Back before COVID-19 and the Great Texas Blackout, Clifton Karnei, general manager of the Brazos Electric Power Cooperative, participated in a 2019 panel discussion on ERCOT’s deregulated market during the Gulf Coast Power Association’s annual Fall Conference.
Asked about the energy-only structure, Karnei, with two decades of experience as a board member for the grid operator, called it a “casino market.” He likened the market to playing a slot machine, saying some years are great for energy providers, others aren’t. (See “Reliability Challenges Ahead,” GCPA Speakers Weigh Texas Market’s Pros, Cons.)
Karnei said the market’s long-term sustainability remained in question, saying, “I think the jury is still out on that.”
The verdict is now in for some market participants.
Brazos filed for bankruptcy on March 1, citing a $1.8 billion debt due to ERCOT as part of the market’s $47 billion in transactions, fueled by $9,000/MWh energy prices incurred during the Feb. 14-19 winter storm. (See ERCOT’s Brazos Electric Declares Bankruptcy.)
Rayburn Country Electric Cooperative is in equally perilous territory, as it has come up short on Tuesday for nearly $340 million in energy costs. The cooperative’s normal weekly bill during February is about $800,000, it said in a filing with the Texas Public Utility Commission.
The city of Denton has filed a lawsuit against ERCOT on behalf of Denton Municipal Electric (DME) when the utility received an energy bill for $207 million following the February winter storm. The city, which has an annual budget of $231.4 million for DME, issued $100 million in new debt to help the utility with its immediate needs.
The city has also secured a temporary restraining order through April 30 against uplift charges. ERCOT had no response to the order.
On Tuesday, Just Energy became the first electric retailer to declare bankruptcy, filing for protection in the U.S. and Canada over more than $250 million owed to the ERCOT market (21-30823).
Three other market participants — retailers Griddy Energy and Entrust Energy and load-serving entity Power of Texas Holdings — have been bounced from the market for failure to make payments or designate a replacement for their services. Entrust was nearly $260 million short through Monday to ERCOT, and Griddy was almost $25 million short.
Some 20 other retailers are thought to be in danger of going under because of the high prices.
ERCOT itself was short $1.7 billion when Kenan Ögelman, the grid operator’s vice president of commercial operations, testified before the state Senate on March 4. (See “ERCOT Market Under ‘Financial Duress,’” Texas PUC Won’t Reprice $16B Error.)
Staff have been using $800 million of undistributed congestion revenue right auction funds and netted some settlement invoices to help protect market liquidity.
The PUC’s docket on issues related to the storm’s “state of disaster” (51812) is filled with market participants seeking relief from invoices and asking the commission to reprice $16 billion of transactions the Independent Market Monitor identified as being in error. (See “Monitor: $16B ERCOT Overcharge,” ERCOT Board Cuts Ties with Magness.)
According to Reuters, several private equity firms have contacted ERCOT with offers of financial support to cover near-term cash needs.
ERCOT declined to comment on the report.
The grid operator’s Board of Directors has scheduled a conference call Friday afternoon to discuss “market financial matters” and other “urgent” business.
Legislature to Take up Repricing $16B
Add repricing the $16 billion worth of market transactions to the list of bills being filed before the 87th State Legislature’s Friday deadline.
Texas Gov. Greg Abbott has asked lawmakers to consider the repricing as an emergency item. PUC Chair Arthur D’Andrea, who has declined to reprice the $16 billion in transactions, is among those who will testify before the legislature Thursday.
Texas House Speaker Dade Phelan has released a list of seven “priority bills” responding to last month’s power outages. They would:
- HB 10: restructure the ERCOT board, replacing the unaffiliated members with members appointed by the governor, lieutenant governor and speaker of the House. It would also require all board members to reside in Texas and create an additional seat to represent consumer interests.
- HB 11: require the state’s electric transmission and generation facilities to be weatherized against extreme weather. Utilities would be required to reconnect service as soon as possible and prevent slower reconnections for low-income areas, rural Texas and small communities.
- HB 12: create a statewide disaster alert system administered by the Texas Division of Emergency Management (TDEM) to alert Texans across the state about impending disasters and extreme weather events. The alerts would also provide targeted information on extended power outages to the state’s regions most affected.
- HB 13: establish a council composed of ERCOT, PUC, Railroad Commission and TDEM leaders to coordinate during a disaster.
- HB 14: require the Railroad Commission to adopt rules requiring gas pipeline operators to implement measures that ensure service quality and reliability during an extreme weather emergency, covering both winter and heat wave conditions. (This bill has not been filed as of press time.)
- HB 16: ban variable rate products for residential customers to provide consumer protection to residential customers while still allowing the competitive market to flourish.
- HB 17: prevent any political subdivision or planning authority from adopting or enforcing an ordinance, regulation, code or policy that would prohibit the connection of residential or commercial buildings to specific infrastructure based on the type or source of energy that will be delivered to the end user.
Spring/Summer SARA Delayed 2 Weeks
ERCOT has pushed back by two weeks the release date for its final spring and preliminary summer resource adequacy report, from March 11 to March 25.
The grid operator said the release date has been changed to “accommodate new system stress scenarios and related report design changes being implemented” and because of staff’s ongoing support for various winter storm response and preparedness investigations.
ERCOT’s seasonal assessment of resource adequacy (SARA) for the winter has been criticized for under-estimating the severity of winter weather. The winter SARA was based on normal weather conditions during peak periods, from 2004 through 2018, which didn’t account for what IHS Market called one of the most extreme winter events in the state in 70 years.