Newsroom

Speech to ERCOT Annual Meeting

Tuesday, December 15, 2009

Thank you for inviting me to speak today.  I appreciate what you all do and how important you are to the State of Texas.  I’m glad to be here.

All of you, in one way or another, produce and/or deliver a product that’s essential to our welfare, security, and prosperity.  Your work underpins our economy and provides a bolstering pillar for our way of life.

What you provide is now so pervasive and basic that people take it for granted.  The fact that virtually everyone in modern civilization trusts that lights will turn on in our homes, machines will run in our hospitals, air conditioners run in our offices, and football will be on our TV's every Monday night – that fact is a tribute to your industry’s success.
 
This is a monumental time to work in the electricity business.  Your industry is in the midst of a fundamental transformation – possibly the largest it's faced in a century.

No matter what, utility companies are going to start generating power in ways that most people could hardly imagine just a generation ago.  No matter what, we will see a continuing decline in the availability of some natural resources.  No matter what, customers are going to realize new savings in some areas, even as they incur new costs in others.  And no matter what, a changing climate and at-risk environment will impose their own costs on citizens – some noticed directly in utility bills, and some perhaps illusive but certainly no less real.

These are big changes.  Some of them will quite literally change the world.  Some people look at this transition and see things to fear—the highly recognizable fear of change.  And, it will be fascinating to see if that fear leads to paralysis and stagnation, with some in the industry being lost or left behind.

To me, this is a time of great promise and excitement.  Our options for confronting the changes create opportunities for innovation, and action, with some in the industry and our people prevailing in grand ways.

I'm very hopeful, because of our history in Texas.  We’ve proven that we can understand and embrace the future, even though we know it won't resemble the past.  Time and again, when we've faced upheavals, we've anticipated and prepared for them instead of running from the opportunity.  

And through it all, even when it looked hard and the naysayers were loud and prophesied failure if not disaster, we’ve prospered.  That’s the power of a common vision.  That’s the value of preparation and foresight.  And that’s the example that we now must follow.

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More than 100 years ago, Texas began building its electrical grid.  In the 1920s and for more than 30 years after, we strove to expand it.  Efforts to rebuild from the Great Depression and build up for World War II created an avalanche of opportunities to construct hydroelectric dams, install new transmission lines, and bring electricity to rural areas like the remote Texas Hill Country.  Our Congressman, Lyndon Baines Johnson – had he accomplished nothing else in his life – left a great legacy in the dams that created the Highland Lakes and brought electricity to rural Texans who'd never expected to see it.  

In these decades, Texas was ready for every new challenge and opportunity it faced.  And by the 1950s, we had the energy base we needed to build the refineries, manufacturing plants, skyscrapers, and subdivisions that made our economy among the most powerful in the world.

The transformation that made Texas a national energy leader may have faded somewhat in our memories, but history reveals it wasn’t without serious challenges.  It wasn’t without costs.  And, it wasn’t without unwanted or unexpected failures.

Another major transformation came in the 1970s.  That decade brought us the Oil Crisis and an effort to move away from petroleum for electric generation.  It also produced the Clean Air Act and Clean Water Act.

While people in this room may feel different things about those two pieces of legislation, I hope we can all agree that they've played a historic role in keeping our citizens safe and healthy, and in making sure our regions and economies remain attractive to new businesses.  

Even more than that, our transition through the '70s showed we don’t have to choose between our citizens' health and their prosperity.  It proved that industry can work with government and with advocates to create common-sense solutions that are in everyone's best interests.

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In a way, our latest transition, the one we face today, combines all of the changes we've faced in the past, and it provides new issues on top of them.  Our generation's opportunity – our transformation – will impact every sector of this industry, from the biggest power plant to the little box that runs my air conditioner.  

This new era brings environmental challenges that few thought much about even a decade ago – and in our transition, one way or another, we will resolve them.

This transition once again will fundamentally change what it means to be a rural Texan.  But this time, rather than just using power produced elsewhere, these Texans will produce electricity and send it, like so many crops, into more populated areas.

We will expand our grid once again – a process that's already well underway – and make the natural resources of our sun and wind every bit as essential as the fossil fuels we've been able to dig out of the ground.
 
And this will be a technological transformation, as well.  Clean, efficient co-generation plants and solar panels will spread across Texas like wildflowers, and Transmission and Distribution providers will have to manage more sophisticated, two–way power flows to keep up.  Utilities will deploy new, smart-grid technologies that will allow innovations and efficiencies that even we in this room can hardly imagine.   

These changes will create a new breed of innovative retailers and sophisticated customers.  As people become more aware of electricity and how they use it, it will become less likely that they take you for granted.  Indeed, they will be your partners.    
 
Our goal will be to strike the balance between the innovation we can muster, the health and safety protections we need, the cost—some of it admittedly great—of early investment in new approaches, the maintenance and strengthening of our existing investment, and the affordability we demand.

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We all share the responsibility of resolving these challenges.  Your industry – even in a market that's deregulated, competitive, and free – is intrinsically and inseparably linked to government and public policy.  Our success depends on one another.  And if either of us stumbles, neither of us will succeed.
 
I’ve seen this interdependence in virtually every stage of my public life.  Growing up, attending Boswell High School, in Saginaw, Texas, I never imagined I'd spend so much of my life working in and with the electricity industry.

(Then again, the gentleman who delivered this keynote speech last year also graduated from Boswell High School, so maybe fate just wanted us all to be together.)

In 1991, Governor Ann Richards gave me my first assignment in government service and named me chair of the Texas Air Control Board – the agency that became part of what’s now the Texas Commission on Environmental Quality.

It was an emersion in air quality and air permitting issues.  I see some people here today who helped me through that personal transition – whether they wanted to or not.

I’ve never lost interest in the shifting but critically important relationships between industry and the environment.  

A few years after leaving the Air Board, I was elected mayor of Austin.  With the office, I became de facto Chairman of the Board for Austin Energy, the city-owned utility.

This introduced me to the glamour of rate setting, resource planning, procurement decisions – and my personal favorite – customer relations.  Because, believe me, in Austin, we know who to call when the power goes out.

After serving as mayor, I became active on the board of the Greater Austin Chamber of Commerce, eventually becoming Chair.  I spent much of that time bringing new employers to Central Texas – and making sure we kept the ones we had.

I got to know people who ran big electricity users such as data centers.  And I saw again how important reliable power, affordable utility bills and an attractive quality-of-life are to our employers and our economy.

I was elected to the Texas Senate in 2006 and then named to the Senate Business and Commerce Committee.  As so many of you know, this committee spends an enormous amount of time and effort making sure Texas has the power it needs to meet realistic demands in safe, appropriate ways.

My first legislative session, in fact, was marked by a big fight over how many new coal-fired power plants should be built across the state.

In January, we were in a so-called emergency, requiring a fast tracking of many such plants.  The number was well over a dozen or so.  But, by March, there was a far less daunting estimate: three.

That debate was dramatically different this year, in what some have called the “solar session.”

In the end, the legislature passed just one solar bill – allowing homeowners to finance solar panels through property tax assessments.  But we worked hard – particularly in the Senate – negotiating several others that could have positioned Texas as a world leader in the solar field.

Many of you in this room spent a lot of time – and money – working to pass, kill, or compromise on these bills.  You all know that there is a tremendous and growing amount of support in the legislature for these concepts.

I firmly believe that had the session been a week longer, or had the House not ground to a halt, we’d have a law setting rules for net metering.  We’d have a rebate program that would kick-start the more widespread installation of solar panels.  And we’d have a law I authored to expand our portfolio of non-wind renewable energy, allowing Texas to lead in the solar business the way we have in wind and driving panel manufacturers to set up shop in Texas.

And I know, because I've seen it, if this year was “supposed” to be a “solar session,” then 2011 will actually be one.

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So the transition is here.  And the public policy and business challenges it raises aren't going away.  More than ever, we all need to come together, figure out where Texas needs to be 10 and 50 years from now, and make sure we're ready.

As I think everyone here can agree, that won't be easy.  Many of us have fresh scars reminding us what we're up against.

But let's not forget, we all essentially want the same thing: a foundation for the future that balances the power we need, the costs we can afford, and the quality-of-life we expect.

And over the next year and a half, we'll all be spending a lot of time together.
 
Right now, ERCOT and the Public Utility Commission are undergoing the Sunset Review process.  This, as you know, means legislators will ask fundamental questions about these agencies, their missions and how they carry out their duties.  And, this is supposed to be a long term view, not one that’s limited to a short game.

For better or worse, this will provide a forum for every sort of potential regulatory reform.  But this process should also be a platform to build the structures and processes that the state, and all of us, will need as we navigate this transition and prepare for our future.

And then there are the many tangible signs of this industry's transition that we'll see in coming years.  Don't misunderstand me – I know many of these things will be controversial.  But each also offers an opportunity for conversation and, I believe, consensus.  We'll need to treat them as such if we are to get where we want to be.

First, ERCOT plans to begin implementing its nodal market approach, an effort that most of you in the room have been significantly invested in.  The hope is that this will enhance our competitive market, introduce more transparency and equity into the way we spread costs, and make the process of electricity offers and bids more efficient.  
 
And then, there's the big one: the push by the federal government to settle on the rules for carbon dioxide and greenhouse gases.  There's no question that those rules will reshape the decisions before us.  And even without a new system, the stakes of climate change aren't going away.  Truly, doing nothing accomplishes nothing, except to pass even harder decisions on to future generations.

Again, the transition is happening.  Right now, no matter what.  And it's about far more than carbon, cap & trade, Copenhagen, or climate gate.  All of those things, as noisy as they may be, should be more than just distractions and divisions.  They shouldn’t bog us down in needless battles.

Truly, it's a shame that the bickering soaks up so much attention.  Because it obscures the vital truth we all know: that Texas became what it is by embracing change and building on opportunity.  Our spirit is creative and entrepreneurial.  Our economy is resilient and strong.  We have the natural resources to allow us to continue being a national leader in energy.  And we're already taking steps to put our state in the best position coming out of this transition.

Acting entirely on our own, we have built economic development programs that made our wind industry the biggest in the country.  On our own, we decided to invest in transmission lines that will deliver that wind power – and more – to future generations of Texans.
I'm proud that the debate over the CREZ lines centered on how far ahead of the curve we should be – and we can rest assured that when it comes to wind power, we aren't falling behind.

I’ve already alluded to the growing economic and political potency of solar power, in Texas and at the Capitol.  There’s every reason to believe that the legislature will take steps to ensure the state will lead in solar as we have in wind power and other traditional forms of energy.  In the last month alone, I've seen a dozen articles proclaiming that Texas is well-positioned to be the world's solar capital – ensuring that we can be energy leaders in this century as we were in the last one. But, I’ve also seen articles declaring that Texas lost jobs to other places because we aren’t moving as fast as I know we can.

We should all be excited by the serious innovations and investments in all areas of energy research – from clean coal, to aerodynamics, to biofuels – occurring today on our college campuses and across the state.

These investments and policies speak to the role that government can and should play in helping this industry and this state through this transition.

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So, to guide us through the coming decades, let's follow our own example.

Let's do all we can to make sure Texas is poised to prosper on the new energy landscape of the 21st Century.  

More than that, let's really run the state like a business.  Let's make proper, far-sighted investments that will pay off for all of us and especially our kids and grandkids – just as our parents and grandparents made investments that we’re profiting from today.

And let's drop the notion that investing in the future means nothing more than building a new power plant or installing a new transmission line.  Instead, let's come together and acknowledge that actions protecting our health, safety, environment and climate should be viewed in a similar light.

Now I realize that at this point, a few of you may plan to head back to your offices, dig through your calendars, and set aside some time to tell me how wrong I am about the public sector's best role during this transition.  

You'll say I should be a lot more skeptical of any plan that lets government do much more than get out of the way of companies.  You're thinking that everything I’m imagining costs money, and we shouldn’t be doing things that cost money – for generators, utilities, customers, or whoever.

Yes, you have concerns about costs.  Believe me – I do too.  There's no question that these concerns must be and will be front and center as we chart our course in this century.

But let's also remember that any successful enterprise costs money.  It feeds on investment.  It rewards innovation.  It builds things that aren't needed now, but will be essential down the road.  It finances things that are without question “experiments” today and tomorrow are state of the art.  And it needs leaders who account for costs in true, transparent, far-sighted ways.

Costs aren’t the only thing you consider in plotting your company’s future.  If they were, you wouldn’t invest.  You’d simply get by, stagnate, fall behind your far-sighted competitors, and ultimately go out-of-business.

By the same token, costs shouldn’t be the sole driver of our state’s efforts to prepare for what’s coming – or, indeed, to respond to what’s happening.  Costs are a concern, without a doubt.  But they must not become shackles – particularly when they are used as a politically expedient argument and when doing nothing will cost so much more.  

No, our objectives must be built on a vision of where Texas needs to go and what it must become.

We must engage in the discussion of how Texas maintains its role of national energy leader in a credible way that recognizes this opportunity is more than a simple win/lose equation. Let’s be open and candid.  Let’s drop the slanted nay-saying arguments of the past and let’s use history as guide for making progress, not for making excuses.   

I desperately hope we will rise to the occasion and engage in the discussion about the future not as advocates or adversaries looking for an immediate legislative win, but more as architects for intergenerational prosperity and success.  

We all need to remember – every day – that our mission of “reliability” will soon be far more complex than it is now.  Because in the 21st Century, we'll be asked to do far more than to simply keep everyone’s lights on, replace big equipment, send out the bills and deposit the checks that come back.

No, even now, “reliability” means doing the things we need to do so that we'll be just as prosperous in 20 years as we are now.

It means reliably maintaining our state's position as a world leader in energy and electricity.

It means reliably assuring your customers, your shareholders, and your fellow citizens that you’re truly ready for what’s coming.

And it means reliably considering the true costs of decisions, and taking a longer view.

Passing through this transition, government must be careful not to hamstring our industries with truly damaging or simply punitive requirements that make it too difficult to pursue innovations and investments.

But at the same time, all of our citizens – your customers, and my constituents – are demanding that we look beyond the next quarter or an annual report.  And I’m confident that by putting the public good first, the payoff – for companies, government, and everyday Texans – will be enormous.

We can't deny the value of renewable sources of fuel.  They are virtually infinite, and they cost nothing.

We can't deny that as we dither and delay, more jobs will leave, more discoveries will be made elsewhere, and the more companies and industries will take root far from Texas.

We can't deny that policies we've tried before, like the RPS, have worked – that they still offer examples to follow and legacies to embrace.

And we can't deny that doing nothing will not protect us – it will only make our inevitable course even harder and more expensive.  

This is the moment – right now – that your successors, your kids, and your grandchildren will look back on.  It must be a moment they’ll point to in praising you for taking the long view, making hard choices, and truly building for Texas’ future.

Again, this transition is upon us.  We get one chance to get it right.  Let’s go seize the future we all want.  And let’s make sure that no matter how much changes, Texas’ leadership never wavers.

I look forward to working with you and hope you will call on me.

Thank you.  God bless you, and God bless Texas.