Planet Money - The Midnight Connection

Episode Date: September 21, 2022

Texas's energy grid is largely disconnected from the rest of the U.S. That led to disastrous consequences last year when the state's grid was overloaded during a winter storm. Back in the 1970s, one company attempted to change the system in a secret, middle-of-the-night operation. Subscribe to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoneyLearn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. February of 2021 was brutal for the state of Texas. There were ice storms, single-digit temperatures, power lines got knocked down all over the place. And, Mos Buchel, you are KUT's energy and climate correspondent based in Austin, which is where you were when the first snowflakes started falling. What was it like on the ground? It was surreal. It was Valentine's Day, and it was just freezing cold. Here in Houston and Southeast Texas, tonight it's record cold.

Teens, single digits. Temperatures at 18 degrees here in Corpus Christi. Temperature in Dallas already colder than in Anchorage, Alaska. At first it was kind of exciting. You know, you never see snow like that in Austin. But there was also this sense of foreboding. Like everyone who knows about the Texas energy system knows that this could cause some serious problems. And it got scary pretty quick. Good evening and thank you for joining us.

We're going to begin with breaking news tonight on the severe weather disaster. For the first time in Texas, all 254 counties are under a winter storm warning. And the storm was just the beginning. The real story was what happened to the power grid. So power plants start freezing up and breaking down right when everyone is turning up their heaters. And so this creates a huge imbalance on the state grid. And the state grid operators, they kind of face this dire choice. They have to cut power or risk frying the entire system.

And that is what they did. They cut power to millions of people. In parts of hard-hit Texas, snow is still falling. Thousands of Austinites have been left without power for almost two days now as temperatures have plummeted. And then pipes started to burst. So you have homes and buildings that are both flooding and freezing. Tap water was undrinkable for a lot of people. There are long lines for food, for gas, and even for plumbing supplies. It's worth remembering that hundreds of people ended up dying,

not just because it was cold, but because of everything else that broke down, that failed in this blackout. And one of the big reasons for all this mayhem is that the Texas power grid does not work the same as power grids in the rest of the country. Most states' grids are interconnected, so that the power utilities in one state are linked not just to each other, but to the power grids in neighboring states. If Texas were more like those other states, when the storm came, power companies would have been able to just pull in the extra power they needed from across the state line. Instead, ever since basically the early days of electrification, the state has gone its own way when it comes to power. Yeah. So what happened was that Texas utilities really decades and decades ago, they made this this kind of handshake deal where they all promised not to connect to grids outside of Texas because it would put them under federal jurisdiction. Texas companies, they wanted to

run their own power system without a lot of regulation and federal oversight. But that means that we are also largely on our own when these ice storms hit. And you and your colleagues have been looking into the backstory behind Texas's power grid for a new podcast. It's called The Disconnect, Power Politics and the Texas Blackout. So tell me what happened next. In the aftermath of the storm, a lot of people started thinking about the Texas grid and asking, why don't we just connect our power grid to the rest of the country? And it turned out that that had been tried before. While I was digging into this, I came across

this mysterious scheme back in the 1970s called the Midnight Connection. Ooh, yeah. That's catnip for reporters like you. Yeah, exactly. So what happened was a Texas utility basically tried to open up the state grid to sneakily link up its power lines across state lines in this tiny town called Vernon, Texas. And me and my co-reporter, Audrey McGlinchey, we decided to head out to Vernon to get to the bottom of it. Hello and welcome to Planet Money. I'm Alexi Horowitz-Ghazi.

And I'm Mos Buchel. The 2021 Texas blackout triggered the largest energy crisis in the state's history, leaving millions stranded for days without power and leading to hundreds of deaths. And it revealed just how vulnerable the state's power grid had become by going it alone. Today on the show, from our friends at the Texas Newsroom's podcast, The Disconnect, the story of the Midnight Connection. How, back in the 1970s, one utility company sent its workers out under cover of darkness to secretly connect the Texas power grid to the rest of America to end the state's energy isolation and why the rest of the Lone Star State's utility companies worked so hard to stop them. It's Planet Money. We're back. So, Mose, you are taking it from here. All right. So in order to follow the trail of this mysterious attempt to connect the Texas power grid across state lines,

this so-called midnight connection, my fellow KUT reporter Audrey McGlinchey and I decided we needed to take a little trip. We're coming to you live from the road. Live from my Honda Civic in North Texas. Where are we driving to, Audrey? We are driving to Vernon, Texas. Vernon is about 20 minutes from the Oklahoma border, but from where we are in Austin,

it's about six and a half hours by car. It was a long drive. I got nuts. I got my smoked almonds. I got my peanuts here. A really long drive. So I just finished a 7-Eleven brand pack of hard-boiled eggs. At one point, we had to make a stop in Dallas.

Hi there. Are you Mr. King? I am. My name is Audrey. I'm sorry to surprise you on am. My name is Audrey. I'm actually, I'm sorry to surprise you on today. My name is Audrey. We wanted to check in with someone who might know something about the midnight connection. All right, well, he is going to think about it. Okay. I got his card.

All right. That's better than to know. Yeah. Then we got back in the car to drive another three hours to Vernon. I think if people know Vernon for anything, it might be as the birthplace of Roy Orbison, according at least to the town website, right? A candy-colored clown they call a Sandman Tiptoes to my room every night

Just as pretty as stardust and a whisper Go to sleep, everything is alright I close my eyes And I drift away But we're not going to learn about Roy Orbison. The reason we're going to Vernon is because this is where, in 1976, a Texas utility company tried to connect the Texas grid to the rest of the country. Yeah, we had heard about this story when we started reporting on the grid,

but it never really gelled into a full story. We'd get little pieces from different people. We weren't quite sure what was true, what wasn't, but it went kind of like this. Okay, so I'll tell you the story. Now, this is my version of it. That was Brad Jones. He's the interim CEO of the Electric Reliability Council of Texas, ERCOT. They're the state's grid operator. And this is Beth Garza, an energy consultant. So the mid-70s, you have to remember, there was no state regulation of electricity in Texas. It was basically the Wild West. But there was a federal law that required utility companies to have their own individual power systems physically connected. So when they ordered these companies to interconnect in Texas, the Texans at that time realized if we interconnect across state lines, we're going to become federal

jurisdictional. We'd rather not. And so they all agreed together not to connect across state lines. But there was a problem. One company called Central and Southwest Corporation owned utilities outside of Texas. One of their facilities was in Oklahoma. Another was in Louisiana. So you can see the problem. In order to follow federal law, they have to connect across state lines. But by doing that,

they would be in violation of this Texas agreement not to cross the border. And to be clear, this wasn't an official agreement. This was like a gentleman's agreement, like a handshake deal. So they had these two utilities on either side of the border, and nobody really noticed for decades that they were breaking federal law.

Then one day somebody did. And so the federal Department of Justice said, hey, this is a problem. Why shouldn't we force you to divest? They realized they had to do something. By not being connected across state lines, they were breaking one federal law. But if they connect, they break the Texas Handshake Agreement and put the whole state under federal jurisdiction. And their answer was to connect across the Red River into Oklahoma. They called it the Midnight Connection.

Basically, the Midnight Connection was they threw a line over the red river to connect their companies they just kind of threw a line across the red river i mean literally overnight they connected two substations one substation on the texas side to another substation on the oklahoma side yeah so you can imagine these guys you know maybe they're wearing ski masks they're they're dressed in all black they're hunched over as to not be seen. They're, I don't know, holding flashlights and whispering and they're sneaking around under the darkness of night to secretly throw this huge switch to make the connection. Yeah, I'm like picturing super stealthy James Bond types. Certainly, transmission line crews are not small, quiet men. I'm sure there was

profanity involved. So they connect these two substations and suddenly the Texas power grid is connected to the power grid in another state. But the problem was all the other companies realized what had happened because there was basically a blip in the frequency. So everyone else knew something had happened, but they didn't know what. And remember, they all agreed together not to connect across state lines because they didn't want the feds to regulate. So now the other companies knew something was up and they began to send out crews to try to figure out where this had happened, where somebody had made this change. And of course, they figure it out. And?

Well, everyone threw lawyers at each other. Lots of paper went around up in D.C. Lots of paper went around. You had court cases with the other utilities in Texas saying, hey, I don't want to be subject to federal jurisdiction. Because the Midnight Connection didn't just mean that Central and Southwest Corporation was connected across state lines. Technically, it meant everyone in Texas connected to Central and Southwest was now also connected to Oklahoma. And so this idea that the feds could somehow come in and tell them how they were going

to do their system or what their rates would be or anything was completely abhorrent. And they took significant action to prevent that from happening. And that significant action was to disconnect their systems from Central Southwest companies. And the Texas grid started to pull itself apart. So imagine all the utilities in Texas are connected to each other, and then they're connected to this one utility in North Texas. So by default, they're all connected now with the national grid. So all of the other companies in Texas separated from that company. Suddenly there might be an electron coming from Oklahoma,

somehow making its way down into the state of Texas. They cannot have that. They start dismembering the Texas grid to avoid this contagion because it could mean federal oversight. And some of them even separated from each other. And remember, this is not a good thing for the grid. Yeah, it's better to have more resources, more utilities linked together to pull energy from in case it's needed somewhere else. But suddenly in the aftermath of this thing, these Texas utilities are breaking apart. Suddenly you're dealing with even smaller little like mini grids right in the state of Texas that was already itself an energy island.

And that's not great. But you have to remember, this version of the story is just what we managed to piece together. There was really one journal article we found from the 1990s, plus people like Beth and Brad, people who work in the electricity business but weren't around when the Connection actually happened. So we weren't quite sure what to believe. That's why we were going to Vernon, the place where the Midnight Connection all went down. So it's almost 2.30 p.m. and we are entering the town of Vernon, Texas. So we arrive in Vernon and start asking people about the Midnight Connection. I asked Marty Mangum, the Vernon city manager. Had you heard about this connection back in 76

before we got here? No, actually, I've lived in Texas all my life, but I wasn't aware of it. All right, so we tried someone else. This is Dustin Fraticelli, a city commissioner. I have not heard of that until Moze had contacted us and sent us a couple articles. And we kind of became a little bit interested to see how that all happened, especially after the last year's events in February. You know how in every little town there's at least one guy who's the local history nut?

We went to him. Nothing. We even asked random people. No dice. We brought this to the local librarian. Some people that ran like a local power company connected a transmission line across the state border. And it kind of set off this big legal battle. But I think it's kind of been forgotten. Does that ring a bell with you at all? Oh, no.

So we stuck around the library to look at archives from the Vernon Daily Record, the local newspaper. Watergate tape surface. Nice. Mother charged an attack on stores' nudity books. A mother of three small children has torn up 29 copies of nudity magazines. This is nice. Sheepherder enjoys solitude of life. What was on TV?

Brady Bunch. Oh, wow. A local woman was named Texas Poet Laureate. What an honor for the town. So we didn't find much, nothing about the actual event, but we did find a couple articles about the legal battle that ensued. But nothing about the moment that a Texas utility sent power from Vernon into Oklahoma and blew up the whole Texas grid. Yeah, we felt a little defeated at this point. You know, we had just spent hours leaning over old newspaper articles in this library.

My back was hurting. My fingers were sore from leafing through papers. Yeah, so, you know, we went back to the hotel. We had a few beers. Not feeling great about the way the day had gone, but start thinking about tomorrow. You know, maybe something's going to come up. We went back to our rooms, got ready for bed, and then Moe's texted me,

turn on the weather. This is a very dangerous storm that's passing just south of the crawl at this point. There were a couple tornadoes touching down around Vernon. People all got together in the lobby of the hotel. From there, we could hear the tornado sirens in the distance. Is that the sirens? Oh, yeah, the sirens.

There were these huge hail balls coming down pretty hard. Wind and thunder. It was a serious tornado. Nobody died, but there were buildings destroyed and damaged. All right, so let's review. Mose and I had driven halfway across the state to report a story in a town where no one's even heard of this story.

And now we were sheltering from a tornado in a f***ing Holiday Inn Express. We started to wonder, why the f*** were we even here? Audrey, good morning. It's Holman King. I woke up the next morning to a voicemail. I wanted to visit with you a little bit about our interview,

so please give me a call. Look forward to hearing from you. Hope you're having a good day. After the break, we hear from one of the people at the center of the Midnight Connection and about how those electrical cables across the Red River sparked a legal fight that went on for years. a legal fight that went on for years. stories, the first thing we do when we start working on a new episode. It is another edition of our behind-the-scenes segment, Five Firsts. That's out Monday. Subscribe to hear it at the link in our episode notes. Remember how I said I stopped at someone's house in Dallas on the way to Vernon? That was the house of Holman King. He was the vice president of the power company that did the Midnight Connection. He was part of the whole thing,

and he was going to talk to us. Ramos and I jumped in the car and drove the three hours back to Dallas. Hi, Holman. Nice to see you. You look like you're equipped for something. I know. While reporting the story, I tried to get a hold of the court documents from the legal battle that ensued when Holman's company sent power from Texas into Oklahoma. I had very little luck. Turns out the case file and all of the documents had been destroyed in 2012. And you said you found my deposition? A federal courthouse in Houston was able to send me a list of people who had been deposed. A lot of people listed had really common names like A.J. Wood and D.W. Word.

Following the very strict rules of journalism, I picked the more unusual names and put those into the Internet. Names like G. Holman King. My name is Holman King, that I go by G.H. King or Gene Holman King to be technically correct. Holman's seated on a big leather couch, an Aggie pillow next to him, and wall-to-wall bookshelves behind him. He's 89 years old. He grew up in Abilene, and he was really raised in the electricity business. His dad worked for a utility in the very early days of electrification, and he went on to study electrical engineering at Texas A&M. In the 60s, Holman started working

for a company called West Texas Utilities. It's a subsidiary of Central and Southwest Corporation, and these are all names you're going to hear a little bit more about in the story. They own basically four operating companies, Central Power and Light Company in Corpus Christi, West Texas Utilities Company in Abilene, Public Service Company of Oklahoma in Tulsa, and Southwestern Electric Power Company in Shreveport. So they were strung out across several states, these power companies all under one roof or one holding company. And this is precisely what threatened the company. It was running afoul of federal law.

A group of electric cooperatives that were confronted with a rate increase from Public Service Company of Oklahoma filed a lawsuit that challenged whether or not Central and Southwest was truly an integrated company. To integrate would mean to link up these different utilities even across state borders. But remember, there was this informal agreement among utilities in Texas that they wouldn't put themselves under more federal oversight by crossing state lines. West Texas Utilities and Central and Southwest Corporation decided to break that agreement.

They would interconnect, sending power between utilities in Texas and Oklahoma. The electric range war, or the midnight raid, if you want to call it that, or the midnight connection. He and his colleagues called it Cuatro de Mayo because that's the day it happened. It was a legal strategy that was set up to demonstrate that interstate service would have no effect on the electric operation in Texas. The first thing we wanted to ask Coleman was, what was this like? You know, we had heard this dramatic story of how the midnight connection went down. The way that the story was first introduced to us, it was kind of like a crew of like special operatives sneaking, you know, like a big extension cord across across the Red River, you know, like and like in the darkness, like all clad in black with like, you know, balaclavas, a ski mask on. And they're like, you know, like that was the kind of like the myth, I guess, that's

like kind of. Sure, that's the characterization that the isolationists put on it. They viewed it as a very emotional thing. Incidentally. He says it probably did happen around midnight. The crews came in and did that work. Sure, it was a provocation, but like Holman said, it was also part of a legal strategy to protect their business. At the time, I was in Chicago signing papers that would be filed at the Federal Power Commission. I kept trying to get

Holman to tell us how he felt about this whole thing. Was he scared, nervous, excited, sitting there waiting to sign papers saying, hey, we did this thing. But he says he sees interconnection as an entirely rational decision, not an emotional one. I don't guess I had any particular feelings one way or the other about it. It was something that had come to a head and was going to happen. Yeah, you know, he's an engineer. He says interconnection makes the most sense just to ensure that people have reliable power. What's clear is that for him, this became about more than just protecting their business from being split up. It was a war to make a better power grid for people living in Texas. to make a better power grid for people living in Texas.

We felt like we had a good position, a good public interest position, to pursue and to carry this out, to achieve those savings for our customers. So anyway, there were court cases all over the place, Texas, D.C., but what Holman remembers the most is the fight at the state's public utility commission. And remember, the PUC was like basically a year old when this happened.

It was a baby state agency. They were new. They'd had a hot potato dropped in their lap that they really didn't want or really didn't know what to do with. And Holman remembers these hearings got super heated, like lots of emotions involved. As the hearings opened, there was an awful lot of name calling by the attorneys. Do you remember any of the names you recall? Oh, I won't repeat them. They were not cuss words.

They were talking about pirates and hostages and things of that sort. I was talking to this guy who said he had read some of the testimony. I think he said he had read this in the court testimony. You know, there may be business reasons to keep the grid isolated. There might have been regulatory reasons. But also just like the sense of like Texas independence. And what this guy told me is he said at one point he heard someone from another utility say, like, essentially, I'll be damned if I'm going to send my power up to the Yankees up there. Yeah, that's I think that's a huge part of the the mindset that drives the isolation.

The mindset that drives the isolation. Because, you see, this wasn't just about business for the other side either, the other power utilities and state regulators. As we were reporting this story, we heard another name for the Midnight Connection, the second battle of the Alamo. They were fighting for Texas independence. This went way beyond energy policy, even beyond making money. It went to something that was crucial to people's identity as Texans. I mean, think about it. These utilities started pulling apart from each other. They were willing to risk the Texas grid, its reliability, just to keep it in Texas hands. These are the people that Holman refers to as isolationists. I simply don't understand and am unpersuaded that there is a benefit

other than Texas boosterism for maintaining isolation. So this legal battle drags on. And even though Holman's confident they're on the right side, they keep losing. Judges and regulators keep ruling against them. Yeah, when you read the articles at the time, you get the sense that they always think they're going to prevail, that they're going to win in the end, because what they've done just makes sense. Interconnection is the right policy. And so they're basically just like, guys, we got to catch up with the rest of the country. Just wake up and accept it.

When you stop and look at it, it is the right way to operate the electric system. Courts and state regulators didn't think so. The Public Utility Commission ordered West Texas Utilities to cut off the line from Oklahoma. And a year after the midnight connection, they did cut it off. Two years later, a judge ruled against them. It is hereby ordered that plaintiffs shall take nothing by their claims against the defendants in this case. And those claims are hereby dismissed with prejudice. The ruling codified the Texas independent power grid.

It wasn't just a deal between power companies anymore. It was on the books. The isolationists, as Holman called them, had won. All costs are taxed against the plaintiffs. It is so ordered. Something else came out of this battle. When West Texas Utilities was told to stop sending power into Oklahoma and to take down the Midnight Connection, a compromise was made. It said the utilities could create a very limited system of connections to other state grids.

There are now four of them, including one outside Vernon, where the Midnight Connection happened. These are different from that big interconnection that Holman was fighting for. These are what they call DC ties that can be cut easily and don't allow nearly as much power to flow. Holman calls them anemic. The DC ties are not a sufficient solution. The court order that kept Texas an energy island was signed in 1979. And for decades, nobody outside the world of electric companies really thought much about it. Then, a little over 40 years later.

Early Monday morning at 2 a.m., our power went out. We're going on about 30 hours or more. Over 100 hours. It was a while before I realized it was often going to stay up. I'm so f***ing heated, y'all. Greg Abbott, what the f*** are you going to do about this power grid? Really? 2021? No f***ing power? As millions of people in Texas sat in the cold last year, Holman was at home. He was actually one of the lucky ones who kept power. But the whole time he was thinking, man, this maybe could have been avoided. This blackout might have been different if we could have brought more power in

from other states. And he sat down and he started writing letters to state lawmakers. Dear Speaker Phelan, as a now retired engineer and vice president who worked on Texas grid reliability early during my 35-year career in the electric utility industry, I have read your public comments with great interest. When I imagine Holman sitting at his desk typing out these letters, referencing in them the Midnight Connection, something he had a direct hand in more than 40 years ago, it's clear he still has hope that one day the Texas grid will connect to another grid, that Texas will build a bridge to its energy island. In 1976, Central and Southwest Corporation sought to interconnect

the Texas grid with the eastern U.S. grid. He says he got a couple of responses. I think probably most of the people that got those said, well, here's some old fogey from somewhere and threw them in the trash. Thank you for your consideration. Sincerely, G.H. King. You know, most of those guys are gone now on both sides. But I think that our side, I don't think that we've ever given up hope that eventually right will be done. Only in you In you

For you After our interview, Holman sent me some coordinates. The location where one of those D.C. ties, that compromise that came out of the legal fight over the Midnight Connection, still links the Texas grid across state lines. So, Mose and I went there. So, Audrey. So what? Here we are.

Here we are. Pretty exciting. The place is not that far from where power flowed from Texas to Oklahoma in 1976. You can actually hear the electricity and the power lines above me. Here, listen. Since the blackout, there's been a lot of interest in making more of these smaller connections. There's one proposal right now. it's called the Southern Cross, that would go over the Louisiana border. But Texas regulators and a lot of other people in the world of Texas energy still oppose more closely knitting the Texas grid to the rest of the world,

that kind of bigger link that Holman and others fought for. Those opponents argue the risk of greater oversight, the potential loss of control, outweighs any benefits. But things can change. That's really clear standing in this field. It's not just that the interstate connection is here. If you're trying to create a scene that sums up the energy landscape in Texas right now, you couldn't write anything better than this. We were standing next to a defunct coal plant that was now surrounded by what I remember to be like hundreds of wind turbines. It almost feels a little bit too on the nose. And right above us,

that little line moving power between Texas and the rest of the country, trying to meet the demand of a growing state. It was built, like so many things we've reported on, as a kind of band-aid, a solution to a business problem that avoided addressing the bigger questions. Questions like linking our grid with the rest of the country. How do we make sure hundreds of people don't die in a blackout? How do we manage the transition from fossil fuel to renewables?

How to deal with the realities of climate change? And standing in that field with an old abandoned coal plant behind us and in front of us, all this new energy technology, it was easy to see things Holman's way. Like the bigger changes are just... inevitable.

That's Audrey McGlinchey, along with Mose Buchel, of the Texas Newsroom's podcast, The Disconnect. You can find it wherever you get your podcasts. Do you have any questions about the economy right now or anything about business or how money works? Let us know. We'd love to look into some of them. You can email us at planetmoney at npr.org. And we are on all the socials media at Planet Money.

This episode of The Disconnect was produced by Audrey McGlinchey, Andrew Weber, Jimmy Moss, and Moe's Buchel, and Matt Largy edited. Planet Money's acting executive producer is Jess Jang. I'm Alexi Horowitz-Ghazi. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.