Texas regulators will not correct $16 billion in electricity ‘overcharges.’ Why?



Haley Samsel
Fri, March 5, 2021, 12:54 PM·3 min read

At its Friday meeting, the Public Utility Commission of Texas declined to adjust prices that resulted in $16 billion in overcharges to the electricity market during the February winter storm. Those charges were documented in a Thursday letter from the commission’s independent market monitor, Potomac Economics.

The governor-appointed regulatory commission, which oversees the Electric Reliability Council of Texas, met with just two members after the resignation of chairperson DeAnn Walker. Commissioners Arthur D’Andrea and Shelly Botkin addressed the Potomac report, which found that ERCOT kept electricity prices too high for at least 33 hours after most outages ended on late Feb. 17.

D’Andrea, now serving as chair, said repricing was “dangerous” because it could potentially cause new problems for customers and electricity providers who made a series of complex, private transactions outside of the official power market.

“It’s nearly impossible to unscramble this sort of egg, and the results of going down this path are unknowable,” D’Andrea said. “We’ve already set a path, we know who is hurt by that and we can focus on helping the people that were hurt instead of throwing everything up into the air again, creating another huge mess, and then a month from now we’ll have a different set of people who are hurt and we have to focus on helping them.”

At the instruction of the commission, ERCOT raised real-time prices to the maximum limit of $9,000 per megawatt hour on Feb. 15, a more than 10,000% increase from the week before. The decision reflected the scarcity of electricity amid an unprecedented statewide demand for heat, and aimed to incentivize electricity generation at a time of desperate need.

In her letter to the commission, Potomac Economics vice president Carrie Bivens wrote that these pricing interventions will result in higher levels of defaults for electricity providers if not corrected. While the firm agreed with the commission’s original decision to raise prices, the increase lasted for too long and could cause “substantial and unjustified economic harm,” she wrote.

Adopting Potomac’s recommendation would not result in revenue shortfalls for ERCOT since the corrected prices would still cover the costs of generation and reflect the supply and demand during the winter storm, Bivens wrote.

“We recognize that revising the prices retroactively is not ideal,” she wrote.

Retail electric providers and their customers could be left with at least $1.5 billion of the bill, according to the Texas Tribune, and many electricity companies and co-ops are at the brink of folding or declaring bankruptcy. Brazos Electric Power Cooperative, based in Waco with 1.5 million customers, filed for Chapter 11 bankruptcy on Feb. 26 with the aim of protecting customers from huge bills.

D’Andrea and Botkin said that there is still the possibility that the commission will adjust ancillary service prices, a catch-all term for the functions provided by the electric grid that support the continuous flow of electricity.

For some electric providers, ancillary service costs soared to more than $20,000 per megawatt hour on Feb. 15. In Georgetown, the municipal electricity provider was charged $17.8 million for one week of ancillary services, compared to $710,000 charged for the entirety of 2020. Those costs alone were 25 years worth, according to a city council presentation.

“The ancillary service thing is different, there is no deadline for that,” D’Andrea said. “We can put that on hold, but the energy market is the one that has a deadline today, and I say we don’t act.”