ERCOT CEO says rules not followed
Comments about storm decision break with his predecessor
ERCOT’s interim CEO said the grid manager’s decision during February’s winter storm to set prices for wholesale electricity at the highest level — for 32 hours longer than may have been necessary — “overrode the ERCOT protocols.”
Brad Jones, who was named to lead the Electric Reliability Council of Texas at the end of April, broke with the conclusions of his predecessor, Bill Magness, who defended the pricing decision as necessary to discourage industrial users and other large power consumers from resuming operations when electricity was still in short supply. Magness was fired in the aftermath of the power crisis and widespread outages, which were blamed for nearly 200 deaths and billions in property damage.
“The market rules themselves weren’t changed, but what is important to know is that the market rules were not followed,” Jones said in recent testimony to the Senate Business and Commerce Committee. “This was a deviation from the ERCOT rules.”
On Feb. 15, soon after the storm blew into Texas, the Public Utility Commission — which oversees ERCOT — ordered the grid operator to set prices at the highest level as rolling blackouts began. The controversy began late Wednesday, Feb. 17, when ERCOT stopped ordering outages but maintained the price at $9,000 per megawatt hour. Without that intervention, prices would likely have fallen in wholesale power markets, the state’s independent market monitor concluded.
Wholesale prices typically run about $25 per megawatt hour. But when electricity is scarce statewide and demand is high, ERCOT’s computer algorithms raise the price to encourage power plant operators to produce and sell as much power onto the grid as possible.
On the night of Feb. 17, however, ERCOT officials decided to override the algorithms and hold prices at the $9,000 per megawatt hour cap for the next 32 hours. Typically, prices in ERCOT only hit the $9,000 maximum for short periods.
Potomac Economics, the independent market analysis firm that monitors ERCOT, said retroactively restoring prices to more normal levels would allow municipal utilities, retail electricity providers, power cooperatives and other wholesale electricity buyers, to eliminate about $3.2 billion in charges. The state’s largest power cooperative, Brazos Electric Power Cooperative in Waco, filed for bankruptcy, as did several retail power companies, including Just Energy and Griddy.
Jones said the decision to keep prices at the $9,000 per megawatt hour cap was “controversial.”
On Friday, ERCOT spokeswoman Leslie Sopko said Jones “did not make any assertions regarding the decisions that were made during the winter storm.”
“His comments were in reference to the PUC order that allowed the wholesale prices to remain at the level they did,” Sopko said.
The question of repricing the wholesale power trades during the controversial 32-hour period divided both the industry and political leader, including Lt. Gov. Dan Patrick, who favored repricing and Gov. Greg Abbott, who cast doubt on whether repricing was the right solution. The state Senate passed a bill to reprice, the House rejected it.
CPS, the San Antonio municipal utility, sued ERCOT, seeking to shield itself from the exorbitant charges during the 32 hours in question. Jones’ comments could bolster their case, CPS officials said.
“He is pointing out there were problems. I think those were huge steps in talking about the rules not being followed,” CPS chief executive Paula Gold-Williams said. “This was the first time that I thought there was clarity about that from leadership at ERCOT.”