ERCOT overcharged electricity in Texas for $ 16 billion during the freeze

The Texas Electric Reliability Council made a $ 16 billion mistake in pricing during the winter storm week that caused power outages across the state, according to a document submitted by its market monitor.

Potomac Economics, the independent market monitor for the Texas Public Utilities Commission, which oversees ERCOT, wrote in a letter to the Public Utility Commission that ERCOT kept energy market prices too high for nearly two days after the widespread falls ended on the night of February. 17. I should have reset the prices the next day.

This decision to keep prices high, according to the market monitor, resulted in additional costs of $ 16 billion for Texas power companies. Bloomberg first reported the news of the overload.

Some of the suppliers charged during the high pricing period could pass on the costs to customers, depending on the type of contract they had, according to Detlef Hallermann, director of the Reliant Energy Trade Center at Texas A&M University.

In Texas, wholesale energy prices are determined by supply and demand: when demand is high, ERCOT allows prices to rise. During the storm, PUC ordered the network operator to set wholesale energy prices at $ 9,000 per megawatt hour, the maximum price. The price hike aims to encourage power generators in the state to add more power to the grid. Companies buy electricity from the wholesale market to deliver it to consumers, which they are contractually obliged to do.

Because ERCOT failed to reduce prices on time, companies had to buy energy on the market at inflated prices.

The mistake is likely to lead to higher levels of defaults, wrote Carrie Bivens, vice president of Potomac Economics, the company that controls the network operator. He said the PUC should direct ERCOT to withdraw the price interventions that occurred after the interruptions ended and allowing them to remain would cause “substantial and unjustified” economic damage.

At least $ 1.5 billion could be transferred to retail electricity suppliers and their customers. Some retail suppliers have already started filing for bankruptcy.

“They will suffer more,” Hallermann said.

Retail energy suppliers have suffered financial problems across Texas since the storm; many were forced to buy energy on the wholesale market at extremely high prices.

Brazos Electric Power Cooperative Inc., Texas’ largest electric cooperative, has already applied for bankruptcy protection after incurring $ 2.1 billion in combined charges to ERCOT, according to court documents filed Monday.

Many retail energy suppliers complained in statements to regulators that electricity generators, which were unable to produce enough energy during the storm, took advantage and left retail businesses to waste.

“The ERCOT market was not designed to deal with an emergency of this scale,” wrote Patrick Woodson, CEO of ATG Clean Energy Holdings, an Austin-based retail energy provider, to the Public Utility Commission. The failure of prices, he wrote, “has pushed the whole market to the brink of collapse.”

Bivens wrote that while he acknowledges that the retroactive revision of prices “is not ideal,” correcting the error will reflect the exact supply and demand of energy during the post-outage period.

Cathy Webking, of the Texas Energy Marketing Association, told lawmakers during a meeting of the Texas Senate Committee on Business and Commerce that prices should be restored to market value. .

“It simply came to our notice then. Immediate action is required, “Webking said.

An ERCOT spokesman declined to comment on the matter.

Kenan Ogelman, ERCC’s vice president of business operations, who testified during a Texas Senate committee hearing Thursday, was not asked by state senators for the $ 16 billion ERCC error. Senator Kelly Hancock of R-North Richland Hills, who chairs the business and trade committee, did not say what action he or other senators would take on the various effects of the winter storm.

“There are financial problems (so to speak) that we need to address,” Hancock said.

Reese Oxner and Shannon Najmabadi contributed to this report.