(Bloomberg) – The financial crisis that threatens the Texas energy market is in the hands of lawmakers after Governor Greg Abbott asked them to decide on the termination of $ 16 billion in overcharging during last month’s blackouts.
The Republican governor ordered lawmakers to debate whether state regulators should instruct the region’s network operator to retroactively adjust prices to correct excessive charges highlighted by an independent monitor. It happens after the regulators refused to reverse the charges.
Reversing energy prices would ease the financial squeeze on companies facing astronomical bills in the wake of the energy crisis that left millions of people in the dark and dozens dead in a historic winter storm. The state’s energy market faces a $ 2.4 billion deficit and at least two electricity companies have filed for bankruptcy.
“Correcting this $ 16 billion error will require an adjustment, but it is the right thing to do,” Texas Vice Governor Dan Patrick said in a statement posted on his website. “Ultimately, it will benefit consumers and it is an important step that we can take now to start fixing what went wrong in the storm.”
Lawmakers scheduled hearings on the matter for Thursday.
See also: Texas Watchdog claims the network operator made a $ 16 billion mistake
Most of the Texas Senate has expressed support for the reversal of the charges as well. On Tuesday, 28 senators, including Republicans and Democrats, sent a letter to the Texas Public Utility Commission asking the agency to order the state network operator to correct prices.
“These billing corrections are a critical step in the significant reforms we are undertaking,” wrote the senators.
Arthur D’Andrea, chairman of the Texas Public Utility Commission, said during a private call with Bank of America utility analysts on Tuesday that he would not change his mind about his decision not to reverse the charges, according to people known about the subject.
As the mid-February storm knocked nearly half of Texas’s power generation, the state’s network operator set the price of electricity to a maximum of $ 9,000 an megawatt hour. This is standard practice during an emergency. But the network operator – the Electric Reliability Council of Texas, or Ercot – left that price in effect days longer than necessary, resulting in excessive charges, according to Potomac Economics, an independent market monitor hired by the state to evaluate Ercot’s performance.
‘Decisions have been made’
In an unusual move, the company last week asked regulators to reverse the $ 16 billion in excessive charges. But the regulators refused.
“Decisions about these prices were made in real time based on information available to everyone,” said Arthur D’Andrea, chairman of the Texas Public Utility Commission, during a March 5 meeting. “It is almost impossible to unscramble this type of egg.”
Texas’ largest power generators generally oppose any kind of revaluation, saying it could discourage future investments in the electricity market.
“We believe that the renegotiation of prices would be a serious mistake, damaging consumers and the confidence of the capital markets in the rule of law in Texas,” said Brett Kerr, spokesman for generator Calpine.
However, some retail electricity providers who have accumulated huge bills in the crisis are eager for help.
On Tuesday, Just Energy Group Inc., a Canadian retail energy retailer serving Texas, filed for legal protection in Canada and filed for bankruptcy in the United States after suffering overwhelming losses from blackouts. Its shares traded in the United States plunged by up to 74% on Wednesday, and trading was halted shortly.
See also: Texas energy crisis pushes only energy for judicial protection
All options
Rayburn Country Electric Cooperative, a nonprofit generation and transmission cooperative serving Northeast Texas, expects $ 735 million in invoices from Ercot and says its customers cannot pay. The cooperative declared force majeure, CEO David Naylor said in a telephone interview on Tuesday. “We are looking at all of our options,” he said.
The handling of the crisis has already led to the departure of several key employees, including Ercot CEO Bill Magness.
(Add details of the call with the regulator in the seventh paragraph.)
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