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PUC Chair Testifies ERCOT $16B Power Crisis Charge Can’t Be Reversed Without Legislative Action, Can’t Explain Difference Between High NatGas Pricing and “Price Gouging”

PUC Chair Testifies ERCOT $16B Power Crisis Charge Can’t Be Reversed Without Legislative Action, Can’t Explain Difference Between High NatGas Pricing and “Price Gouging”

Communications were disasterously inadequate during the power crisis, though the emergency system worked; committee members agree that the system needs to be revamped

March 11, 2021 — Public Utility Commission of Texas (PUC) Chairman Arthur D’Andrea says he believes it would be a violation of law if he or the PUC retroactively “re-priced” the cost of electricity inflated during the Valentine’s Week power crisis to a level that has been estimated at $16 billion, though he might be able to do so with the backing of the Texas Legislature.

Speaking for more than an hour to the House State Affairs committee Thursday morning, Chair D’Andrea said the Independent Market Monitor (IMM), an outside group of economists that the PUC uses for financial monitoring, calculated a couple of weeks ago that during the power crisis three weeks ago the Electric Reliability Counsel of Texas (ERCOT) probably shouldn’t have charged that $16 billion to pay for electricity.

Mr. D’Andrea said he doesn’t believe ERCOT did anything wrong in this case.

Late in the testimony, Rep. Joe Deshotel drew an analogy between the emergency charging of extremely high prices by gas companies — even though such prices are part of the emergency system protocol — and raising the cost of gasoline to consumers during a natural disaster (commonly referred to as “price gouging”) and asked D’Andrea the difference — but D’Andrea answered “we don’t regulate oil and gas.”

“Then we’re looking at the wrong thing,” the representative said.

“I agree,” D’Andrea replied, “right now you’re looking at my box and I think you should be looking at their box,” likely referring to the RRC.

Rep. Deshotel then said, “Maybe you’re taking heat over something you had no control over;” committee members said they’re looking forward to hearing from power providers and the RRC.

Several committee members expressed frustration at the complexity of the crisis response system during the power crisis because consumers will end up paying the price.

ERCOT can routinely but significantly raise the price paid for electricity generation during emergencies; there is disagreement over whether ERCOT did the right thing by continuing to keep that price extremely high (up to $16 is the figure tossed out most recently) even though it appeared by Thursday February 18th that the crisis was over.

ERCOT kept the price extremely high at its $9,000 cap for an extra 32 hours, Thursday-Friday February 18th-19th), and the PUC oversees ERCOT.

But “re-pricing” has been done before; the question is whether ERCOT’s decision to keep prices high was a “error” — and D’Andrea said the ERCOT decision stuck to planned protocol and was not an error.

D’Andrea told the committee, however, that the IMM has since recalculated that amount at $3.2 billion, and he feels calling the charge an “error” is inaccurate.

“Our market broke down in a number of ways and we’re gonna fix it,” he said; “fighting about the money isn’t gonna fix things.”

“Re-pricing” or wiping out that $3.2 billion (or $16 billion) is the center of the controversy that is placing power providers that don’t generate electricity and have lost huge amounts of money against power providers that do generate electricity and made money from the re-pricing during the crisis.

Twenty-eight of 32 Texas senators, in a letter, have joined the governor and the lieutenant governor in calling for the PUC to reverse those charges no matter what they are because the excess charges are bringing financial hardships to electricity providers such as Brazos Electric Power Cooperative, a co-op that when faced with its share of the excess charges quickly filed for bankruptcy protection and Rayburn County Electric Co-operative.

Solving the problem would require refunds from natural gas companies.

D’Andrea said members of the Dallas Federal Reserve are worried about the possibility of re-pricing because of its possible effects on markets.

South Texas Electric Co-op (STEC), the “entire southern electric corridor of Texas,” would be hit extremely hard if pricing were changed, Austin Energy would be hit too — but the Lower Colorado River Authority would go bankrupt, D’Andrea said.

The LCRA said in a statement, however, that it did not say it would go bankrupt in this case.

The PUC chair told the committee that the markets have already settled, so money charged by ERCOT during the power crisis has already been distributed across the markets and would be a distressing disruption — that’s why Mr. D’Andrea has held back from repricing.