Houston Power Outages Following Hurricane Beryl: Determining Responsibility and Acting Now

HOUSTON — The prolonged power outages that Houston and area residents are experiencing are the result of prolonged neglect and underinvestment in electrical infrastructure. CenterPoint reports that its restoration efforts are ahead of the progress made after Hurricane Ike, but that doesn’t matter. Residents are paying more and getting less. And there are many misconceptions.

First, everyone needs to show consideration for the thousands of workers who left their families and homes to come to Houston to fix the local power grid. In logistical terms, mobilizing 12,000 workers is the equivalent of mobilizing an Army division. The difference is that an Army division is under the direction of a general with uniform equipment, uniform communications, uniform controls, and provisions for housing and meals as part of the deployment.

Could CenterPoint have been better prepared? They say yes. Could the city of Houston and Harris County have been better prepared? They say yes. Keep in mind that repairing power lines usually requires clearing roads. The city and county seem to have been slow to respond.

A cursory look at CenterPoint’s outage map shows that most of the outages were concentrated in the city’s wooded areas, with some in urban and industrial areas. We’ll know more when the response reports are prepared.

There has been much criticism of CenterPoint for not reinvesting its profits in the Houston grid. CenterPoint’s Houston operations are run by a separate company, CenterPoint Energy Houston Electric, LLC. CenterPoint’s natural gas and other-state operations are not required to subsidize the company’s Houston electric operations. That makes sense, because no one in Houston wants to know that, for example, the rates charged here are subsidizing customers in Indiana.

CenterPoint’s 2023 annual report touts the company’s efforts to reduce costs for its Houston customers.

“We have maintained annual customer expense increases in our Houston Electric business at or below the historical inflation rate of 2% over the past 10 years.” (page 2 of the annual report).

“In addition, in 2023, we maintained our goal of reducing operating and maintenance costs by an average of 1 to 2 percent annually based on our current 10-year plan to help maintain customer affordability. Our expense management discipline and strong organic customer growth, particularly in our Greater Houston service territory, have allowed us to keep our Houston Electric customers’ average monthly charges nearly flat since 2014.” (page 3 of the 2023 Annual Report).

The Texas Public Utilities Commission, the City of Houston and the Harris County Courthouse can all see CenterPoint’s financial statements and should ask questions about the company’s expenses. For example, to keep up with inflation, expenses should have increased. Why didn’t they increase?

CenterPoint’s senior management is led by accountants who previously worked for Pacific Gas & Electric. For years, Pacific Gas & Electric underinvested in maintaining its cables and pipelines. It was a financial decision that killed dozens of people, caused billions of dollars in damages, and led to criminal charges against the company. (San Bruno pipeline explosion in 2010, Camp fire in 2018)

PG&E isn’t the only company that has paid the price for its maintenance efforts. (2017 Thomas Fire). In Dallas, Atmos Energy’s lack of maintenance and responsiveness led to a deadly explosion. (2018 Dallas pipeline explosion). In the Princeton University Press book Corporate Profit and Nuclear Safety: North East Public Service Strategy in the 1990s Yale economists Paul W. MacAvoy and Jean Rosenthal have shown that Northeast Utilities’ management and board cut operating and maintenance costs at the expense of safe operations at three nuclear power plants. The company pleaded guilty to crimes, paid millions in fines, and spent more than $1 billion to bring Millstone 2 and Millstone 3 back into compliance with safe operating procedures. Millstone 1 could not be saved.

With evidence of what happens when other utilities skimp on operating and maintenance expenses, whose job is it to look out for the Houston consumer? CenterPoint is directly regulated by the Public Utility Commission of Texas, the City of Houston and the Harris County Commissioners Court. These appointed and elected officials are fiduciaries of the public interest. That means more than just monitoring the rates consumers pay. It means making sure CenterPoint provides the services it’s supposed to provide. But here we have what economists call the Principal-agent problem, In this context, the top management has a different agenda than its constituents (see for example Paul W. MacAvoy’s 1979 book The Regulated Industries and the Economy). Elected officials are concerned with re-election and generally seek to reduce costs to constituents. Opportunism is the order of the day.

The PUCT, the City of Houston, and the Harris County Courthouse know all there is to know about the deaths and degradation of public safety when the local power grid is down. Since Texas leaders began focusing on costs over safety and reliability more than 20 years ago, Texans have suffered repeatedly.

In other words, the power outages caused by the May derecho and Hurricane Beryl are not entirely CenterPoint’s fault. Our elected leaders are also culpable.

Media reports have reported that the Department of Energy recently denied CenterPoint a $100 million grant to upgrade its infrastructure. Additionally, the PUC was also denied a $300 million grant to upgrade CenterPoint and other regional utilities that serve our petrochemical and refinery complex along the Texas Gulf Coast. While the reasons for these denials are unclear, there is no doubt that a more resilient grid along the Texas Gulf Coast is a national security priority. Everyone remembers that states from Louisiana to New York and up and down the Atlantic coast panicked when the Colonial Pipeline was offline for a few days due to a ransomware attack. Why? The Colonial Pipeline can transport up to 3 million barrels per day of gasoline, jet fuel, or diesel through its system. If the local grid here in Houston goes down for an extended period of time, the pipeline and the refineries that feed it will also go down. That would be devastating for states and communities along the pipeline route.

Political rhetoric and whistleblower hearings are not the answer. The answer is to demand a change in attitude from local and state leaders and a change in priorities from CenterPoint. To protect our local electrical infrastructure, trees and vegetation must be cut down and kept cut down. Old pine utility poles must be replaced. While some suggest that burying power lines is a solution, the costs can be prohibitive for all but the most critical areas of the region.

Taxpayers will certainly bear much of the cost of a complete cleanup, but the city, county, and state should pass laws requiring landowners with vines and trees in CenterPoint easements to be billed for tree removal. If a landowner’s tree falls onto a CenterPoint power line, the landowner should be held responsible for cleanup and repair. If the landowner can’t pay at the time, the utility can file a lien to recoup the cost of vegetation removal when the property is later sold. (It’s not just private landowners—we can all see from driving around Houston that the city itself has planted trees in utility easements, too!)

It is not acceptable that Houstonians face the same type of recovery time after Beryl that we experienced with Category 3 Hurricane Alicia in 1983. The prospect of a very busy hurricane season in 2024 is reason to act now.

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