The $ 16 billion in Texas electricity costs too high? Monitor says only $ 3.2 billion can be undone

That’s because most of the overcharge was already settled or handled in the financial markets by companies that own both power plants and electricity suppliers, the Potomac Economics monitor said.

The excess costs sparked a political battle in the Lone Star State. Top Texas politicians are demanding that the government commission and the power grid operator re-praise the market for reversing the costs involved, while generators, market experts and others warn that such a move would lead to a loss of confidence in the Texas markets.

The monitor, reporting to the Texas Public Utility Commission, had last week recommended that the charges be reversed.

Carrie Bivens, the Potomac Economics director who oversees the Texas market, said additional data had come to light since the monitor’s initial review, affecting hedging activity and other variables affecting what happened retrospectively. force could be done, could be examined more closely.

“Without doing this analysis, it was difficult to know where those dollars were going to go,” she told state lawmakers Thursday.

Arthur C. D’Andrea, the chairman of the utility committee, initially announced the monitor’s new assessment at a Texas House committee hearing in which lawmakers asked him for his position on whether prices should be revised. The committee has faced mounting political pressure in recent days, with Texas Governor Greg Abbott, Lieutenant Governor Dan Patrick and most of the Senate publicly calling for re-praise.

Amid the freeze, the three-member public benefit committee appointed by Mr. Abbott ordered the Electric Reliability Council of Texas, the state grid operator, also known as Ercot, to raise wholesale electricity prices to peak price of $ 9,000 per megawatt hour. The independent market monitor said in a report last week that Texas has kept wholesale prices artificially high for more than 30 hours longer than necessary, generating at least $ 16 billion in additional costs.

Wholesale prices are calculated by producers, who sell electricity to large cooperatives and other suppliers who distribute the power to retail customers

Bill Magness, Ercot’s Chief Executive, told lawmakers on Thursday that the grid operator had made a conscious decision to keep prices at that level when it stopped calling for power outages to keep generators online and give them price certainty when taking operational decisions.

“We had to maintain the consistency of the system, the integrity of the system despite many risks,” he said.

“We didn’t want to get back into the danger zone,” he added.

Ercot said Thursday that since the power outage ended last month, electrical retailers had not made about $ 3.09 billion in required payments. The grid operator, who collects that money and uses it to pay power plant operators, has used $ 800 million in an income account to meet some of those obligations.

Mr. D’Andrea previously stated that he was against a price change and reiterated that position on Thursday, saying that such a move would be excessively complicated and akin to disentangling an egg. Repricing, he said, could create unforeseen problems by reclaiming money from power generation companies and power cooperatives.

“Right now we know who is hurt, and we don’t know who,” he said. “There is a certain ‘devilish you know’ aspect of not winning again.”

Potomac Economics said that in addition to the $ 3.2 billion in “overpriced energy,” an additional $ 1.9 billion in incorrect additional costs may also be recoverable.

Mr. D’Andrea is currently the only sitting member of the committee. Former Commissioner Shelly Botkin stepped down on Monday. DeAnn Walker stepped down as chairman earlier this month after state lawmakers called for her impeachment.

Market participants are deeply divided on whether the utility committee should repeat the electricity sale, with some expressing concern that such a dramatic state intervention would shake investors’ confidence in the Texas electricity market.

Daniel Hudson, chief executive officer of Temple Generation I LLC, which owns a 750 megawatt natural gas plant in central Texas, warned that in an application to the utility committee that following the market monitor’s suggestions “ would have a chilling effect. on investments in the Ercot market at the most critical moment in its 20-year history. “

Some of the state’s largest generators, including NRG Energy Inc.

and Calpine, have spoken out against the prospect of a price change, arguing that it could cause a cascade of unforeseen consequences.

“NRG is concerned that revising the price of the ERCOT market, retrospectively, for certain hours or days, would cause long-term harm to consumers and incur unknown costs that could exceed any perceived benefits,” wrote the company in an application to the utility committee. .

However, several electrical cooperatives have expressed support for retroactive pricing in the submissions to the commission. Brazos Electric Power Cooperative Inc., the largest in the state, urged the agency to take action to review charges, which it believed caused unnecessary balance sheet damage. Brazos filed for Chapter 11 bankruptcy protection earlier this month, citing more than $ 2.1 billion in costs related to the power outage.

“Because Brazos Electric and its members place 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]