Texas Power Market is short with $ 2.1 billion in post-freeze payments

Ercot, which collects that money and uses it to pay power plant operators, said it would use $ 800 million in revenue to pay them for some of what they owe, but it would fall short of $ 1.32 billion .

It also said it had started taking collateral payments from the retailers who had not paid their bills, a sign that some may no longer be solvent.

An Ercot spokeswoman said she wasn’t sure if this was the total amount that retailers owed or if more late payments would be disclosed later.

The shortage of payments will lead to a bitter battle in Texas over how to close the gap. In the rare instances when market participants are unable to pay their bills, Ercot spreads the cost among the remaining electrical retailers, municipal utility companies, and others who purchase electricity.

This could put more strain on the remaining retailers, some of whom are already short on cash.

Denton, a North Texas city that saw its energy costs skyrocket during the crisis, filed a lawsuit against Ercot, arguing that such additional payments were “ an illegal and unconstitutional raid by [Ercot] to the honor of cities that operate electricity companies. “

In a statement, the city said it would “explore all legal options to protect the financial assets of the City of Denton and its taxpayers from improper use,” adding that it had been issued a restraining order against the non-profit network operator.

The cost of electricity in Texas soared last week when freezing temperatures forced countless power plants of all types to go offline, significantly reducing electricity supplies and causing millions of people to lose power for days on end.

As the crisis worsened, the state public utility commission ordered market prices to the maximum level of $ 9,000 per megawatt hour until the end of the emergency, up from about $ 1,200 per megawatt hour at the time of last Monday’s order. Prices stayed at that peak price for about 90 hours. Previously, the Texas market had hit that $ 9,000 level just once, in 2019, for a total of three hours, according to an application to the Texas Public Utility Commission.

The result was a massive increase in electricity costs for electricity suppliers, local utility companies, and eventually businesses and consumers in Texas, where electricity prices averaged $ 22 per megawatt hour last year.

Vistra Corp.

, which is both a major owner of power plants in the Texas deregulated market and a retailer that sells power to more than 2 million households, said it lost between $ 900 million and $ 1.3 billion Friday morning.

Shares of the company are down 24% on Friday. The company said it had enough to cover the loss, but was concerned that smaller electrical retailers wouldn’t.

“Billions of dollars have changed hands in a week. People will go out of business because of this, ”said Curt Morgan, Vistra’s Chief Executive.

On Friday, S&P Global Ratings put Vistra on watch for a lower credit rating due to the impact of the storm on cash flow. S&P has also downgraded or negative credit eight cities in Texas, electrical co-ops and energy authorities due to the unexpectedly high costs.

The rating agency watched San Antonio’s electricity and gas system for a cut, noting that its financial commitments for energy purchases from the event were potentially $ 1 billion – more than it had spent in total on such purchases during the last fiscal year. .

Earlier this week, electronics store Just Energy Group arrived Inc.

said it had incurred an estimated loss of $ 250 million by purchasing high-quality wholesale electricity on behalf of its customers.

Until now, companies that did well in the wild market have kept quiet about their windfalls. Australian Macquarie Group Ltd.

raised its annual guidelines to indicate it made $ 215 million moving gas and electricity.

Wall Street banks and trading desks have also been quiet about their gains or losses. Royal Dutch Shell PLC, which operates one of the largest power trading desks, said it was still figuring out how its desk and partners were performing.

“During the week, we have been in close contact with our Shell Energy North America customers and relevant regulatory authorities and will remain so as we continue to assess the aftermath of these devastating weather events,” said Shell spokesman Curtis Smith.

Write to Russell Gold at [email protected]