Public Utility Commission of Texas rejects $16 billion ERCOT charge correction

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Friday, March 5, 2021
Public Utility Commission rejects price lowering request
Members of the state's utility regulating board decided against granting requests to correct the pricing on Feb. 19.

HOUSTON, Texas (KTRK) -- The state's regulator of electric utilities rejected a proposal to reverse $16 billion in power pricing during the week of the winter storm that caused power outages across the state.

Potomac Economics, the independent market monitor for the Public Utility Commission of Texas, which oversees ERCOT, wrote in a letter to the Public Utility Commission that ERCOT kept market prices for power too high for nearly two more days after widespread outages ended late Feb. 17. It should have reset the prices the following day.

PUC chairman Arthur D'Andrea said the proposal would not accomplish what many people believed it would.

"It looks like 'Oh no, it's just money that generators got, and if you reverse it, it would go to the consumers,' but that's very simplistic, and that's not how it works," D'Andrea said. "There are a lot of consumers that could be hurt by repricing."

WATCH: ABC13 Data Analyst Keaton Fox explains what the commission's decision means

The Public Utility Commission of Texas decided Friday not to issue an order on price changes for electric generating companies during the winter storm.

ERCOT's decision to keep prices high, the market monitor described, resulted in $16 billion in additional costs to Texas power companies. The news of the overcharging was first reported by Bloomberg.

In Texas, wholesale power prices are determined by supply and demand - when demand is high, ERCOT allows prices to go up. The grid operator let prices hit the $9,000 per megawatt-hour maximum during the storm, which is supposed to incentivize power generators in the state to add power to the grid. Companies then buy power from the wholesale market to deliver to consumers, which they are contractually obligated to do.

WATCH: Power grid was 4 minutes from catastrophic failure, ERCOT says

The state was dangerously close to a long-term outage that would have left millions of Texans in the dark, for not days, but weeks. In the video, ABC13 data analyst Keaton Fox is making it easier for you to understand exactly what happened when Texas entered the "danger zone" during the start of the winter storm.

Because ERCOT failed to bring prices back down on time, companies had to buy power in the market at inflated prices.

The error will likely result in higher levels of defaults, wrote Carrie Bivens, a vice president of Potomac Economics, the firm that monitors the grid operator. She said the PUC should direct ERCOT to remove the pricing intervention that occurred after outages ended, and allowing them to remain would result in "substantial and unjustified" economic harm.

WHAT IS ERCOT? There might be some misunderstanding behind the leaders behind Texas' electric grid. In the video, get a basic understanding of what this group does and why it was formed.

Retail power providers have been in financial distress across Texas since the storm, as many were forced to buy power on the wholesale market at extremely high prices.

Several complained in filings to regulators that generators of electricity, which were unable to produce enough power during the storm, profited and left retail companies scrambling.

"The ERCOT market was not designed to deal with an emergency of this scale," wrote Patrick Woodson, CEO of ATG Clean Energy Holdings, a retail power provider based in Austin, to the Public Utility Commission. The pricing failure, he wrote, "has pushed the entire market to the brink of collapse."

Bivens wrote that while she recognizes that retroactively revising the prices is "not ideal," correcting the error will reflect the accurate supply and demand for power during the period after the outages.

The recommendation "will not result [in] any revenue shortfalls for ERCOT's generation as the corrected prices will cover the generator's as-offered costs," she wrote. "We recognize that revising the prices retroactively is not ideal."

The Texas Tribune contributed to this report.

The Texas Tribune is a nonprofit, nonpartisan media organization that informs Texans - and engages with them - about public policy, politics, government and statewide issues.


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