Introduction
For most Texans, Valentine’s Day in 2021 was far from a romantic ideal. Winter Storm Uri pummeled the state with record-setting ice and snowfall, which triggered cascading failures for the state’s insufficiently weatherized electric grid.
Roughly 70% of Texans were without power for an average of forty-two hours.
Winter Storm Uri is believed to be responsible for 246 deaths
and $130 billion in economic loss.
While Texas has experienced at least three other severe freezes in the last thirty years, Winter Storm Uri’s devastation was unparalleled,
and many attribute the storm’s impact to a confluence of magnified climate risk and inadequate grid adaptation.
A similar tale looms over Puerto Rico and its experience with Hurricane Maria in 2017. The Category 4 storm
was responsible for an estimated 4,645 deaths
and the longest blackout in U.S. history.
It took eleven months and $3.2 billion for the island’s only electric utility—bankrupted as a result of the storm—to restore power.
Puerto Rico is no stranger to hurricanes, but many climatologists hypothesize that climate change likely enhanced Hurricane Maria’s ferocity and also has the potential to make similar storms about ten times more likely to occur in the future.
Winter Storm Uri and Hurricane Maria are only two of several recent examples where climate change has exposed just how vulnerable the electric grid is to extreme weather. Since many climate experts anticipate that these types of weather events will occur with increased regularity and intensity going forward, it is imperative that utilities identify why the grid is particularly susceptible to climate impacts.
The most likely answer lies in the fact that the grid—which consists of exposed hardware across large swaths of territory—has been built to withstand historical climate conditions, which, because of climate change, no longer track current or projected future conditions.
Accordingly, if the grid is to withstand the climate crisis, then utilities “must fundamentally rethink their approach.”
Despite the urgent need to act, however, utilities have largely failed to proactively engage in serious climate adaptation.
The industry is plagued by a “climate resilience gap,” whereby a significant and growing divergence exists between the current level of protection afforded to critical grid infrastructure and the degree of protection needed to withstand the climate crisis.
Utilities, however, are not solely to blame: Their supervising regulatory bodies have also largely failed to prioritize resilience.
In the United States, utilities are regulated by federal, state, and local entities, with state Public Service Commissions (PSCs)
typically exerting the closest degree of oversight.
These state commissions review and must ultimately approve some of the critical elements of a utility’s business, ranging from rates and service terms, to capital projects and resource strategies.
When conducting these duties, a PSC typically considers whether a utility’s business plan complies with principles of (1) prudence, (2) least-cost, and (3) used and useful.
Together, these three ratemaking components require the utility to make reasonable efforts to meet energy demand by providing reliable service to customers at the lowest possible cost.
A critical failure, however, stems from the fact that PSCs, despite their influence over utility behavior, have not updated the ratemaking principles to reflect the new climate reality. As a result, PSCs have continued to validate utilities’ use of historic climate data in the infrastructure design process, even though such data is an increasingly unreliable predictor of future weather patterns.
Thus, by applying prudence, least-cost, and used and useful in a manner that does not incorporate observable shifts in baseline weather patterns, PSCs have largely failed to introduce climate resilience into the ratemaking process.
To combat this problem and compel climate resilience, this Note offers an original proposal advocating for the injection of an explicit, forward-looking mechanism into the utility regulatory regime. To provide this prospective focus, this Note looks to other areas of the law before ultimately pinpointing tort’s foreseeability principle. In tort law, foreseeability is the standard by which liability attaches to a defendant: An actor, owing a duty of care to another, is negligent if he knew or should have known of certain foreseeable risks but nonetheless fails to take reasonable precautions.
Mapping this construct onto utility ratemaking, foreseeability will apply a prospective valence over prudence, least-cost, and used and useful to require utilities to study future climate risks and take necessary precautions ex ante to avoid environmental harms ex post. Thus, relative to the existing scholarship in this area which tends to treat regulatory and tort law as separate, siloed legal channels, this Note instead emphasizes that the two disciplines should commingle in order to catalyze forward-looking resilience planning across the utility sector.
This Note proceeds in three parts. Part I contextualizes the climate crisis as it relates to electric utilities and provides an overview of resilience and utility regulation. Part II unpacks the core problem this Note seeks to address, namely, that utility and regulatory inaction has generated a resilience gap that exposes the electric grid to foreseeable climate risks. Part III offers a solution, suggesting that tort’s foreseeability principle can be woven into utility ratemaking as a legal mechanism capable of compelling forward-looking climate planning.