AUSTIN, Texas – The Electric Reliability Council of Texas made a $16 billion error in pricing during the week of the winter storm that caused power outages across the state, according to a filing by its market monitor.
Potomac Economics, the independent market monitor for the Public Utility Commission of Texas, which oversees ERCOT, wrote in a letter to the Public Utility Commission that ERCOT kept market prices for power too high for nearly two more days after widespread outages ended late Feb. 17. It should have reset the prices the following day.
That decision to keep prices high, the market monitor described, resulted in $16 billion in additional costs to Texas power companies. The news of the overcharging was first reported by Bloomberg.
In Texas, wholesale power prices are determined by supply and demand — when demand is high, ERCOT allows prices to go up. The grid operator let prices hit the $9,000 per megawatt hour maximum during the storm, which is supposed to incentivize power generators in the state to add power to the grid. Companies then buy power from the wholesale market to deliver to consumers, which they are contractually obligated to do.
Because ERCOT failed to bring prices back down on time, that meanings companies had to buy power in the market at inflated prices.
The error will likely result in higher levels of defaults, wrote Carrie Bivens, a vice president of Potomac Economics, the firm that monitors the grid operator. She said the PUC should direct ERCOT to remove the pricing intervention that occured after outages ended, and allowing them to remain would result in “substantial and unjustified” economic harm.
The recommendation “will not result [in] any revenue shortfalls for ERCOT’s generation as the corrected prices will cover the generator’s as-offered costs,” she wrote. “We recognize that revising the prices retroactively is not ideal.”
A spokesperson for ERCOT was not immediately available to comment.
Reese Oxner and Mitchell Ferman contributed to this report.