Improving Critical Infrastructure
Cybersecurity.

32
regulations, but is subject to review and interpretation by the various relevant regulatory and
administrative bodies.

TX: TX: TX: TX: TX: TX: FED:

TRRC 39
PUCT CHP 40 LIPA 41 UAS 42 S.B. 3 CISA
Chemical

Commercial
Facilities
Communications

Critical
Manufacturing
Dams

Defense
Industrial Base
Emergency
Services
Energy

Financial
Services
Food &
Agriculture
Government
Facilities
Healthcare &
Public Health
Information
Technology
Nuclear

Transportation
Systems
Water &
Wastewater

39 See appendix 1 for definitions and details on each of these categories.

40 Combined Heat and Power.
41 Lone Star Infrastructure Protection Act.
42 Tex. Gov’t Code. § 423.0045:  Operation of Unmanned Aircraft over Correctional Facility, Detention Facility, or

Critical Infrastructure Facility.

33
However, given the different priorities, jurisdictional scope, legislative mandates, and agency missions
reflected in the different state and federal definitions described above, a sector simply appearing in
several different definitions is not sufficient for it to be deemed “critical” or “high priority human
needs” under TERC’s expanded definition. Other considerations include:

• Emphasizing the four CISA “lifeline” sectors as having already been deemed particularly
important to protect during emergencies, and especially depended upon by other critical
infrastructure sectors. This would add weight to transportation, water, energy, and
communications.
• Apart from CISA’s definition, we should prioritize any additional sectors that support other
sectors. Food is an example that is not in CISA’s definition but supports several other sectors,
especially during emergencies.
• Special weight should be put on sectors that are “high priority human needs” since the
legislature has distinguished those from “critical infrastructure,” the focus of all the existing
definitions. This would weigh water, healthcare & public health, and food & agriculture higher.
• Finally, since TERC in its current form was established by S.B. 3, we should give weight to
the sectors specifically identified by the legislature to be represented in TERC, namely
chemical, energy, and transportation.
Combining these rules yields the following 6 sectors as in TERC’s recommendation:

Sector Reason Included

Energy - other than electricity and gas 43 CISA lifeline sector; in 6 existing definitions;
(e.g., Solar, Wind, Nuclear, or Coal) supports other critical sectors.
Water CISA lifeline sector; in 5 existing definitions;
supports other critical sectors.
Transportation CISA lifeline sector; in 5 existing definitions;
supports other critical sectors.
Communications CISA lifeline sector; in 3 existing definitions;
supports other critical sectors.
Food Uniquely human needs; supports other critical
sectors.
Healthcare Uniquely human needs.

TERC believes that in addition to the two “Tier 1 Critical” sectors that have been the focus of existing
rules and legislation, these additional six sectors merit special attention as being particularly critical to
maintain operational during times of emergency.

43 Electricity and gas are already covered as Tier 1 Critical.

34
TERC recommends that policymakers consider these sectors expressly for future study, including as
appropriate future legislation and regulation, which will necessarily require additional refinements to
each definition (as an example, should “water” include wastewater). While the interaction of gas and
electric service is the current focus, future rules and laws ought to consider targeted expansion and
specific treatment of the additional critical infrastructure and human needs sectors.

For specifics on load-shed in Texas, see generally Section E of this report.

35
D. PROTECTING HIGH PRIORITY HUMAN NEEDS AND CRITICAL
INFRASTRUCTURE

The Texas Legislature authorized several tools through approved measures during the 2021 Regular
Session. Improved identification, communication, and coordination among power generators, electric
transmission providers, electric distribution companies, gas LDCs, natural gas pipelines (“Pipelines”),
and natural gas storage facilities (“Storage Facilities”) in the state have gone a long way to mitigate
future disruptions. With the passage of S.B. 3, rules have been implemented or are nearing completion,
which include (but not limited to):
i. Requiring gas well operators to implement measures to prepare for a weather emergency,
which the RRC has established by rule
ii. Requiring the RRC to adopt rules regarding measures gas pipeline facility operators must
implement to prepare gas pipeline facilities for extreme weather conditions, including
designating which natural gas facilities and entities are critical during an energy emergency
iii. Requiring the RRC to analyze gas supply chain facilities’ emergency operations plans and
submit reports
iv. Requiring the PUCT to implement rules requiring weatherization of generation and
transmission assets for winter and summer weather emergencies
v. Requiring the PUCT to adopt criteria for the content and activation of a power outage alert
vi. Requiring the inspection of generation and transmission assets in the ERCOT power region
for compliance with the reliability standards; and,
vii. Requiring the PUCT to analyze utilities’ emergency operations plans and submit reports

Curtailment rules, which the RRC recently updated, are designed to ensure that the energy and electric
industries in this state meet HCNI by prioritizing the delivery of natural gas during an emergency.
This prioritization further emphasizes the importance of having human needs customers clearly and
accurately defined and the need to develop incentives to safeguard long-term reliability.

Energy Providers anticipating natural gas demand and ensuring ample gas supply in advance of an
extreme weather event are also vital in balancing the operational flow of Pipelines and Storage
Facilities.

To minimize the disruptions of gas supply to high priority human needs customers, Texas through
the PUCT, ERCOT, and RRC should consider market incentives for market participants to improve
resiliency by having fuel redundancy that could include multiple pipeline interconnections or alternate
fuel capabilities; however, TERC does not endorse any particular method at this time. Market
incentives to promote use and development of storage facilities could provide meaningful gas supply
during temporary unavoidable disruptions.

Advancements in natural gas production and transportation continue to be made throughout the value
chain of delivering needed energy to the end-user. For example, many natural gas pipeline compressor
stations providing fuel to power generation are now driven by zero emission electric motors. During
extreme weather events, the ability to rely on natural gas already in the pipeline or by pipeline
connected storage as a fuel source provides greater reliability in the delivery of gas through critical

36
pipeline infrastructure. The natural gas transmission industry and its customers are encouraged to
continue to develop and support diversified pipeline-fueled backup for electric motors to drive critical
compression needs.

The PUCT and ERCOT should continue to assess the effectiveness of credit requirement
enhancements made post Winter Storm Uri, and consider the need for additional enhancements, to
ensure sufficient financial assurance and ensure confidence in the market and incentivize additional
investment.

Study: The PUCT, ERCOT, and RRC should also study the evolution of power and infrastructure
needs as demand and supply change. Further, they also should determine how best to ensure industrial
process safety needs are appropriately included in high priority human needs and critical infrastructure.
The requirements described above promote redundancy and resiliency across the natural gas and
electricity sectors. Prioritization of human needs customers goes beyond those in the forefront such
as fire, EMS, and police stations, 911 call centers, hospitals, nursing homes, etc. and to include the
process safety needs for industrial customers. Every industrial manufacturing facility has OSHA-
mandated designed layers of protection to prevent uncontrollable process safety events that could
negatively impact the community which surrounds it. The ability to properly shutdown, clear and/or
maintain control of these manufacturing processes is critical to ensuring community safety. Many of
these layers of protection are dependent on maintaining power supply to industrial facilities for their
critical instrumentation/equipment; natural gas supply to vent destruction devices such as flares,
industrial kilns, and thermal oxidizers; and industrial gases (primarily nitrogen) to maintain inert
atmospheres.

37
E. SERVICE PRIORITIZATION

Sections C and D above discussed identifying and protecting high priority human needs and
critical infrastructure. Identification and protection are steps that can and should be taken prior
to an energy emergency. This section addresses service prioritization during and after an energy
emergency. During an energy emergency, it may be impossible for natural gas and electric systems
to continue to serve all customers identified as high priority and critical. In such circumstances,
it becomes essential to evaluate curtailment depending on location, purpose, and consumption
of natural gas and electricity.

A goal of prioritization is, where possible, initiate involuntary service curtailment only as a last
resort. Thus, natural gas providers, electricity providers, and ERCOT engage in load control
programs that pay customers to decrease or cease consumption, curtail interruptible customers,
and encourage voluntary conservation. These programs have become significantly more robust
subsequent to Winter Storm Uri. Gas utilities determine when involuntary curtailment should
occur during a natural gas curtailment situation.

ERCOT is responsible for ensuring the real-time balance of electricity supply and demand and in
most instances can direct additional supply if demand increases or some resources cannot
perform as expected. If, however, supply is insufficient, ERCOT can determine if involuntary
curtailment of electricity is necessary and will direct electric utilities to implement emergency
operations plans based on their proportional share of ERCOT system load. The electric utility
emergency operations plan generally distribute load shed impact across as many customers as
possible for a short amount of time, ideally 15-45 minutes at a time.

Natural Gas Curtailment Prioritization

Prior to the 2021 Winter Storm, the RRC issued an emergency order which elevated deliveries of
natural gas to power generation customers as the second highest priority after deliveries of natural
gas to human need customers and to LDCs serving human needs customers. The RRC has since
adopted a rule, 16 Tex. Admin. Code § 7.455, that prioritizes the firm sales and transportation of
natural gas by gas utilities during a curtailment event in the following descending order:
1. Human needs customers and local distribution systems which serve human needs customers
2. Electric generation facilities
3. Industrial and commercial users of the minimum natural gas required to prevent physical harm
and/or ensure critical safety to the plant facilities, to plant personnel, or the public when such
protection cannot be achieved through the use of an alternate fuel
4. Small industrials and regular commercial loads that use less than 3 million cubic feet of gas per
day
5. Large industrial and commercial users for fuel or as a raw material where an alternate fuel or
raw material cannot be used, and operation and plant production would be curtailed or shut
down completely when natural gas is curtailed

38
 6. Large industrial and commercial users for fuel or as a raw material where an alternate fuel or
raw material can be used, and operation and plant production would be curtailed or shut down
completely when natural gas is curtailed
7. Customers that are not covered by the priorities listed above 44

Electric Service Prioritization

The PUCT has prioritized several customer groups, pursuant to both statute and rule:

• Assisted living facilities, end stage renal disease facilities, hospice services, nursing
facilities, all of which must have the same priority as a hospital. 45

• Critical natural gas facilities, 46 with additional guidance as follows: 47

o Tier One A
• Pipelines that directly provide natural gas to ERCOT identified Black Start Service
facilities and other natural gas fired electric generation;
• Natural gas local distribution company critical pipelines or pipeline facilities;
• Underground natural gas transportation and storage facilities;
• Natural gas liquids transportation and storage facilities; and
• Associated pipelines, compressor stations, and control centers for facilities in Tier
One A.
o Tier One B
• Natural gas wells and oil leases producing natural gas in the amount of 5000
MMcf/day or greater;
• Gas processing plants with a capacity of 200 MMcf/day and greater;
• Associated pipelines, compressor stations, and control centers for facilities in Tier
One B; and
• Associated saltwater disposal wells supporting the wells and leases for facilities in
Tier One B.
o Tier Two A
• Natural gas wells and oil leases producing natural gas in the amount of > 1000
MMcf/d <= 5000 MMcf/day;
• Gas processing plants with a capacity of >100 and < 200 MMcf/day;
• Associated pipelines, compressor stations, and control centers for facilities in Tier
Two A; and
• Associated saltwater disposal wells supporting the wells and leases for facilities in
Tier Two A.
o Tier Two B
• Natural gas wells and oil leases producing natural gas in the amount of >250
MMcf/d <=1000 MMcf/day;
• Gas processing plants with a capacity of <100 MMcf/day;

44 16 TAC §7.455.
45 Tex. Util. Code § 38.072.
46 Tex. Util. Code § 38.074. The RRC rule specifies critical natural gas customers. 16 TAC §3.65.
47 http://puc.texas.gov/industry/electric/cng/documents/Critical%20Natural%20Gas%20Guidance.pdf.

39
 • Associated pipelines, compressor stations, and control centers for facilities in Tier
Two B; and
• Associated saltwater disposal wells supporting the wells and leases for facilities in
Tier Two B.
o Tier Three
• Natural gas wells and oil leases producing natural gas in the amount of <250
MMcf/day;
• Associated pipelines, compressor stations, and control centers for facilities in Tier
Three;
• Associated saltwater disposal wells supporting the wells and leases for facilities in
Tier Three; and
• Any additional facilities identified as critical on Railroad Commission of Texas
Form CI-D, including processing, metering, and similar support facilities and
equipment.

• The PUCT may designate other types of critical load to be given the highest priority for
restoration 48 and has done so for the following customers: 49
o Critical Load Public Safety Customer -- A customer for whom electric service is
considered crucial for the protection or maintenance of public safety, including
but not limited to hospitals, police stations, fire stations, and critical water and
wastewater facilities.
o Critical Load Industrial Customer -- An industrial customer for whom an
interruption or suspension of electric service will create a dangerous or life-
threatening condition on the retail customer’s premises, is a “critical load industrial
customer.”
o Chronic Condition Residential Customer -- A residential customer who has a
person permanently residing in his or her home who has been diagnosed by a
physician as having a serious medical condition that requires an electric-powered
medical device or electric heating or cooling to prevent the impairment of a major
life function through a significant deterioration or exacerbation of the person’s
medical condition.
o Critical Care Residential Customer -- A residential customer who has a person
permanently residing in his or her home who has been diagnosed by a physician
as being dependent upon an electric-powered medical device to sustain life.

The differences in prioritizations for natural gas and electricity may appear counter-intuitive but
are based on the characteristics of the respective systems. For example, natural gas LDCs do not
direct involuntary outages of their customers because the logistics of safely restoring service after
pilot lights have all been cut off are daunting. Consequently, natural gas shortages must be
addressed by limiting service to interruptible and large customers, where service may be more
easily restored. By contrast, electric utilities can and must direct involuntary outages of their

48 Tex. Util. Code § 38.076.

49 16 TAC § 25.497.

40
customers because the service can be more easily restarted, particularly on electric distribution
systems. Thus, prioritization of natural gas and electricity supplies is necessarily different.

Recommendations to Enable More Effective Prioritization

Refinement or reprioritization of the customers described in this section as well as sections C and
D must be made by a much broader community of customers and service providers at the PUCT.
During Winter Storm Uri, many large loads voluntarily came offline, mitigating the firm load shed
for residentials. We should encourage transmission level customers to engage in confidential
discussions in which they share information with their interconnecting utility. Doing so can help
to streamline voluntary load reductions at the transmission level during firm load-shed events.
Throughout operations outside of a firm load-shed event, compensated demand response
continues to be a reliable tool for grid management and can quickly be expanded as necessary.

41
F. WEATHERIZATION

In the aftermath of Winter Storm Uri, it was apparent that the weatherization of facilities in all sectors
of the energy supply chain – energy production, transmission, storage, generation, and consumer –
needed to occur, each with varying degrees of priority and effect. Additionally, state agencies needed
a better understanding of their regulated industries’ preparedness and capabilities and needed to
communicate with one another for the expressed goal of planning and response in an extreme weather
event.

The codification of TERC has allowed for a centralized place in which all agencies can communicate
in times of extreme weather. Before the Winter Storm of 2021, TERC was an informal gathering led
by the RRC, comprised of the RRC, PUCT, gas operators, electric utility operators, and ERCOT.
Now, TERC has provided an umbrella for RRC, PUCT, TCEQ, and TxDOT to all share real-time
information regarding needs, on the ground assessments, and industry communications to mitigate
real-time challenges and prepare for future needs.

During a weather emergency, it is essential to continue critical operations and communication. To that
end, TCEQ should have the ability to issue enforcement discretion waivers to prioritize continued
energy production and transportation during an emergency over regulatory limits.

TxDOT has a Snow & Ice Operations Manual that contains SOPs on how state-maintained roads will
be maintained during winter weather. Each state-maintained road is given a classification / priority
from Tier 1 roadways (Interstates) to Tier 4 (Low volume Farm/Ranch Market). TxDOT should
continue to share snow and ice operational information with cities, counties, and private partners.
While TxDOT does not have authority over how a county maintains its roads, TxDOT should have
access to the Supply Chain Map and should inform counties of the importance of the country road
via the TDEM Disaster District Councils.

S.B. 3 required winter resource capability qualifications and PUCT Project No. 52373 ordered
ERCOT to develop a firm-fuel product that provides additional grid reliability and resiliency during
extreme cold weather and compensates generation resources that meet the higher resiliency standard.
This is known as the Firm Fuel Supply Service, and it was approved by ERCOT on January 31, 2022.
ERCOT has completed its procurement for service for the 2022-2023 winter season. The PUCT
should maintain this program to ensure additional resiliency, such as through on-site storage or dual
fuel capabilities, amongst natural gas fired generators.

H.B. 3648 (87R) and S.B. 3 required the PUCT and RRC to work collaboratively to adopt rules to
establish a process to designate certain natural gas facilities and entities associated with providing
natural gas in Texas as critical customers or critical gas suppliers during an energy emergency. The
new rulemakings are codified in 16 Tex. Admin. Code § 25.52 (PUCT Rule) and 16 Tex. Admin. Code
§ 3.65 (RRC Rule). The RRC has adopted rule change that will lower the number of natural gas
facilities that are considered critical. The goal of this change is to prioritize critical natural gas
infrastructure while allowing smaller, less critical facilities to have power cut in the event of load shed.

Through 16 Tex. Admin. Code § 3.65, the RRC adopted the Form CI-D, Acknowledgement of Critical
Customer/Critical Gas Supplier Designation, requiring operators subject to the rule to file for critical
designation status at the RRC and requiring critical customers to certify that they have provided critical
customer information to its electric utility. Initial filings were required on January 15, 2022 and have
42
been updated/refiled on September 1, 2022. Beginning in 2023, Form CI-D must be filed with all
parties bi-annually by March 1 and September 1 of each year. The RRC has audited operator filings to
ensure compliance.

Within the newly created CID, the RRC also created a 24-hour emergency hotline. Additionally, in
accordance with S.B. 3 requirements, the RRC required all operators (upstream production and
midstream pipelines) with assets located on the Supply Chain Map, to file Emergency Operations
Plans with the RRC by August 1, 2022. The PUCT has required electric utilities to file contact
information (Project No. 52964), and it is accessible to the public on the PUCT website through a
market directory search function.

Both the PUCT and the RRC adopted weatherization rules in accordance with S.B. 3, which include
all components of the energy supply chain as outlined in the introduction of this section. 16 Tex.
Admin. Code § 25.55 and 16 Tex. Admin. Code § 3.66 at the PUCT and RRC, respectively, require
weatherization of facilities in accordance with the requirements of S.B. 3 and an attestation by the
operator that its facilities are prepared and meet the standard of the weatherization rules. The RRC
also issued its second, updated weatherization practices report, as well as weather data by country and
a winter weather pattern projection provided by the Texas State Climatologist. The PUCT has adopted
an additional rule focused on year-round weather emergency preparedness reliability standards
informed by a robust weather study that has been conducted by ERCOT in consultation with the
Office of the Texas State Climatologist.

ERCOT and RRC have both increased their inspections in the field. Inspections began prior to the
2021/2022 winter season to ensure that facilities had taken necessary precautions to produce and
deliver energy to end-use customers. The inspections include all aspects of electric facilities –
generation, and transmission and distribution – in addition to natural gas producers, pipelines, and
storage facilities. Both agencies will continue with increased inspections.

The PUCT and RRC should ensure that implemented weatherization requirements are maintained
and audited. Regulations should be reviewed, and based on assessments, the PUCT and RRC should
consider revising weatherization rules as new data becomes available and technology deems
appropriate. The PUCT and RRC should be apprised of any applicable NERC Standards regarding
weatherization.

43
G. DATA AND METRICS

TERC analyzed market and operational data that could improve decision making concerning natural
gas and the electricity supply chains. Certain data considerations and needs necessarily vary by industry.
TERC reviewed the data and metrics required to evaluate the reliability of the interconnected natural
gas and electricity sectors. The first step in the analysis was to determine the authority of the key
agencies to request data and information. The second step was to identify the data and information
needed to establish the metrics for the market and examine the impact of changes to the market. For
each agency listed below, the jurisdictional authority to request information is described and is
followed by the data and information necessary to establish the proper metrics for reliability for these
interconnected systems. TERC also recommends that the legislature require the Mapping Committee
collect water and wastewater critical infrastructure as a layer to the map.

Railroad Commission
The RRC has jurisdiction “over the oil and natural gas industry, pipeline transporters, natural gas and
hazardous liquid pipeline industry, natural gas utilities, the LP-gas industry, and coal and uranium
mining operations.” 50

The RRC has broad authority to request documents related to production, transportation, safety, and
environmental impacts from the entities it regulates. 51 Each regulated entity must file and keep up-to-
date an organizational report that provides general information about the entity including contact
information, and information concerning the structure and purpose of the entity. 52 Entities must
maintain records of their operations, allow the RRC or its representatives to inspect the records, and
cooperate with the RRC in complying with its regulations. 53 Tex. Admin. Code § 3.1 requires entities
to keep operating records of the quantities or volumes of product produced, sold, on hand, and
disposed of, as well as clerical records relating to leases, property transactions, and other information
which the RRC may require to fulfill its obligations to regulate the industry. 54

The RRC requires gas utility pipelines to file reports about their operations on an annual basis. 55 The
gas utility annual report is filed in accordance with the Commission’s rule and utilizing a Commission
approved form. 56 The gas utility annual report requires information including but not limited to plant
in service, operating income, and gas sales and purchases. 57 The RRC may also require a gas utility to
make a sworn report regarding the total quantity of gas distributed by the pipelines and the total
quantity of gas held in storage, amongst other items. 58

50 https://www.rrc.texas.gov/about-us/.
51 See generally 16 TAC §§ 3.1, 3.59, 7.301, 8.105, 8.301, 8.51, 9.4.
52 16 TAC §§ 3.1, 8.51.
53 16 TAC §§ 3.1(b-c), 8.105, 9.4.
54 16 TAC §§ 3.1(b).
55 See 16 TAC § 7.301.
56 https://www.rrc.texas.gov/gas-services/gas-services-forms/.
57 Id.
58 Tex. Util. Code § 121.102.

44
Recommendations:

Agency Coordination Overview:

• The PUCT and RRC are working together on information sharing solutions.
• The PUCT and RRC will continue to explore and define the processes for sharing planned
maintenance information between gas and electric industries and ERCOT.
• TERC recommends:
o Agency participation during SOC activations to include planning, training, and
exercising
o The Texas Emergency Management Council continue to lead industry calls while
preparing and responding to potential weather events and disasters
o The regulatory agency directors continue to coordinate directly
o The regulatory agency directors continue to coordinate directly in efforts to enhance
communication.
o Agencies continuing to evaluate opportunities to address stability and reliability
through the rule making process like RRC and PUCT have done through the
weatherization, gas curtailment rules, critical designations, etc.
o The RRC should continue to inspect statewide weatherization and provide regular
updates to TERC

Public Utility Commission

The PUCT has wide ranging power to govern and regulate market participants in the ERCOT power
region, 59 and vertically integrated utilities in the other, non-ERCOT, power regions in Texas. The
PUCT has the power to request operational and market information from market entities within its
jurisdiction and requires that certain records be maintained by the entities under its jurisdiction. The
Commission may also obtain market and operational data from the ERCOT and the independent
market monitor (“IMM”) for the ERCOT market.

Electric Utilities

The PUCT has been granted the authority “to do anything specifically designated or implied by [the
Public Utility Regulatory Act 60] that is necessary and convenient to the exercise of its power to regulate
and supervise the business of each public utility within its jurisdiction.” 61 The PUCT has the authority
to compel public utilities to report information related to a transaction between a utility and affiliate
inside or outside of Texas as long as the transaction is within the Commission’s jurisdiction. 62 The
PUCT may also inspect and obtain copies of “the papers, books, accounts, documents, and other
business records of a public utility within its jurisdiction.” 63

Accordingly, electric utilities under the PUCT’s jurisdiction are subject to extensive reporting
requirements, including providing the PUCT with operational and market data, data relating to loads
being served or forecasted load growth, transmission and distribution information and information

59 PURA sec. 39.151.

60 Public Utility Regulatory Act, Tex. Util. Code Ann. §§ 11.001-66.016 (“PURA”).
61 PURA § 14.001 (emphasis added).
62 PURA § 14.003(1).
63 PURA § 14.204.

45
relating to generation interconnections and forecasted changes to interconnected generation. Electric
utilities must periodically provide the PUCT with information related to significant interruptions of
service and service quality; 64 emergency operations plans; 65 winter weather preparedness; 66 earnings
monitoring reports; 67 reports on activities related to infrastructure and maintenance; 68 storm hardening
plans; 69 information on the repair or construction of transmission facilities due to emergency
operations; 70 energy efficiency programs; 71 vertically integrated electric utilities outside of ERCOT are
also required to submit monthly fuel reports to the PUCT on power plant efficiency, fuel cost, peak
demand and sales, and fuel purchases, information on sales to qualifying facilities; 72 and information
concerning avoided costs, capacity additions, and estimated capacity costs. 73

Transmission Service Providers

TSPs are also required to submit Emergency Operations Plans to the PUCT and must also file annual
reports related to transmission line inspection and safety. 74 The PUCT sets the transmission rate
recover in the transmission cost of service and requires certain service level protections of customers
with respect to transmission service. Information concerning service, compliance, customer impacts
can be required of TSPs.

Power Generation Companies

Power Generation Companies are required to file annual generating capacity reports to report the
nameplate rating and summer net dependable capabilities of their generating facilities 75 in addition to
filing Emergency Operations Plans with the PUCT.

Retail Electric Providers

REPs do not physically touch the grid but take title to the power they purchase at wholesale for retail
sale to their loads. They are also assigned an ancillary service obligation from ERCOT and are assessed
charges from ERCOT for other grid stability services such as firm fuel service and emergency response
service based on the amount of retail load they serve. REPs must file Emergency Operations Plans in
addition to filing quarterly performance measure reports regarding the performance of the retail
market in Texas. 76 REPs must also file information requested by the PUCT concerning their business,
operations, compliance with PUCT regulations and customer protection.

64 16 Tex. Admin. Code (“TAC”) § 25.52.

65 16 TAC § 25.53.
66 16 TAC § 25.55.
67 16 TAC § 25.73.
68 16 TAC § 25.94.
69 16 TAC § 25.95.
70 16 TAC § 25.101(c)(3).
71 16 TAC § 25.183.
72 16 TAC § 25.242.
73 Id.
74 16 TAC § 25.97.
75 16 TAC § 25.91.
76 16 TAC § 25.88.

46
Municipally-Owned Utilities and Electric Cooperatives

Municipally owned utilities and electric cooperatives must comply with certain reporting requirements
described above applicable to power generation companies, electric utilities, and transmission service
providers. As load serving entities, municipally-owned utilities and cooperatives take title to the power
they purchase at wholesale for retail sale to their customers. They are also assigned an ancillary service
obligation from ERCOT and are assessed charges from ERCOT for other grid stability services such
as firm fuel service and emergency response service based on the amount of retail load they serve.
PURA sections 40.004(7) and 41.004(5) grant the PUCT the authority to require reports from
municipally owned utilities operations and electric cooperative operations, respectively, to enable the
PUCT “to determine the aggregate load and energy requirements of the state and the resources
available to serve that load” 77 and to “determine information relating to market power.” 78

Qualified Scheduling Entity Information

The PUCT requires market participants that submit schedules to ERCOT through a qualified
scheduling entity (“QSE”) to maintain records of scheduling, offer, and bidding information for “all
schedules, offers, and bids that its QSE has submitted to ERCOT on its behalf, by interval.” 79 All
ERCOT market participants, and ERCOT, are required to maintain information on all wholesale
transactions; 80 information and documentation of all planned, maintenance, and forced generation
and transmission outages; 81 information on pricing and settlement information; 82 and on verbal
dispatch instructions (“VDIs”) received from ERCOT. 83 Market participants must provide this
information to the PUCT upon request. 84

Power Generation Companies, municipally-owned utilities, electric cooperatives, and PUNs through
their QSE, are required to submit a substantial amount of information to ERCOT in real-time and on
a rolling basis. 85 The PUCT is able to obtain the data submitted to ERCOT. Scheduled outage
information is available to ERCOT up to five years in advance, and the expected availability of all
generation units is provided to ERCOT seven days in advance of operation through submission of
Current Operating Plans. This information is provided to market participants on an aggregated basis.

77 PURA § 40.004(7)(A) and 41.004(5)(C).

78 PURA § 40.004(7)(B) and 41.004(5)(D).
79 16 TAC § 25.503(n)(1).
80 16 TAC § 25.503(n)(2)(A).
81 16 TAC § 25.503(n)(2)(B).
82 16 TAC § 25.503(n)(2)(C).
83 16 TAC § 25.503(n)(3).
84 16 TAC § 25.503(n)(4).
85 In real time such data includes, but is not limited to, Net Real Power, Gross Real Power, Gross Reactive Power, Net

Reactive Power, Generation Resource Breaker and Switch status, high-sustained limit, high emergency limit, low
emergency limit, low-sustained limit, configuration identification information, and ancillary service schedule and
responsibility. On a rolling basis such data includes, but is not limited to, expected resource status, high-sustained limit,
high emergency limit, low emergency limit, low-sustained limit, ancillary service responsibility, known outages, known
derates, planned retirements.

47
ERCOT

ERCOT must also make periodic reports to the PUCT on daily system adequacy; 86 long-term resource
adequacy; 87 the efficacy, utilization, related costs, and contribution of the Operating Reserve Demand
Curve to grid reliability in the ERCOT power region; 88 the performance of the retail electric market
in Texas; 89 the effectiveness and performance of Emergency Response Service; 90 emergency events; 91
essential market operations statistics, including prices and quantities of energy and capacity purchased
in the markets operated by ERCOT; 92 the four monthly coincident peaks (“4CP”) in the ERCOT
System in June, July, August and September; 93 winter weather preparedness; 94 a list of resources that
failed to provide summer and/or winter weatherization declarations; 95 and a list of resources that
failed to provide an attestation regarding coordination with each natural gas pipeline that is directly
connected a resource. 96 The PUCT has complete oversight over ERCOT 97 and can request
information of ERCOT or request that ERCOT make certain information public. Under newly passed
legislation, the PUCT is also charged with ensuring that ERCOT conducts a “biennial assessment of
the ERCOT power grid to assess the grid’s reliability in extreme weather scenarios.” 98 The PUCT can
request any information of ERCOT to allow the PUCT to meet the statutory requirement that the
independent organization be “directly responsible and accountable to the commission.” 99

Independent Market Monitor for the ERCOT Market

The IMM is an independent organization that both monitors the wholesale market for possible
manipulation and makes recommendations to enhance the effectiveness of the market . 100 The IMM
is required to submit to the Commission “[d]aily, monthly, an quarterly reports” on prices and
congestion in the ERCOT market101 and an annual report on the state of the ERCOT market, which
must contain “an assessment of the efficiency of ERCOT’s management of the balancing energy,
ancillary services, and congestion rights markets” and “an evaluation of the effectiveness of congestion
management by ERCOT.” 102 The PUCT also has the authority to require the IMM to provide
“[p]eriodic or special reports” to the PUCT on market conditions or specific event as requested by
the PUCT. 103 The IMM is required to operate under the supervision and oversight of the PUCT 104

86 16 TAC § 25.505(c).
87 16 TAC § 25.505(b).
88 16 TAC § 25.505(e).
89 16 TAC § 25.88.
90 16 TAC § 25.507.
91 16 TAC § 25.362(i)(4).
92 16 TAC § 25.362(i)(2)(B).
93 16 TAC § 25.192(d).
94 16 TAC § 25.55.
95 ERCOT Nodal Protocols §§ 3.21(5) and (6).
96 ERCOT Nodal Protocols § 3.21.1(6).
97 PURA §39.151.
98 PURA §39.159.
99 PURA §39.151(d).
100 PURA sec. 39.1515(a).
101 16 TAC § 25.365(1).
102 16 TAC § 25.365(2).
103 16 TAC § 25.365(3).
104 PURA §39.1515(d).

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and the PUCT may request information from the IMM in order to fulfill its obligation to oversee the
IMM.

Recommendations:

The PUCT should supplement its existing data reporting requirements by conducting an assessment
related to power plants’ fuel usage and procurement.

Texas Commission on Environmental Quality

TCEQ may also request and compile certain operational data related to the electricity supply chain
during certain emergency conditions. When ERCOT (or another Independent System
Operator/Regional Transmission Organization) determines that “it is, or likely will be, unable to
reliably meet its system electric demand and reserve requirements or that a local reliability issue exists
with the generation facilities that are expected to be available to serve that demand,” ERCOT will
contact the TCEQ and request that TCEQ consider exercising its enforcement discretion for potential
violations related to air permit limitations under TCEQ’s jurisdiction. 105 If the request is granted,
generators must maintain records of their operations during the emergency and such records may be
subject to review by the TCEQ. 106

Recommendations:

Because the TCEQ does not oversee the availability of generation or of gas supply, TERC makes no
recommendations regarding the provision of additional authority to the TCEQ with respect to the
compilation of market and operational data.

Texas Electricity Supply Chain Map

S.B. 3 created the Mapping Committee to map the state’s electricity supply chain and identify critical
infrastructure facilities in the supply chain107required for the delivery of natural gas to natural gas
dependent facilities and identifies the connections between the critical infrastructure to the electric
transmission and distribution system.

The mapping of the electric supply chain was a monumental task and has provided a tool that will be
invaluable in future weather or emergency events. Currently that tool is available to the PUCT, RRC,
TDEM, and the ERCOT. TERC has been provided a high-level view of the Supply Chain Map.

On April 29, 2022, the Mapping Committee announced that it had completed its first iteration of the
map, which depicts the physical location and characteristics of certain electric transmission and
distribution lines, substations, electric generating facilities, electric service area boundaries, natural gas

105 See Procedure for Requesting TCEQ Enforcement Discretion Relating to a Power Emergency in Texas for ERCOT, MISO, or SPP

Regions, available at https://www.tceq.texas.gov/downloads/response/enforcement-discretion.pdf.

106 Id.

49
pipelines, compressor stations, underground storage facilities, real time-weather information, and
owner and operator contact information. The map includes the physical locations of electric
infrastructure and detailed information about mapped facilities so that the map can be used in
emergencies by entities like TDEM and the Texas Emergency Management Council.

The Mapping Committee’s first iteration of the map identified “more than 65,000 facilities including
electricity generation plants powered by natural gas, electrical substations, natural gas processing
plants, underground gas storage facilities, oil and gas well leases, saltwater disposal wells, as well as
more than 21,000 miles of gas transmission pipelines and approximately 60,000 miles of power
transmission lines.” 108

The Mapping Committee is required to provide the PUCT with access to the map, who must then
create a database identifying the critical infrastructure facilities. The Mapping Committee must also
provide TERC with access to the electricity supply chain map following the completion of the map. 109
TERC has been provided a high-level overview of the map as required by PURA.

Recommendation:

Should the legislature consider expanding access on a limited basis, such access should be only on a
need-to-know basis with the most stringent safeguards in place, including but not limited to a NERC
or United States Department of Transportation equivalent background check and only after approval
under the supervision of PUCT, RRC, or TDEM employees.

108 Texas Adopts First-Ever Electricity Supply Chain Map, Railroad Commission of Texas and the Public Utility Commission
of Texas, April 29, 2022, https://www.puc.texas.gov/agency/resources/pubs/news/2022/042922-Joint-RRC-PUC-
Map-press-release.pdf.
109 PURA § 38.201(e).

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X. APPENDIX
Appendix 1 : Critical Infrastructure Identification Methodology
State Laws & Regulations

Critical infrastructure is defined expressly or implicitly in a number of Texas laws and regulations, and
it makes sense to rely on those definitions as a starting point for defining HNCI and, in turn, the focus
of TERC’s analysis and recommendations. While “high priority human needs” is not a term that is
elsewhere defined or arises as frequently in technical contexts, several existing “critical infrastructure”
definitions also are sufficiently broad to include segments that could otherwise be called “high priority
human needs,” and thus are sufficient to form a basis for developing an overall TERC HNCI
definition. Texas sources and their features are described below:

SOURCE DEFINITION(S) NOTES

16 TAC § 3.65 - Defines “critical gas supplier” (enumerated gas Limited in
Railroad Commission production, processing, transportation, logistics, and scope by
of Texas Criticality storage facilities and saltwater disposal facilities and agency’s
Definition disposal pipelines) and “critical customer” (gas supplier jurisdiction.
for whom electrical supply is essential).
16 TAC § 25.52 - “Critical loads” include “Loads for which electric Includes both
Public Utility service is considered crucial for the protection or human needs
Commission maintenance of public safety; including but not limited and critical
Criticality Definition to hospitals, police stations, fire stations, critical water infrastructure
and wastewater facilities, and customers with special in- components;
house life-sustaining equipment.” Also cross-references broader than
TRRC definition of “critical customer.” TRRC
definition; still
Identifies several categories of criticality: focused
16 TAC § 25.497 - • “Critical Load Public Safety Customer,” for whom especially on
Public Utility electric service is crucial for public safety (e.g.: natural gas.
Commission hospitals, police stations, fire stations, and critical water Definition
Criticality Definition and wastewater facilities.) focuses on
• “Critical Load Industrial Customer,” for whom an consumers of
interruption or suspension of electric service will create electricity only,
a dangerous or life-threatening condition not producers.
• “Chronic Condition Residential Customer,” a
residential customer diagnosed as having a serious
medical condition that requires an electric-powered
medical device or electric heating or cooling
• “Critical Care Residential Customer,” a residential
customer diagnosed as being dependent upon an
electric-powered medical device to sustain life
Texas Critical Examples of Critical Infrastructure Sites: Limited to
Infrastructure • Water or wastewater facilities CHP feasibility
Policy for State • Hospitals and nursing homes context, but
Facilities • Command and control centers comprehensive

51
 (implementation of • Datacenters list of
HB 1831, HB 4409, • Food processing and food storage potentially
and HB 1864)110 • Hazardous waste storage facilities critical sites
• Shelters
• Prisons and jails
• Police and fire stations
Lone Star Prohibits Texas businesses and government entities Narrow
Infrastructure from contracting with entities owned/controlled by application to
Protection Act Chinese, Russia, North Korea, and Iran interests if contracting but
(LIPA) (SB 2116) related to “critical infrastructure” defined as “a comprehensive
communication infrastructure system, cybersecurity definition
system, electric grid, hazardous waste treatment system, which is useful.
or water treatment facility.” 111
Tex. Gov’t Code. § List a large variety of facilities and industries, including Unrelated
423.0045:  Operation “a petroleum or alumina refinery,” “an electrical power subject matter
of Unmanned generating facility, substation, switching station, or but useful
Aircraft over electrical control center,” “a chemical, polymer, or definition.
Correctional Facility, rubber manufacturing facility,” “a water intake
Detention Facility, or structure, water treatment facility, wastewater treatment
Critical Infrastructure plant, or pump station,” natural gas infrastructure
Facility including compressors, terminals, storage, and
processing, “a telecommunications central switching
office or any structure used as part of a system to
provide wired or wireless telecommunications
services,” ;
“a port, railroad switching yard, trucking terminal, or
other freight transportation facility,” radio
transmission, steelmaking facilities, dams, and animal
feeding operations. Also includes additional facilities if
enclosed by fences, notably pipelines, production
facilities, and tanks.
Senate Bill 3 Criticality priorities can be identified from sectors Not an express
included in TERC representatives list: natural gas definition
supply chain; electric industry (including dispatchable
generation, transmission & distribution, retail electric
providers, municipally-owned utilities, electric
cooperatives); motor fuel producers, and chemical
manufacturers.

110 https://chptap.ornl.gov/profile/226/TexasCriticalInfrastructure-profile1.pdf.
111 Subtitle C, Title 5, Business & Commerce Code, 113.001(2).

52
Federal Laws & Regulations

The best and most comprehensive federal source for identifying criticality is the Cybersecurity &
Infrastructure Security Agency’s list of 16 “critical infrastructure sectors,” whose assets, systems, and
networks, whether physical or virtual, are considered so vital to the United States that their
incapacitation or destruction would have a debilitating effect on security, national economic security,
national public health or safety, or any combination thereof. 112

Sector CISA Description / Examples

Chemical • U.S. chemical facilities that “use, manufacture, store, transport, or
deliver chemicals” 113
• Examples: chemical & petrochemical manufacturers, chemical
distributors, pharmaceutical manufacturers, agricultural facilities,
chemical distributors, universities, hardware stores
Commercial • Sites “where large numbers of people congregate daily to conduct
Facilities business, purchase retail products, and enjoy recreational events and
accommodations.” 114
• Examples: entertainment & media; casinos; lodging; outdoor venues;
public assembly (stadiums, arenas, museums, libraries); real estate;
retail; sports.
Communications • Includes “both physical infrastructure (buildings, switches, towers,
antennas, etc.) and cyber infrastructure (routing and switching
software, operational support systems, user applications, etc.).” 115
• Examples: broadcasting systems (TV, radio); cable networks; satellite
components; wireless; wireline (data & telephone, internet backbone)
Critical • “The Critical Manufacturing Sector processes raw materials and
Manufacturing produces highly specialized parts and equipment that are essential to
primary operations in several U.S. industries—particularly
transportation, defense, electricity, and major construction.” 116
• Examples: primary metals; machinery; electrical equipment; appliances
& components; transportation components.
Dams • Includes dams providing “hydroelectric power; river navigation; water
supply for municipal, industrial, and agricultural uses; flood control;
efficient water resource management in drought- and flood-prone
regions; waste management; recreation; and wildlife habitat
protection” 117
Defense • “The DIB Sector consists of government and private sector
Industrial Base organizations that possess capabilities to support military operations

112 https://www.cisa.gov/critical-infrastructure-sectors.
113 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-chemical-2015-508.pdf.
114 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-commercial-facilities-2015-508.pdf.
115 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-communications-2015-508.pdf.
116 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-critical-manufacturing-2015-508.pdf.
117 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-dams-2015-508.pdf.

53
 directly; certain laboratories and capabilities to produce small-quantity,
uniquely military materiel; and other specialized services that support
military operations.” Also includes private sector domestic and foreign
companies, “and supply chains delivering a vast array of products and
services to support DoD business and military requirements.” 118
Emergency • Human personnel (law enforcement, fire, EMS, public workers);
Services physical facilities, equipment, and vehicles; cyber (virtual operations,
internet, information networks)). 119
Energy • “This critical infrastructure is divided into three interrelated segments
or subsectors— electricity, oil, and natural gas—to include the
production, refining, storage, and distribution of oil, gas, and electric
power, except for hydroelectric and commercial nuclear power
facilities and pipelines.” 120
Financial • Institutions providing “(1) deposit, consumer credit, and payment
Services systems products; (2) credit and liquidity products; (3) investment
products; and (4) risk transfer products.” 121
Food & • Includes “growers, processors, suppliers, transporters, distributors, and
Agriculture consumers” including restaurants and institutional food service
establishments; supermarkets, grocery stores, and other food outlets;
warehouses, manufacturers, processors; farms. 122
Government • Includes Public Facilities (“Offices and office building complexes;
Facilities Housing for government employees; Correctional facilities; Embassies,
consulates, and border facilities; Education facilities; Courthouses;
Maintenance and repair shops; Libraries and archives; Monuments”)
and Non-Public Facilities (“Research and development facilities;
Military installations; Record centers; Space exploration facilities;
Storage facilities for weapons and ammunition, precious metals,
currency, and special nuclear materials and waste; Warehouses used to
store property and equipment”). 123
Healthcare & • Includes “publicly accessible healthcare facilities, research centers,
Public Health suppliers, manufacturers, and other physical assets,” and “information
technology systems required for care delivery and to support . . .
transmission and storage of [healthcare] data.” 124
Information • Comprises physical assets, virtual systems and networks includes “the
Technology full set of processes involved in creating IT products and services,
including Research and Development (R&D), manufacturing,
distribution, upgrades, and maintenance.” 125
Nuclear • Formally consists of “Nuclear Reactors, Materials, and Waste” 126

118 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-defense-industrial-base-2010-508.pdf.
119 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-defense-industrial-base-2010-508.pdf.
120 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-energy-2015-508.pdf.
121 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-financial-services-2015-508.pdf.
122 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-food-ag-2015-508.pdf.
123 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-government-facilities-2015-508.pdf.
124 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-healthcare-public-health-2015-508.pdf.
125 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-information-technology-2016-508.pdf.
126 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-nuclear-2015-508.pdf.

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 Transportation • Aviation; maritime; freight rail; highway & motor carrier; pipeline;
Systems postal & shipping; mass transit. 127
Water & • Drinking water and wastewater. 128
Wastewater

Of these 16 sectors, four are designated “lifeline functions” – transportation, water, energy, and
communications. CISA defines these “lifeline functions” to mean that “their reliable operations are
so critical that a disruption or loss of one of these functions will directly affect the security and
resilience of critical infrastructure within and across numerous sectors.” 129

127 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-transportation-systems-2015-508.pdf.
128 https://www.cisa.gov/sites/default/files/publications/nipp-ssp-water-2015-508.pdf.
129 CISA Report, https://www.cisa.gov/sites/default/files/publications/Guide-Critical-Infrastructure-Security-

Resilience-110819-508v2.pdf. (“For example, energy stakeholders provide essential power and fuels to stakeholders in
the communication, transportation, and water sectors, and, in return, the energy sector relies on them for fuel delivery
(transportation), electricity generation (water for production and cooling), as well as control and operation of
infrastructure (communication)”).

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