State

After $16 Billion in Overcharges, Public Utility Commission Declines to Reprice Texas Blackout Transactions

The Public Utility Commission (PUC) declined to approve a request to reprice previously completed “day ahead” electricity transactions made during the Texas blackouts in a Friday meeting.

That option was floated after a letter from Potomac Economics estimated $16 billion in overcharges derived from the PUC’s decision to order wholesale electricity prices up to their $9,000 megawatt-hour (MWh) cap.

The price increase was ordered so that scarcity in the electricity market could be “accurately reflected,” in the PUC’s judgement, which would then in theory incentivize generators to maximize production during the period where it waned substantially.

But the price remained at the cap for days on end, not only resulting in exorbitant utility bills for customers whose plans are indexed on the wholesale price, but also for companies purchasing the electricity to then pass on to customers. 

The state’s largest electric cooperative declared bankruptcy this week due to a $1.8 billion bill the Electric Reliability Council of Texas (ERCOT) dropped on its lap.

“ERCOT exceeded,” the Potomac letter reads, “the mandate of the [PUC] by continuing to set process at [the cap] long after” the emergency load-shed concluded.

If further added, “The Independent Market Monitor recommends that the Commission direct ERCOT to correct the real-time prices from [midnight February 18 to 9:00 a.m. on February 19], to remove the inappropriate pricing intervention that occurred during that time period.”

Even after it stopped ordering blackouts, but while generation problems still lingered, ERCOT kept the price artificially high. This is what Potomac urged the PUC to remedy.

Effectively, fulfilling the request would entail revising the traded prices of electricity for transactions already made.

Because the money has already exchanged hands, such a backtrack would provide quite a shock to the industry and market.

PUC Chairman Arthur D’Andrea — who was appointed by Governor Greg Abbott to replace DeAnn Walker after she resigned this week — was generally opposed to the suggestion.

He stated, “You think you’re protecting the consumer and it turns out you’re bankrupting a co-op or a city. And so, it’s dangerous, after something is run, to go around and redo it.”

“It’s nearly impossible to unscramble this sort of egg.”

D’Andrea added that the underlying factors such as price hedging cannot be seen by the PUC, and that because they can only see the 30,000-foot view of the transactions they cannot predict the ripple effects such an order will create.

To provide a timely answer on the repricing question to the energy futures market, the PUC had to come to a decision by 4 p.m. Friday.

The repricing request would have required those who sold electricity during that period at the market cap to remit those determined excess revenues back to the purchasers.

It is possible the PUC makes a more definitive decision on the issue down the road.

Two days ago, the PUC agreed to do just this, but only for one specific category of generation called “ancillary services.” Ancillary services are reserves contracted beforehand designed as a sort of fail switch of generation in emergency moments.

The PUC also rescinded a previously issued order suspending the ability of retailers to charge late fees for overdue utility bills. It was originally issued in the wake of the winter storm when customers were faced with unexpectedly large utility bills. The commission kept, however, the order prohibiting disconnection from electricity for delinquent bills.

Fiscal repercussions of the winter event are still being identified, let alone fixed. With more bankruptcies likely to come, the monetary ramifications will continue to be hashed out.

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