Only a fraction of the $ 16 billion in Texas electricity surcharges from last month’s blackouts can likely be recovered for consumers in an attempt to reverse tariffs, an independent market monitor said on Thursday.
The monitor – who first revealed last week that Texas appeared to have charged $ 16 billion more for electricity during the winter storm that left millions without power at low temperatures – said that, after further analysis, he believed that the maximum that could probably be recovered is $ 3.2 billion.
That’s because most of the overcharging has already been settled in the financial markets or managed by companies that have both power plants and retail electricity providers, the Potomac Economics monitor said.
The excessive charges triggered a political struggle in the State of the Lonely Star. Texas’s top politicians are demanding that the state utility commission and the state power grid operator pass through market prices to reverse the charges involved, while generators, market experts and others are warning that such a move would lead to a loss of revenue. confidence in Texas markets.
The monitor, who reports to the Texas Public Utility Commission, recommended that the charges be reversed last week.
Carrie Bivens, the director of Potomac Economics who oversees the Texas market, said that additional data has come to light since the monitor’s first assessment, allowing for a more detailed analysis of hedge activity and other variables that affected what could be done retroactively.
“Without carrying out this analysis, it was difficult to know where those dollars were going,” she told state lawmakers on Thursday.
Arthur C. D’Andrea, the chairman of the public service commission, initially revealed the monitor’s new assessment during a Texas House committee hearing, in which lawmakers asked him to explain his position on whether prices should be revised. The commission has faced increasing political pressure in recent days, with Texas Governor Greg Abbott, Lieutenant Governor Dan Patrick and most of the state senate publicly demanding a new price.
Amid the freeze, the three-member utility commission, appointed by Mr. Abbott, ordered the Electric Reliability Council of Texas, the state’s network operator also known as Ercot, to increase wholesale energy prices to the price peak of $ 9,000 per megawatt-hour. The independent market monitor said in a report last week that Texas has kept wholesale prices artificially high for more than 30 hours longer than necessary, creating at least $ 16 billion in extra charges.
Wholesale prices are charged by generators, which sell electricity to large cooperatives and other suppliers who distribute energy to retail consumers
Ercot Chief Executive Bill Magness told lawmakers on Thursday that the network operator made a deliberate decision to keep prices at that level as it stopped asking for blackouts to keep generators online and reassure them. while making operational decisions.
“We needed to maintain the consistency of the system, the integrity of the system in the face of many risks,” he said.
“We didn’t want to go back to the danger zone,” he added.
Ercot said on Thursday that electricity retailers have failed to make about $ 3.09 billion in mandatory payments since the blackouts ended last month. The network operator, who collects this money and uses it to pay power plant operators, used $ 800 million in a revenue account to meet some of these obligations.
Mr. D’Andrea previously indicated that he was opposed to readjusting prices and reiterated that position on Thursday, saying that such a measure would be excessively complicated and compared to unstacking an egg. Price correction, he said, can create unforeseen problems in getting money back from power generation companies and electricity cooperatives.
“At the moment, we know who is injured and who is not,” he said. “There is a certain ‘devil you know’ aspect of not reproaching.”
Houston residents took shelter in a furniture store during last month’s climate crisis.
Photograph:
Go Nakamura / Getty Images
Potomac Economics said that in addition to the $ 3.2 billion in “overvalued energy”, another $ 1.9 billion in incorrect ancillary charges were also potentially recoverable.
Mr. D’Andrea is currently the sole sitting member of the committee. Former Commissioner Shelly Botkin resigned on Monday. DeAnn Walker stepped down as president earlier this month after state lawmakers called for his dismissal.
Market participants are deeply divided over whether the utility bill should renegotiate electricity sales, with some expressing concern that such dramatic state intervention would shake investors’ faith in the Texas energy market.
Daniel Hudson, executive director of Temple Generation I LLC, which owns a 750-megawatt natural gas plant in central Texas, warned that in a lawsuit with the utility commission that following the market monitor’s suggestions “would have an inhibiting effect on investment in Ercot’s market is at the most critical moment in its 20-year history. “
Some of the biggest generators in the state, including NRG Energy Inc.
and Calpine, spoke out against the prospect of repricing, arguing that this could create a cascade of unforeseen consequences.
“NRG is concerned that repricing the ERCOT market, after the fact, for selected hours or days, would cause long-term damage to consumers and incur unknown costs that could exceed any perceived benefits,” wrote the company in a document with the utilities commission.
Several electricity cooperatives, however, have expressed support for retroactive pricing in proceedings before the commission. Brazos Electric Power Cooperative Inc., the largest in the state, urged the agency to take steps to review the charges, which it said caused undue damage to its balance sheet. Brazos filed for Chapter 11 bankruptcy protection earlier this month, citing more than $ 2.1 billion in costs associated with blackouts.
“As Brazos Electric and its members placed the immediate humanitarian needs of their members and their consumers above financial interests, Brazos Electric, its member cooperatives and its retail consumers face significant financial losses,” he said.
Write to Katherine Blunt at [email protected] and Russell Gold at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8