Texas chooses not to fix $ 16 billion power surge

The Texas Public Utilities Commission said Friday that it did not intend to reverse $ 16 billion in electrical surcharges that an independent market monitor had noted as a result of week-long blackouts in the state.

Commission President Arthur C. D’Andrea said it was too difficult to re-price energy markets and involved too many uncertainties.

“It is impossible to decipher this type of egg,” he said.

D’Andrea said there were so many hedges and private transactions out of the commission’s sight that taking a step designed to help consumers could have unintended consequences. “You think you are protecting the consumer and it turns out that you are bankrupting a cooperative or a city,” he said.

The commission met Friday morning to consider a recommendation from its independent market monitor, which concluded that Texas held wholesale prices artificially high for 33 hours longer than warranted during a winter freeze last month, which resulted in $ 16 billion in overcharges to consumers.

Amid the freeze, which resulted in massive blackouts that left millions of homes in the dark for days, the three-member panel appointed by Texas Governor Greg Abbott ordered the state’s network operator to raise prices. of wholesale power at the maximum price of $ 9,000 per megawatt. time.

The market monitor said in a report released Thursday that those prices should have dropped when the grid operator stopped instituting blackouts, not when the power emergency ended a day and a half later. He recommended reversing $ 16 billion in charges.

Earlier this week, former commission chair DeAnn Walker resigned under criticism, leaving Mr. D’Andrea and Shelly Botkin as acting commissioners, who also indicated Friday that they were unwilling to order a review of prices.

Various market participants and consumer groups had urged the commission to reinstate and lower prices to $ 9,000. Vistra Corp.

VST 1.37%

, which is one of the largest power generators in Texas and also owns a major electricity retailer, said not changing the price “would lead to unfair and unreasonable results.”

Texas is grappling with massive financial consequences after last month’s power crisis, with the state’s public utility commission and the power grid operator disagreeing over exactly what went wrong.

A few hours after the blackouts, the utility commission took the unusual step of abandoning the market-based pricing mechanism and ordering wholesale energy prices to be at the $ 9,000 limit until the blackouts ordered by the net.

The grid operator complied and kept prices at the price cap after it stopped ordering blackouts, but at the time local power companies were still struggling to get their lights back on and some continued to have widespread blackouts.

The four extended days of prices of $ 9,000, an exponential increase over normal prices in Texas, which last year averaged $ 22 a megawatt hour, came at a massive financial cost to some market participants.

Vistra said it suffered losses of between $ 900 million and $ 1.3 billion. Many wind farm operators, who needed to buy electricity due to hedging contracts, are in financial difficulties. A major electricity cooperative has declared bankruptcy.

The public services commission did not vote to reject the independent market monitor’s suggestion, leaving the door open for a policy change in the coming weeks.

Sen. Nathan Johnson, a Dallas Democrat, said he considered the agency’s decision a mistake. He said he would have supported a recovery to ease concerns among power generators and retailers about regulatory intervention in market pricing.

“That would have sent a stronger market signal,” he said.

President Biden approved a major disaster declaration for Texas after a winter storm created a power and utility crisis that left millions without clean water. Photo: Joe Raedle / Getty Images (Originally Posted Feb 20, 2021)

Write to Russell Gold at [email protected]

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