$16B error? Watchdog, ERCOT pitch power grid changes

Source: By Edward Klump, E&E News reporter • Posted: Sunday, March 7, 2021

Texas’ power crisis has no shortage of eye-popping numbers, and yesterday brought another one: $16 billion.

That’s how much was charged incorrectly as extreme winter weather last month threw Texas electricity prices into turmoil, according to an independent market monitor. Potomac Economics said the Electric Reliability Council of Texas shouldn’t have held prices at an inflated level during Feb. 18 and part of Feb. 19.

The watchdog now says it wants ERCOT to recalculate wholesale electricity prices on those days.

“We recognize that revising the prices retroactively is not ideal,” Carrie Bivens, the monitor’s director for the ERCOT region, said in a letter to Texas regulators. But she argued that “the prices are inconsistent with ERCOT’s protocols” and a commission order, and that “allowing them to remain will result in substantial and unjustified economic harm.”

Bloomberg News quoted Bivens as saying the pricing correction could save Texas end customers about $1.5 billion that otherwise could be passed to them by power providers.

The pricing matter is the latest hot-button item for members of the Public Utility Commission of Texas to consider. The PUC is scheduled to meet today after making some market adjustments on Wednesday (Energywire, March 4). Key disputes in the market involve power prices that went to a cap of $9,000 per megawatt-hour during much of the power crisis, as well as some ancillary services prices that went even higher.

The financial fallout will have major implications for companies across the Texas electricity sector. Wholesale power prices in ERCOT’s region are often in the tens of dollars per MWh. Generators that reaped high electricity prices or had to buy replacement power at a premium also may have had to contend with a huge leap in the price of natural gas during the crisis. Gas fuels a lot of the power mix in Texas.

ERCOT didn’t provide a comment on the monitor’s letter by press time.

Filings in a PUC docket on the winter storm revealed diverging views on how to respond to the crisis.

In a statement last night, Rayburn Country Electric Cooperative Inc. said it filed a petition with the PUC asking it to order ERCOT to protect Texas consumers “by suspending invoicing, billing and collection of charges related to February’s massive energy market failure.” The cooperative called for giving the executive and legislative branches in Texas time to investigate and address issues.

“Now, based on the Independent Market Monitor’s letter, we can see that ERCOT may have overcharged market participants by $16 billion,” David Naylor, Rayburn’s president and CEO, said in a statement. “Unless ERCOT works with Rayburn and [other] market participants, millions of Texans will suffer and hundreds of Texas businesses could fail.”

Calpine Corp., which has power generation and retail businesses in Texas, said retroactive repricing by the PUC would “lead to mismatches that create huge losses for participants who entered into hedging transactions in reliance on the existing market rules and real-time instructions” from the grid operator.

“To reverse ERCOT’s prior determinations, as well as the rules underlying those determinations, and retroactively reset the market prices, would create uncertainty in the market and harm those market participants that took prudent actions to protect themselves,” Calpine said in a filing.

But in another filing with the PUC, the Coalition of Competitive Retail Electric Providers urged the regulator to reprice day-ahead ancillary services clearing prices and cap them at $9,000 per MWh for Feb. 15-20.

Vistra Corp., whose business includes Texas power generation and retail operations, told the PUC it “strongly advises against” ordering ERCOT to cap ancillary services at that level.

“The Commission should consider opening a Project to address repricing issues for the February 2021 Winter Weather Event holistically, giving all affected market participants the chance to be heard,” Vistra said in its filing.

ERCOT priorities

Meanwhile, ERCOT outlined a list of eight priority areas for potential change going forward — from dealing with extreme weather scenarios to coordinating with the gas sector, according to a letter this week.

It was addressed to leaders of ERCOT’s Technical Advisory Committee and signed by ERCOT President and CEO Bill Magness, who’s preparing to exit after ERCOT’s board of directors recently announced his termination and gave him 60 days’ notice.

ERCOT framed its list as a starting point of ideas to examine through data analysis, discussion of technical options or market rule changes.

“We know there are concurrent efforts at the Legislature and Commission in response to the winter storm events, and we must defer to those efforts, and also prepare to implement directions provided on these or other issues,” Magness said in the letter.

ERCOT led off its priority list by suggesting coordination with wires companies to understand limitations around rotating outages. The grid operator has said the size of its request to shed load last month meant that some utilities weren’t able to rotate outages as expected while also protecting critical infrastructure like hospitals.

ERCOT also suggested working with government and private entities to bolster emergency public safety communications. And it said there should be more coordination through the Texas Energy Reliability Council and ERCOT’s Gas Electric Working Group to identify critical gas facilities so as to avoid disconnections during emergency events.

In terms of extreme peak load and generation outage scenarios, ERCOT called for analyzing “a greater range of potential risks for extreme weather events and their impacts” on the grid.

Some other ideas were technical in nature, including possible changes to ERCOT’s outage scheduler to make sure there’s more specific and accurate information.

As Texas tries to sort through issues, several Democratic members with the House Energy and Commerce Committee in Washington sent a letter to Magness to ask for information about ERCOT’s preparation and response to the winter event. The members, who included Chairman Frank Pallone (D-N.J.) and Rep. Lizzie Fletcher (D-Texas), also asked for a briefing for committee staff.

“The ongoing crisis raises significant questions regarding Texas’ grid resilience and regulatory regime, and ERCOT’s stewardship of the grid prior to and during this crisis,” the five lawmakers said in the letter.

Reporter Lesley Clark contributed.