State regulators don’t back $16B fix

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

Texas regulators chose not to revise wholesale prices in the state’s main power region despite a market monitor’s report that a power crisis last month led to $16 billion in excessive charges.

Arthur D’Andrea, chairman of the Public Utility Commission of Texas, said parties made decisions about prices in real time based on information available to all market participants.

“They did all sorts of things that they wouldn’t have done if the prices were different,” D’Andrea said during a meeting today, adding that it’s “nearly impossible to unscramble this sort of egg.”

The discussion was closely watched by companies that operate in the region managed by the Electric Reliability Council of Texas. Potomac Economics, which acts as an independent market monitor for ERCOT’s wholesale markets, said in a letter this week that prices were kept at an inflated level for too long for part of February. Brazos Electric Power Cooperative Inc. recently filed for Chapter 11 bankruptcy, and more upheaval could be on the way.

Bloomberg News quoted Carrie Bivens, independent market monitor director for the ERCOT region, this week as saying the pricing correction could save end customers about $1.5 billion that otherwise could be passed to them by power providers (Energywire, March 5).

Observers fear that a number of companies could fail in the Texas electricity sector after power and natural gas price spikes during the February cold snap, which led to controlled power outages as enough generation wasn’t available to keep up with demand.

Key disputes in the market involve wholesale 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.

In a letter to D’Andrea this week, Texas state Sen. Drew Springer (R) said revising prices “would mean significant savings for a number of commercial/industrial customers, municipals, and cooperatives who are facing extremely high costs.” But Calpine Corp., a power producer and retailer, argued in a filing this week with the PUC that retroactively resetting prices would create uncertainty and harm some market participants.

D’Andrea and Commissioner Shelly Botkin, the two current members of the PUC, acknowledged that comments came in on both sides of the issue. While D’Andrea suggested some results of repricing would be unknowable, he said many consumers could be hurt by it because of transactions outside the market.

“On the surface, it looks like, ‘Oh no, it’s just money that generators got. And if you reverse it, it will go to the consumers,'” he said. “But that is very simplistic, and it’s not how it works.”

ERCOT declined to comment on the PUC’s moves today.

Also today, the PUC clarified wording related to its recent move to claw back ERCOT payments to generators that didn’t deliver a special category of reserves, called ancillary services, during the recent crisis.

The PUC may continue to discuss market and repricing issues at future meetings. The commissioners could, for example, examine potential revisions of clearing prices related to certain ancillary services during the power crisis. Ancillary services are power reserves contracted in advance to help support energy transmission, according to the PUC.