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Texas will not fix ERCOT’s $16 billion power billing mistake

State News

FORT WORTH, TX – FEBRUARY 16: Pike Electric service trucks line up after a snow storm on February 16, 2021 in Fort Worth, Texas. Winter storm Uri has brought historic cold weather and power outages to Texas as storms have swept across 26 states with a mix of freezing temperatures and precipitation. (Photo by Ron Jenkins/Getty Images)

Texas’ utility regulator had an opportunity Friday to eliminate some of the $16 billion that the state’s grid operator erroneously overcharged power companies during last month’s deadly winter storm — but the board of the Public Utility Commission chose not to do so.

Some Texas electricity customers could have benefited from a decision to readjust the electricity market prices for the week of the storm, according to PUC Chair Arthur D’Andrea and some independent analysts. But other customers could have been harmed by such a move, D’Andrea said.

“I totally get how it looks like you’re protecting consumers [by readjusting electric prices],” D’Andrea said Friday during a PUC meeting. “But I promise you you’re not.”

D’Andrea added that a retroactive decision would have winners and losers: “You don’t know who you’re hurting. And you think you’re protecting the consumer and it turns out you’re bankrupting [someone else].”

Potomac Economics, the independent market monitor for the PUC, which oversees grid operator the Electric Reliability Council of Texas, had recommended that the PUC retroactively reduce the market price for power for at least part of the week of the freeze.

In Texas, wholesale power prices are determined by supply and demand: When demand is high, ERCOT allows prices to go up. During the storm, PUC directed the grid operator to set wholesale power prices at $9,000 per megawatt hour — the maximum price. Raising prices is intended to incentivize power generators in the state to add more power to the grid. Companies then buy power from the wholesale market to deliver to consumers, which they are contractually obligated to do.

But extended freezing weather made that impossible because it knocked a large portion of the state’s electricity generation offline.

ERCOT maintained its highest level of emergency alert until the morning of Feb. 19 — five days after the storm initially struck the state — a signal to the market that the power grid was still unstable, which kept prices high.

Potomac Economics wrote in a letter this week to the PUC that ERCOT kept market prices for power too high for nearly two days after widespread outages ended late the night of Feb. 17. ERCOT should have reset the prices the following day, the letter said.

D’Andrea, who was elevated to chair this week by Gov. Greg Abbott, and PUC Commissioner Shelly Botkin could have decided Friday to order ERCOT to follow Potomac Economics’ recommendation — a move that could have potentially shaved billions of dollars off of what the grid operator overcharged power companies.

State Sen. Drew Springer, R-Muenster, was hoping for a different decision by the PUC on Friday.

“Keeping the market at an artificial $9,000 for 32 hrs cost $16B,” Springer tweeted, adding that the Potomac Economics report “says those hours should be repriced, I agree.”

The Texas Tribune is a nonpartisan, nonprofit media organization that informs Texans — and engages with them – about public policy, politics, government and statewide issues.

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