ERCOT charged more than $ 16 billion in Texas electricity during the freeze

The Texas Electric Reliability Council made a $ 16 billion price error during the week of the winter storm that caused power outages across the state, according to a document 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 kept energy market prices very high for almost two days after the outages widespread ended on the night of February 17. It should have readjusted prices the next day.

This decision to keep prices high, the market monitor said, resulted in $ 16 billion in additional costs for Texas energy companies. The news of the overcharging was first reported by Bloomberg.

Some of the providers that were charged during the high price period could pass the costs on to customers, depending on the type of contract they signed, according to Detlef Hallermann, director of the Reliant Energy Trade Center at Texas A&M University.

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

As ERCOT was unable to cut prices on time, companies had to buy energy on the market at inflated prices.

The error is likely to result in higher levels of defaults, wrote Carrie Bivens, vice president of Potomac Economics, a company that monitors the network operator. She said that PUC should direct ERCOT to remove the price interventions that occurred after the end of the interruptions, and allowing them to remain would result in “substantial and unjustified” economic damage.

At least $ 1.5 billion could be passed on to retail electricity providers and their customers. Some retail suppliers have already started to file for bankruptcy.

“They will suffer more,” said Hallermann.

Retail power providers have been in financial trouble across Texas since the storm; many were forced to buy energy in the wholesale market at extremely high prices.

Brazos Electric Power Cooperative Inc., Texas’ largest energy cooperative, has already filed for bankruptcy protection after incurring $ 2.1 billion in combined charges due to ERCOT, according to court documents filed on Monday .

Many retail energy suppliers have complained in filings to regulators that electricity generators, which were unable to produce enough energy during the storm, profited and left retail companies struggling.

“The ERCOT market was not designed to handle an emergency of this scale,” wrote Patrick Woodson, CEO of ATG Clean Energy Holdings, an Austin-based retail energy provider, to the Public Utility Commission. Price failure, he wrote, “has pushed the entire market to the brink of collapse.”

Bivens wrote that, while recognizing that retroactively revising prices “is not ideal,” correcting the error will reflect the precise supply and demand for energy during the period after outages.

Cathy Webking, of the Texas Energy Association for Marketers, told lawmakers during a meeting of the Texas Senate Business and Commerce Committee on Thursday that prices should be brought down to market value.

“There are more defaults imminent. Immediate action is needed, ”said Webking.

An ERCOT spokesman declined to comment.

Kenan Ogelman, ERCOT’s vice president of commercial operations, who testified during a Texas Senate committee hearing on Thursday, was not questioned by state senators about ERCOT’s $ 16 billion error. Senator Kelly Hancock, R-North Richland Hills, who chairs the business and trade committee, did not indicate what action he or other senators would take on the various financial effects of the winter storm.

“There are financial issues – let’s put it this way – that we have to resolve,” said Hancock.

Reese Oxner and Shannon Najmabadi contributed to this report.