Only a fraction of the $ 16 billion in taxes in Texas resulting from last month’s disappearance can probably be recovered for consumers by trying to recoup the cost, an independent market monitor said Thursday.
The monitor – which first announced last week that Texas had charged $ 16 billion too much for electricity in the winter storm, leaving millions without power in icy temperatures – said it believed after more review that the largest possible can be relapsed. $ 3.2 billion.
This is because most of the overcharges have already been settled in financial markets or have been handled by companies that own both power plants and retail electricity suppliers, says the monitor, Potomac Economics.
The excessive cost has given rise to a political struggle in the Lone Star State. Top Texas politicians are demanding that the state commission and power network operator re-price the market to reverse its cost, while generators, market experts and others warn that such a move would lead to confidence in the Texas markets.
The monitor, which reports to the Public Utility Commission of Texas, recommended that the charges be reversed last week.
Carrie Bivens, the director of Potomac Economics, which oversees the Texas market, said additional data has come to light since the first review of the monitor, which looks at hedging activity and other variables more closely, which has had a retroactive effect could be done.
“Without conducting this analysis, it was difficult to know where the dollars would flow,” she told lawmakers on Thursday.
Arthur C. D’Andrea, chair of the Utilities Commission, initially announced the new review of the monitor during a hearing in the Texas House committee in which lawmakers asked him to state his position on whether prices should be reviewed, to explain. The commission has faced increasing political pressure over the past few days, with Texas Gov. Greg Abbott, Lieutenant General Dan Patrick and most of the state legislature publicly calling for re-taxation.
Amid the freezing point, the commission for public utilities of three members, appointed by mr. Abbott, the Texas Electric Reliability Council, the state’s network operator, also known as Ercot, to increase wholesale prices to the highest price of $ 9,000 per megawatt hour. The Independent Market Monitor said in a report last week that Texas keeps wholesale prices artificially high for longer than 30 hours, which creates at least $ 16 billion in levies.
Wholesale prices are charged by generators selling electricity to large cooperatives and other suppliers distributing the power to retail customers
Ercot CEO Bill Magness told lawmakers on Thursday that the network operator made a deliberate decision to keep prices up to date once it stopped making power outages to keep generators online and provide price safety while making decisions .
“We had to maintain the consistency of the system, the integrity of the system in the face of many risks,” he said.
“We did not want to get into the danger zone again,” he added.
Ercot said Thursday that electric retailers have not been able to make $ 3.09 billion in required payments since the end of the blackouts last month. The network operator, which collects the money and uses it to pay power station operators, used $ 800 million in a revenue account to meet some of these obligations.
Mr. D’Andrea had earlier indicated that he was opposed to repricing, and reiterated the position on Thursday, saying such a move would be excessively complicated, comparing it to shaking an egg. According to him, re-counseling can create unforeseen problems by withdrawing money from power generation companies and electricity cooperatives.
“At the moment we know who was hurt, and we know who is not,” he said. ‘There’s a certain’ devil you know ‘aspect of not repricing. “
Houston residents sheltered in a furniture store during the weather crisis last month.
Photo:
Go Nakamura / Getty Images
Potomac Economics said that in addition to the $ 3.2 billion “too expensive energy”, another $ 1.9 billion in incorrect additional costs may also be recoverable.
Mr D’Andrea is currently the only sitting of the commission. Former Commissioner Shelly Botkin resigned on Monday. DeAnn Walker stepped down as chairman earlier this month after state lawmakers demanded she be ousted.
Market participants are deeply divided over whether the Electricity Commission should re-price electricity sales, and some are worried that such dramatic state interference will shake investors’ confidence in the Texas power market.
Daniel Hudson, CEO of Temple Generation I LLC, which owns a 750-megawatt natural gas plant in central Texas, warned that the market monitor’s proposals had a cold effect on investment in the Ercot market at the most critical time. in its 20-year history. ”
Some of the state’s largest generators, including NRG Energy Inc.
and Calpine, spoke out against the prospect of repricing, arguing that it could cause a cascade of unintended consequences.
“NRG is concerned that the repricing of the ERCOT market, for certain hours or days, will cause long-term harm to consumers and incur unknown costs that could outweigh the benefits,” the company wrote in a submission to the utility commission. .
However, several electric cooperatives have expressed support for retrospective prices in the submission to the commission. Brazos Electric Power Cooperative Inc., the largest in the state, has asked the agency to take action to review the charges, which it said were unduly detrimental to the balance sheet. Brazos applied earlier this month for the protection of Chapter 11 against bankruptcy, citing more than $ 2.1 billion in costs related to the disappearance.
“Because Brazos Electric and its members place the immediate humanitarian needs of its members and their consumers above financial interests, Brazos Electric, its member cooperatives and their retail consumers face significant financial damage,” he said.
Write to Katherine Blunt at [email protected] and Russell Gold at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8