Texas Grid Failure: Why More Heads Need To Roll
Ed Hirs, 02 March 2021
The Texas electricity market failed. Yet in the words of ERCOT, the Electric Reliability Council of Texas, it functioned just as designed. ERCOT has congratulated itself for losing only 40% of the grid and is proceeding to settle transactions to transfer more than $50 billion from consumers to electricity generators. Why is there such an obvious disconnect?
The core premise of effective governance is that the officers and directors of any entity understand the business they govern. The late Yale University economist Paul W. MacAvoy used to state it this way: The purpose of the board of directors is to assist the CEO to develop the corporation’s strategy and then monitor performance. If performance is not up to expectations, the board must ask two questions.
Is the strategy correct? If so, then the CEO should be fired for failing to execute.
Is the strategy at fault? If so, then the CEO who developed the plan must go because a fresh start is needed.
With the Texas grid failure, the blame game from ERCOT and up through the chain of command above ERCOT indicates one of two things—the ERCOT board, Public Utility Commission, legislature and executive leadership of Texas never bothered to learn the business, or they turned a blind eye.
