ERCOT overcharged buyers $16B
Monitor’s report follows embattled CEO’S firing
Texas’ grid manager overcharged the state’s electricity market by an estimated $16 billion by leaving emergency pricing in place too long, according to the state’s independent market monitor.
The conclusions by the monitor, which acts as a watchdog for Texas power markets, came a day after the board of the Electric Reliability Council of Texas, or ERCOT, fired CEO Bill Magness. Magness,
who has led the grid manager since 2016, has been harshly criticized for the widespread failure of the electricity system that cut power and heat for some 4 million Texans over days of bitter cold.
Magness was given his 60-day termination notice after a closeddoor board meeting Wednesday night. He was terminated without cause, which means he’s entitled to a full year’s salary as severance, but he informed the board that he would not seek or accept severance pay, according to a spokeswoman.
Magness earned $883,000 in salary and other compensation in 2018, according to IRS filings. ERCOT said it would immediately launch a search for a successor.
The report by the independent market monitor adds to questions about ERCOT’S response to the power crisis. The monitor, a Virginia-based firm called Potomac Economics, was hired by the Public Utility Commission to assess ERCOT’S operation of wholesale electricity markets.
At issue is an emergency order that the PUC issued Feb. 15, directing ERCOT to lift prices to $9,000 per megawatt-hour, the state maximum, to reflect the dire electricity shortages as the winter weather knocked generators offline. Potomac concluded that the conditions had improved enough by the end of Feb. 17 that ERCOT should have ended the emergency pricing.
Instead, ERCOT kept the emergency pricing in place until the morning of Feb. 19.
As a result, Potomac said, wholesale buyers were overcharged some $16 billion. The extended period of maximum prices pushed the state’s largest electricity cooperative into bankruptcy and threatened the survival of some retail electricity providers, according to analysts.
The monitor called on ERCOT to correct the pricing, estimating that it would save households and other end users some $1.5 billion.
“We recognize that revising the prices retroactively is not ideal,” the report said. “In this case, however, given that the prices are inconsistent with ERCOT’S protocols and the commission order and that allowing them to remain will result in substantial and unjustified economic harm, we respectfully recommend that the (Public Utility Commission) take the action described above to correct ERCOT’S real-time prices.”
ERCOT did not immediately respond to a request for comment.
The power crisis has not only led to Magness’ ouster, but also to the resignations of PUC Chairwoman Deann Walker and five ERCOT directors. Leaders of ERCOT and the PUC came under pressure from Gov. Greg Abbott and state legislators for the failure of the power system.
“The governor called on ERCOT leadership, including Bill Magness, to resign early on during the response to last month’s severe winter weather when it was clear that ERCOT made false assurances to the public and failed to stabilize the grid — leaving Texans in the dark,” Renae Eze, Abbott’s press secretary, said Thursday. “The change in leadership is an important step toward fixing the structural problems at ERCOT, and we continue working with the Legislature to reform our power system and ensure these tragic events are never repeated.”
ERCOT has not provided the details of the decision to fire Magness.
Not all board members voted in favor of the move. Nick Fehrenbach opposed the measure; he did not respond to a request for comment. Lori Cobos abstained.
Energy analysts said it was inevitable that heads would roll after a failure of this magnitude.
“It would be hard for a leader of an organization to survive such a thing,” said Doug Lewin, an energy consultant in Austin.
Magness grew up in Texas, graduated from the University of Texas at Austin and has worked in the utility industry for 25 years. Before taking ERCOT’S top spot, Magness served as its general counsel.
Taylor Goldenstein, Jeremy Wallace and Jeremy Blackman
contributed to this report.