Texas electricity officials won’t reverse $16 billion in overcharges
AUSTIN, Texas — About $16 billion in overcharges for wholesale electricity racked up because of a pricing error during the massive failure of the state’s power grid last month won’t be reversed, after Texas utility regulators rejected a recommendation that they make the change.
“It’s just nearly impossible to unscramble this sort of egg,” Arthur D’Andrea, the new chair of the Public Utility Commission, said during a commission meeting Friday.
Potomac Economics, a Virginia-based firm that’s paid by the state to provide an arm’s-length assessment of the Texas power grid, recommended Thursday in a letter to the commission that the overcharges — which were billed to retail electric providers, distributors and others — be reversed by retroactively lowering wholesale electricity prices for a 32-hour period beginning Feb. 18.
The Electric Reliability Council of Texas, or ERCOT, oversees the state’s power grid. An independent grid monitor has said a pricing error by the agency during the recent weather emergency ended up resulting in $16 billion in overcharges for wholesale electricity billed to retail providers, distributors and others.
The overcharges occurred because the Electric Reliability Council of Texas, which oversees the grid and is commonly known as ERCOT, kept the prices at the maximum level allowable — $9,000 per megawatt hour — during the 32-hour period. ERCOT should have stopped intervening by then because the power crisis was over and instead let supply and demand determine pricing, Potomac said.
The Public Utility Commission oversees ERCOT. At ERCOT’s request, it initially set the price at the $9,000 cap — from a market price of about $1,200 at the time — during a specially called meeting Feb. 15 in an effort to incentivize as many generators as possible to keep producing power early in the weather emergency.
Retail electricity providers that incurred the exorbitant charges — as well as some generators that did so because their own plants had been knocked out by the weather — have been advocating that regulators embrace Potomac’s remedy, even though it would blunt only a portion of the financial blow delivered by the storm and the subsequent breakdown of the ERCOT grid.
“This is an immediate issue and a very dire issue in terms of finances,” Catherine Webking, who heads a lobby group that represents retail electricity providers, told state lawmakers during a hearing Thursday that touched on Potomac’s recommendation.
Enacting the remedy “is not changing market prices (because) those prices are not market prices,” she said.
But an executive of the Lower Colorado River Authority — which was able to keep a relatively high proportion of its generation plants operational during the weather emergency — voiced skepticism of the proposal during the same hearing.
“There are always winners and losers on both sides (of a transaction), because that pie doesn’t change size, even if you reprice,” said Randa Stephenson, LCRA’s senior vice president for wholesale markets. “It’s really hard to go back and change the rules when people make business decisions off of them.”