Texas weathers rolling blackouts as mercury drops

HOUSTON Wed Feb 2, 2011 7:03pm EST

Busses carrying news media are escorted on icy streets to media day for Super Bowl XLV at Cowboys Stadium in Arlington, Texas, February 1, 2011. REUTERS/Brian Snyder

Busses carrying news media are escorted on icy streets to media day for Super Bowl XLV at Cowboys Stadium in Arlington, Texas, February 1, 2011.

Credit: Reuters/Brian Snyder

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HOUSTON (Reuters) - Texas imposed statewide rolling blackouts for only the second time in more than two decades on Wednesday, after frigid weather shut down dozens of generators, and warned it may be forced to do the same on Thursday.

The grid operator declared an energy emergency after unusually frigid weather shut down 7,000 megawatts of power generators, about 8 percent of the installed capacity in the second-most populous U.S. state. Spot power prices surged 60-fold at one point, and Mexico exported electricity.

The Electric Reliability Council of Texas (ERCOT) rescinded its call for rolling blackouts at about 2 p.m. local time, but warned of a "strong possibility" it will reinstate them later Wednesday or Thursday unless more power plants return to help meet forecasts for even stronger heating demand as temperatures in some cities dip below freezing through Friday.

More than 5,000 megawatts remained shut on Wednesday evening due to extreme cold, ERCOT said.

"Without this safety valve, generators would overload and begin shutting down to avoid damage, risking a domino effect of a state-wide outage," ERCOT said in a statement.

Early explanations for the widespread unit outages were slim. One state regulator -- the Texas Railroad Commission -- said power outages affected some fuel deliveries to gas-fired power plants, forcing them to reduce power output.

Rolling blackouts hit gas processing plants operated by Kinder Morgan and Enterprise Products Partners LP, which crimped deliveries to the Frontera electric plant in McAllen, the commission said.

Near Dallas-Fort Worth, frozen pipeline compressors spurred Atmos Mid-Tex to curtail gas deliveries to 300 industrial customers, it said.

The disruptions left nearly 1 million homes dark and without heat for up to an hour, caused some schools and businesses to shut and spurred traffic snarls as some traffic lights stopped working. But they had little impact on major oil and gas operations in the heart of the U.S. energy industry.

"Rolling blackouts in Houston ... You would have never thought you would see the day in the energy capital of the world," Jack Moore, chief executive of oilfield services equipment maker Cameron said on a conference call conducted from a division office because its Houston headquarters had no power.

Transmission utilities including American Electric Power Co and CenterPoint Energy imposed the blackouts, which are rare in Texas. Similar measures were last taken in April 2006 when soaring heat caused demand for air conditioning to surge.

The National Weather Service issued a winter storm watch for southeast Texas for Thursday and Friday, with frozen rain and sleet in the forecast.

MOST REFINERIES SPARED

Early Wednesday, ERCOT called on state energy suppliers to cut about 4,000 megawatts worth of power demand in the early hours of the day -- equal to 800,000 homes, using ERCOT's estimate of 1 megawatt per 200 houses in extreme temperatures.

The cold snap did not impact the state's giant fleet of oil refineries, which comprises about 13 percent of U.S. refining capacity, but it did spur the shut-down of a pipeline and cause some Texas natural gas production wells to shut.

Shell Oil Co said severe winter weather triggered a malfunction in fuel production units at its 329,800 barrel-per-day (bpd) joint-venture refinery in Deer Park, Texas.

Freezing weather shut at least 600 million cubic feet per day of natural gas production in three Texas basins, according to data from Bentek Energy.

Explorer Pipeline, which carries crude oil and distillates from Texas to Tulsa, Oklahoma, shut due to cold weather.

"Houston faces rolling blackouts, which should be disruptive to residential users. This is not likely to have any major effect on the oil industry," Mark Routt, oil engineer and consultant at KBC in Houston told Reuters.

Refineries and other critical infrastructure have separate power supply agreements with utilities and are less susceptible to interruptions than residential or commercial customers.

MEXICO TO THE RESCUE

Mexico's Federal Electricity Commission said it was supplying Texas with about 280 MW of power from noon to 10 p.m. Wednesday via interconnections along the border.

Weather-related unit outages caused hourly wholesale power prices in Texas to soar 60-fold to $3,000 per megawatt-hour, up from about $50 where they usually trade. That's comparable to about $3 per kilowatt-hour for residential users, though most Texas home-owners have long-term power deals with suppliers that protect them from short-term price spikes.

Wholesale power for Thursday delivery traded as high as $500, up from about $70 for Wednesday, as cold weather was expected to persist until Friday.

ERCOT forecast peak demand would top 55,000 megawatts on Wednesday and 57,000 MW on Thursday before dropping to about 47,000 MW on Friday.

That is still well below the grid's 2010 summer peak of 65,715 megawatts.

(Additional reporting by Scott DiSavino, Joe Silha and Josh Schneyer in New York, Braden Reddall in San Francisco and Robert Campbell in Mexico City; Editing by Lisa Shumaker, Sofina Mirza-Reid and David Gregorio)

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