Legislators, monitor urge ERCOT to amend storm-related prices

AUSTIN, Texas – State Senators are asking the Electric Reliability Council of Texas to take a hard look at amending the sky high energy prices charged during the winter storm. That request came as an independent monitor stated it believes ERCOT overcharged the Texas market by billions of dollars.

“What we do here impacts every business, every home that operates in the state of Texas,” said State Sen. Kelly Hancock (R-District 9), chair of the Senate’s Business and Commerce Committee.

Hancock’s words opened a hearing meant to probe the financial impact of last month’s storm. At issue is the billions of dollars ERCOT charged energy providers during the crisis. At ERCOT’s behest, the Public Utility Commission of Texas allowed energy prices to hit the cap of $9,000 per megawatt-hour during the storm.

ERCOT vice president of commercial operations explained to the committee the price hike was needed during the storm to ensure every available power generator was pumping energy into the grid. Ogelman testified that during the storm, energy prices were fluctuating based on supply scarcity. He said as more power units went down and demand grew, prices went up. As ERCOT called for millions of people to lose power, prices dropped since it appeared demand and supply were evening out.

Ogelman then explained that was causing a problem with the system potentially viewing a power generator as a reserve unit.

“(That) put risk on additional resources potentially tripping offline and making the problem worse,” said Ogelman.

Ogelman said removing any price roadblock ensured the grid was getting all the power it could at the time.

“You start seeing a move from tens of millions of dollars to us starting to invoice billions of dollars,” said Ogelman.

Ogelman told state senators those storm-related prices are why it is now owed more than $2 billion from energy companies that can’t pay their bill. Two companies have already filed for bankruptcy.

“Within about two weeks, I think you’ll see large numbers going bankrupt to renegotiate their debt,” said State Sen. John Whitmire (D-District 15). “They were paying such high prices for the gas to keep the lights on that now the bills are due, they don’t have the revenue.”

State Sen. Paul Bettencourt (R-District 7) said the Legislature will have to step in and make sure prices never reach those levels again.

“I don’t understand why we ever got above a thousand-dollar cap on a megawatt-hour,” Bettencourt said. “When you look at the East Coast stuff, that’s where they cap out at.”

ERCOT is overseen by the PUC, which contracts with an independent monitor, Potomac Economics. This firm monitors Texas’ energy market to look for inefficiencies or actions that distort market outcomes.

In a letter to the PUC, Potomac Economics writes it agreed with the move to increase prices during the storm to avoid causing greater harm to the grid, but adds those high prices were left in place for 32 hours longer than needed, which caused an additional $16 billion in charges.

Potomac strongly suggests ERCOT retroactively amend energy prices to bring the bills down.

“Allowing them to remain will result in substantial and unjustified economic harm,” Potomac wrote.

State senators asked ERCOT to do the same during the hearing at the Capitol.

“ERCOT is able to do that and I think there is a proceeding before the commission to examine that very fact,” said Ogelman.

The PUC will take up this matter during a hearing Friday morning. ERCOT also released a list of all the power units that went down during storm. The list shows dozens of units started tripping offline a full 24 hours before ERCOT called for emergency conditions.

Some of the single biggest losses were the nuclear plant in Matagorda County -- down for two days at a loss of 1,353 megawatts -- and a coal plant in Fort Bend County -- down for more than 24 hours at a loss of 664 megawatts. For reference, one-megawatt powers about 200 homes, according to ERCOT.

What is not known is the exact reason each individual unit was offline during the storm. Lawmakers said getting those answers will help craft legislation. Whitmire said he expects the governor will have to call a special session to address these issues.