Only a fraction of the $ 16 billion in Texas electricity overload resulting from last month’s outages is likely to be recovered for consumers trying to reverse taxes, an independent market monitor said on Thursday.
The monitor – which first revealed last week that Texas appears to have charged too much $ 16 billion in electricity during the winter storm that left millions without energy at freezing temperatures – said that after further analysis , believed that the most likely to be recovered is $ 3.2 billion.
This is because most overcharges have already been settled in the financial markets or managed by companies that own both power plants and retail electricity suppliers, said the monitor, Potomac Economics.
The surcharges have sparked a political struggle in the Lone Star state. Top Texas politicians urge state utility and grid operator to repeat market to reverse charges, while generators, marketers and others warn that such a move would lead to a loss of confidence in Texas markets. .
The monitor, which reports to the Texas Public Utilities Commission, recommended renewing taxes last week.
Carrie Bivens, director of Potomac Economics, which oversees the Texas market, said additional data emerged from the first evaluation of the monitor, allowing a closer look at hedging activity and other variables that affected what could be done retroactively.
“Without conducting this analysis, it was difficult to know where those dollars would flow,” she told state lawmakers on Thursday.
Arthur C. D’Andrea, chairman of the utility committee, initially unveiled 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 growing political pressure in recent days, with Texas Gov. Greg Abbott, Lt. Gov. Dan Patrick and most of the state senate publicly calling for retraining.
Amid the frost, the three-member public service commission, appointed by Mr. Abbott, ordered the Texas Electrical Reliability Council, the state grid operator, also known as Ercot, to raise wholesale electricity prices to the maximum price $ 9,000 per megawatt hour. The independent market monitor said in a report last week that Texas has kept artificial wholesale prices high by more than 30 hours longer than necessary, creating surcharges of at least $ 16 billion.
Wholesale prices are charged by generators, which sell electricity to large cooperatives and other suppliers who distribute energy to retail customers.
Ercot CEO Bill Magness told lawmakers on Thursday that the network operator had made a deliberate decision to keep prices at that level once it stopped calling for breaks to keep generators online and give them price certainty while making decisions. operational.
“We had to maintain the coherence of the system, the integrity of the system in the face of many risks,” he said.
“We did not want to return to the danger zone,” he added.
Ercot said on Thursday that electricity retailers had failed to make the necessary payments of about $ 3.09 billion since the end of last month’s outages. The network operator, which collects that money and uses it to pay power plant operators, has used $ 800 million in an revenue account to meet some of these obligations.
Mr D’Andrea earlier said he opposed the re-evaluation and reiterated the position on Thursday, saying such a move would be extremely complicated and comparing it to laying an egg. The revaluation, he said, could create unforeseen problems by recovering money from electricity companies and electricity cooperatives.
“Right now we know who is hurt and we know who is not,” he said. “There’s a certain ‘devil you know’ aspect of not revaluing prices.”
Houston residents took refuge in a furniture store during last month’s weather crisis.
Photo:
Go to Nakamura / Getty Images
Potomac Economics said that in addition to $ 3.2 billion in “overvalued energy,” another $ 1.9 billion in incorrect ancillary taxes was potentially recoverable.
Mr D’Andrea is currently the only member of the Commission. Former Commissioner Shelly Botkin resigned on Monday. DeAnn Walker resigned as president earlier this month after state lawmakers called for her resignation.
Market participants are deeply divided over whether the utility commission should curb electricity sales, with some expressing concern that such a dramatic state intervention would shake investor confidence in the Texas energy market.
Daniel Hudson, CEO of Temple Generation I LLC, which owns a 750-megawatt natural gas plant in central Texas, warned that in a filing with the Utilities Commission that, following market monitor suggestions, “it would have a terrible effect on investments in Ercot Square at the most critical moment in its 20-year history. ”
Some of the state’s largest generators, including NRG Energy Inc.
and Calpine, spoke out against the prospect of revaluation, arguing that it could create a cascade of unintended consequences.
“NRG is concerned that the revaluation of the ERCOT market after that, for certain hours or days, would cause long-term harm to consumers and incur unknown costs that could outweigh any perceived benefits,” the company wrote in a statement to the commission. of utilities. .
However, several electric cooperatives have expressed support for setting retroactive prices in committee submissions. Brazos Electric Power Cooperative Inc., the largest in the state, called on the agency to take action to review the fees, which it said caused undue damage to its balance sheet. Brazos sought bankruptcy protection in Chapter 11 earlier this month, citing costs of more than $ 2.1 billion associated with the outages.
“Because Brazos Electric and its members have placed the immediate humanitarian needs of its members and their consumers above financial interests, Brazos Electric, its member cooperatives and their retail consumers are facing significant financial damage,” he said.
Write to Katherine Blunt at [email protected] and Russell Gold at [email protected]
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