In Texas's electricity grid (ERCOT), the system is currently defined as "reliable" if it is predicted to experience less than one blackout every ten years. After Winter Storm Uri, the Texas Legislature tasked the Public Utility Commission of Texas (the Commission) with revisiting that standard. The Commission responded by proposing a multi-metric reliability standard—one that defines "reliability" not just in terms of the frequency of outages, but also the maximum tolerable duration and magnitude of these events. In our comments, Policy Integrity supported the Commission's overall approach, because multi-metric reliability criteria are an emerging best practice compared to the old one-in-ten approach.
We also suggested two ways the Commission could strengthen its proposal. First, the threshold values for the metrics were selected in part based on an ERCOT study that assumed a constant value of lost load (VOLL). Because the VOLL varies with the duration and magnitude of an outage, the Commission could select thresholds that more accurately balance the costs and benefits of preventing outages by using a variable VOLL. The Commission should also consider adding an additional metric to the multi-metric proposal: a stress test based on specific catastrophic conditions (e.g., Uri-like conditions). Using historical data to simulate loss of load events is imperfect for predicting the likelihood of future extreme events, so stress testing for resilience to extreme events can complement ERCOT's historical-data-based scenario modeling.