Texas’s big freeze may not bring the reforms it showed are needed

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“TEXAS IS A mirror in which Americans see themselves reflected, not life-sized but… bigger than life,” wrote John Bainbridge in “The Super-Americans”, a book published in 1961 about the Lone Star state. Recently, the picture of Texas has been one of super-sized suffering. A snowstorm and freezing temperatures caused power-equipment failures, leading to rolling blackouts. Around 4.5m households had to go without power and half of all Texans lost access to safe drinking water. Dozens have died and hundreds were poisoned by carbon monoxide. Survivors have had to contend with burst pipes in their homes, flooding and eye-watering electricity bills.

With most of the state shut down for a week, the disaster will probably become the costliest in Texas’s history, eclipsing the toll of even the worst hurricanes. Joe Biden, who is planning to visit and survey the devastation first-hand, has approved federal funds to help with disaster relief. In scenes reminiscent of a developing country, Texans lined up for food, blankets and bottled water.

The state’s leading politicians were quick to distance themselves from the disaster, physically as well as philosophically. Ted Cruz, a senator, jetted off to Mexico with his family, while others, including Greg Abbott, Texas’s governor, cast blame on renewable-energy sources for the blackouts. A hearing has been called at the State Capitol for February 25th where legislators will grill representatives from the Electricity Reliability Council of Texas (ERCOT), the oversight body that is meant to ensure the reliable functioning of the state’s grid. ERCOT deserves some blame for Texans’ suffering, but the bigger failure lies in the state’s light-touch regulation and prioritisation of business interests. The question is whether politicians will learn the right lessons from this disaster.

The design of Texas’s grid reflects its wariness of government. Having a standalone grid—which is twice as large as any other state’s and larger than most countries’—ensures that Texas is not subject to federal rules. It deregulated and privatised its electricity market in the early 2000s. Texas has enjoyed lower-than-average electricity prices, which is good for consumers and industry, but the system does not incentivise energy companies to forgo short-term profits and invest enough to ensure their equipment withstands extreme weather.

ERCOT itself is run without proper governance or oversight and is “accountable to no one”, says Edward Hirs, a lecturer at the University of Houston. ERCOT’s board is packed with executives from the energy business who have a financial interest in the market they oversee, which is akin to Wall Street financiers moonlighting at the Securities and Exchange Commission. ERCOT is the only transmission-system operator in North America to lack a fully independent board. A decade-old report by the Texas Sunset Advisory Commission, which reviews state agencies’ performance, recommended restructuring ERCOT’s board to make it more independent and increasing oversight of the body, but its suggestions were ignored. Inattention and inaction help explain how ERCOT’s current boss, Bill Magness, could receive a whopping $883,000 in compensation in 2018, nearly six times as much as Mr Abbott’s salary, which is set by the legislature.

Those who have called this February storm a once-in-a-century black swan event have forgotten 2011. A decade ago, a severe storm caused nearly one-third of the state’s power-generating units to fail, causing rolling blackouts and prompting hearings into ERCOT. Yet experts’ suggestions—such as protecting equipment for winter conditions, increasing the grid’s excess capacity and reforming ERCOT—were ignored. “We fell short, because we didn’t demand the full implementation of those recommendations,” says Joe Straus, a former Republican speaker of the Texas House. “We knew what to do, we just didn’t do it.”

Natural disasters that highlight states’ vulnerabilities can be catalysts for change. In the 1990s, after Hurricane Andrew hit Florida and the Northridge earthquake struck California, both states updated their building requirements to withstand future disasters, says Mark Jones, a professor at Rice University in Houston. Texas has the chance to learn from this painful saga and ensure it does not happen again. “We need to make sure they don’t just fire a bunch of people and find a way out of this short-term problem without addressing what we’ve known for a decade needed to be done,” says Mr Straus. “This has got to be the inflection point. The public is going to have to demand action.”

Texas’s founders were so wary of government that they wrote into the state constitution that the legislature should meet only every other year for up to 140 days. Yet with limited government come limitations. Texas-watchers note that while innovative companies might make investments to ensure they stay competitive, the Lone Star State is so wary of government and has such a lean budget that it does not invest much in its people or in strategic initiatives. Texas is notoriously parsimonious, spending around $4,000 per person, 40% less than the average American state. Because it fought the expansion of Medicaid, a health-care scheme for the poor, it has the highest uninsured rate in the country, which probably contributed to the state’s higher-than-average death rate from covid-19.

Could this power crisis prompt a broader reckoning about the limits of Texas’s anti-government, low-regulation philosophy? Despite the reasons to think it should, that is unlikely, for three reasons. First is the flow of people and businesses to Texas, which has no state income tax. Failing at something as essential as heating and electricity may tarnish its image in the short term but is not likely to be a permanent setback. Elon Musk, who has expanded his companies’ operations in the state, has said that Austin is going to be the “biggest boomtown” America has seen in 50 years. Texas’s leaders will be disinclined to engage in deeper soul-searching when they have the validation of so many people moving to the state.

A second reason to doubt bigger change will come is that there is no effective opposition to usher it in. After trumpeting the likelihood of making gains in the state legislature during last year’s election, Democrats did not do as well as expected. Texas remains a de facto one-party (Republican) state. “In what was supposed to be the most hopeful cycle in 25 years for Democrats, they face-planted and got nothing,” is how Evan Smith, the boss of the Texas Tribune, a non-profit news outfit, bluntly puts it. Not going out and campaigning door-to-door during the pandemic hurt Democratic candidates, as did inaccurate perceptions about their party’s wanting to defund the police. Republicans will now be in charge of redrawing electoral districts, setting back Democratic gains for at least the next decade, predicts Jason Sabo of Frontera Strategy, a political-strategy firm.

A third factor is the political ambition of Texas’s current leaders and their desire to differentiate themselves from the Biden administration. Despite public scrutiny as a result of the grid crisis, Mr Abbott will stand for re-election in 2022 and is rumoured to be eyeing a run for the Republican nomination for president in 2024. “Any time that Mr Biden gives in to the left wing of his party, those will be opportunities for Mr Abbott,” says Mr Jones. As Texas’s attorney-general, he sued Barack Obama’s government 31 times over policies including health care and environmental regulations, turning Texas into the de facto capital of the resistance. That opposition is likely to continue on subjects such as energy, the border and social issues. Ken Paxton, the state’s current attorney-general, has his own reasons for keeping lawsuits against the federal government steady and frequent, since he will want to deflect attention from an ethics scandal and a reported criminal investigation by the FBI.

Texas’s resistance might seem hypocritical, in light of how much the state will benefit from having a Democrat in the White House. Under Mr Biden, Texas will receive more stimulus money, covid-19 relief and other federal funds than it would have under a Republican administration. As Mr Abbott asks for help in navigating the aftermath of the storm, he is more muted in criticism of Mr Biden than he might otherwise be. But he will not stay polite for ever. The country’s largest red state may have gone dark for a week, but now that the lights are back on, Texas will show its true colours.