ERCOT overpaid $ 16 billion for electricity in Texas during freezing

The Electric Reliability Council of Texas made a $ 16 billion price error during the week of the winter storm that caused power outages in the state, according to a submission from its market monitor.

Potomac Economics, the independent market monitor for the Texas Public Utility Commission, which oversees ERCOT, wrote in a letter to the Public Utility Commission that ERCOT is holding the price of power too high for nearly two days after widespread disruptions in the night of February ended. 17. It should have recovered the prices the next day.

The decision to keep prices high, the market monitor claimed, led to $ 16 billion in extra costs for power companies in Texas. The news of the overcharging was first reported by Bloomberg.

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

In Texas, wholesale prices are determined by supply and demand: if demand is high, ERCOT allows prices to rise. During the storm, PUC ordered the network operator to set wholesale prices at $ 9,000 per megawatt hour – the maximum price. The increase in prices is intended to encourage generators in the state to add more power to the network. Businesses then buy power from the wholesale market to supply to consumers, which they are contractually obliged to do.

Because ERCOT could not succeed in putting prices back on time, companies had to buy power in the market at high prices.

The error is likely to result in higher levels of standards, wrote Carrie Bivens, vice president of Potomac Economics, the firm that monitors the network controller. She said the PUC should order ERCOT to remove the price interventions that took place after the interruptions ended, and to keep them that way would cause “substantial and unfair” economic damage.

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

“They’re going to suffer the most,” Hallermann said.

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

Brazos Electric Power Cooperative Inc., Texas’ largest power cooperative, has already filed for bankruptcy after owing $ 2.1 billion in joint costs to ERCOT, according to court documents filed Monday.

Many retail power suppliers have submitted to regulators that electricity generators that could not supply enough power during the storm were profitable and caused retail businesses to scramble.

“The ERCOT market is not designed to handle an emergency of this scale,” Patrick Woodson, CEO of ATG Clean Energy Holdings, a Austin retail power supplier, wrote to the Public Utility Commission. The price error, he writes, “drove the entire market to the brink of collapse.”

Bivens wrote that while she realizes that retrospective pricing is ‘not ideal’, correcting the error will reflect the accurate supply and demand for power during the post-interruption period.

Cathy Webking of the Texas Energy Association for Marketers told lawmakers at a meeting of the Texas Senate Committee on Business and Trade Thursday that prices should be set back to what the market value would be.

“There are more standards at hand. Immediate action is needed, “said Webking.

An ERCOT spokesman declined to comment.

Kenan Ogelman, the ERCOT vice president of commercial operations, who testified at a committee hearing in Texas on Thursday, was not asked by state senators about ERCOT’s $ 16 billion error. Sen. Kelly Hancock, R-North Richland Hills, who chairs the Business and Commerce Committee, did not indicate what action he or other senators would take on the various financial ripple effects of the winter storm.

“There are financial concerns – let’s put it this way – that we need to address,” Hancock said.

Reese Oxner and Shannon Najmabadi contributed to this report.