The ERCOT market faces a more than $3 billion shortfall after widespread generator outages stemming from a February winter storm drove short-term electricity prices to the $9,000/MWh cap, staff told their Board of Directors on Friday during a teleconference.
Kenan Ögelman, the grid operator’s vice president of commercial operations, told the board that invoices were settling at $3.09 billion as of March 11. That figure was reduced to $3.02 billion after staff received additional payments and cashed in some market participants’ collateral, he said.
Brazos Electric Power Cooperative, which declared bankruptcy on March 1, accounts for more than half of the shortfall, owing $1.86 billion. Rayburn Country Electric Cooperative, another troubled publicly owned utility, is short $570.4 million. (See Is the ERCOT ‘Casino’ Going Bust?)
During testimony before the Texas Senate the day before, Independent Market Monitor Carrie Bivens warned that the market’s shortfall could have “significant” consequences.
“I remain concerned about the possibility of cascading bankruptcies,” Bivens said.
The directors did not ask any questions during the public session on “market financial matters.” An executive session that followed was not expected to result in voting items, said ERCOT General Counsel Chad Seely, who led the meeting in the absence of a chair and vice chair.
Staff did not address a recent Wall Street Journal report that ERCOT has held talks with financial institutions, including Goldman Sachs, about potential financing options that might address the market shortfall.
A special meeting of corporate members listed on the ERCOT website as being scheduled for Friday was canceled before the board meeting began.
The board welcomed three new members: former ERCOT CEO Bob Kahn, representing the municipal segment; Demand Control 2’s Shannon McClendon, representing the retail electric provider segment; and Pedernales Electric Cooperative CEO and former Texas Public Utility Commissioner Julie Parsley, representing the cooperative segment. Kahn and McClendon joined the board earlier in the week. (See Former ERCOT CEO Rejoins Board.)
The board is now up to 11 directors, missing only five unaffiliated positions. State law requires the board’s leadership positions be filled by unaffiliated directors. Those directors all resigned or pulled their nominations the week after the outages. (See ERCOT Chair, 4 Directors to Resign.)
ERCOT Releases Unredacted Generator Outage Data
The Texas PUC on Friday ordered ERCOT to post an unredacted version of generator and energy storage outage data during the February winter storm. The new list includes data from about 40 generators that were not initially published on March 4 (51812). (See “ERCOT Shares List of Generator Outages,” ERCOT Board Cuts Ties with Magness.)
ERCOT wasted no time in complying with the order, publishing the data before the close of business. The outage/derate information now goes back to Feb. 10. Normally, ERCOT keeps the information confidential for 60 days following the operating day.
“Academics at [the University of Texas] are looking at this stuff closely,” PUC Chair Arthur D’Andrea said. “We need as many eyes on this as possible to parse this data.”
D’Andrea, holding his first solo open meeting since the resignation of the rest of the commission, also issued orders directing ERCOT to claw back money from generators that didn’t provide contracted ancillary services during the storm and ensuing outages, and to extend deadlines for storm-related settlement disputes from 10 days to six months.
The commission unveiled what it called “the roadmap to move forward,” a document in which staff identified eight categories requiring PUC attention in its response to the winter storm. The roadmap will be updated for future open meetings.
D’Andrea said the areas of focus have emerged as “the most likely contributors to the disaster.”
“I’m confident our team will collaborate closely with Texans and the entities that serve them to get answers and devise solutions to protect our state,” he said.
The areas of focus are:
- an examination into generation weatherization and emergency operations;
- establishment of standards to protect load essential to maintaining the grid;
- an examination of standards related to essential customer load and emergency load shed;
- a review of ERCOT’s planning and forecasting processes;
- a review of communications expectations among ERCOT, utilities, the PUC and the general public;
- an examination of ERCOT’s settlement and market uplift practices;
- potential improvements to ERCOT’s wholesale market design; and
- review of customer protections in the retail market.
The PUC has invited interested parties to submit their suggestions for the project using the agency’s filing system. Staff also plan to file a separate forensic audit report on the ERCOT market with the state legislature before its session ends May 31.
D’Andrea thanked Adrianne Brandt, the commission’s newly appointed director of ERCOT accountability, and the grid operator’s former COO Brad Jones for volunteering to ensure it and the PUC “are on the same direction when trying to figure out what went wrong and that it never happens again.” (See Texas PUC Strengthens Oversight of ERCOT.)
“I’m so grateful to both of them. They don’t need this job,” the chairman said. “I begged [Brandt], pleaded with her, to come out of retirement. She’s a public servant like no other, and Brad is the same. I’m going to keep them as long as I can.”
ERCOT Absent from US Senate Hearing
ERCOT was conspicuously absent from the list of witnesses testifying before the U.S. Senate Energy and Natural Resources Committee last week at a hearing on electric service reliability, resilience and affordability. Sen. Martin Heinrich (D-N.M.) asked committee Chair Joe Manchin (D-W.Va.) why there was no one representing the Texas grid operator. (See related story, Senators Grill Robb, Asthana over Texas Outages.)
“It certainly wasn’t for the lack of inviting them,” Manchin said. “We invited everyone from ERCOT and spoke to everyone that is still left, which I’m not sure anyone is left.”
“So ERCOT chose not to be here?” Heinrich asked.
“They needed to remain available to their direct regulators,” Manchin responded, referring to the Texas legislature. “They are in total confab with them.”
Former ERCOT CEO Bill Magness did supply a statement that was entered into the record.
“We at ERCOT are working day and night to provide policymakers with the information they need to ensure that Texas electric suppliers maintain the necessary capacity and resiliency to meet the demand created by unprecedented winter weather events,” Magness wrote.
Former FERC and Texas PUC Chair Pat Wood stood up for ERCOT under questioning from the panel. “I am not aware of any evidence that ERCOT had alternatives to significant load shedding in real time. Their responsibility is to protect the entire grid in real time,” he said.
Wood also defended Texas’ reliance on renewable resources, which drew criticism from Ranking Member John Barrasso (R-Wyo.) and other GOP members.
“At the end of the day, after sitting in the dark for a few days last month, I can vouch for the fact I want every megawatt, regardless of how it’s generated, on the grid,” Wood said. “Wind was slow to come back, but so was gas and coal. I’m not willing to give up that we don’t have a good energy portfolio. It just didn’t show up when we needed it.”
Wood noted the winter storm struck all 254 Texas counties and was the third most intense storm in 130 years of recorded weather in the state.
“It was historic in duration, geographic expanse and low temperature,” he said.
CPS Takes Action Against ERCOT
San Antonio municipal utility CPS Energy on Friday filed a lawsuit against ERCOT, its officers and directors over what it said is “one of the largest illegal wealth transfers in the history of Texas.”
CPS pointed to the $3 billion in market transactions when scarcity pricing remained in effect Feb. 18-19 after ERCOT had stabilized the grid. The utility said it wanted to protect its customers against “massive errors in ERCOT’s excessive prices, which will cause price spikes in monthly bills and a blatantly unlawful result.”
Calling the power prices and natural gas costs “illegitimate,” CPS said it spent about $1 billion buying gas and power during the winter storm, more than its annual fuel costs in a typical year. The utility said in its lawsuit that it is owed at least $18 million by ERCOT.
Moody’s Investors Service said CPS and ERCOT recently reached an agreement on purchased power costs that will result in the utility paying net obligations of $87 million to the grid operator. That number could increase with any uplift to the market to cover short payments.
