Texas electricity regulator under pressure to slash winter storm bills

[March 03, 2021]  By Gary McWilliams

HOUSTON (Reuters) - The Texas electricity regulator meets Wednesday for the first time since a devastating winter storm fueled a financial crisis in its power market, amid calls to slash billions of dollars from costs facing businesses and consumers.

The storm temporarily knocked out up to half the state's generating plants last month, triggering outages that killed dozens and pushing up power prices to 10 times the normal rate. About $47 billion in higher costs is threatening the companies that sell, transmit or generate electricity in the state. Consumers will see higher prices as the costs are passed along.

Power marketers that sell electricity want the state's Public Utility Commission to reduce, suspend or rescind fees for ancillary services such as standby power that they are required to pay, though in some cases the services were not provided during the blackout. According to one power marketer, those fees ballooned from $37,000 to $19 million for the week of the storm.

The Independent PUC adviser Carrie Bivens this week recommended cuts that could shave about $2 billion from service fees, though she provided no estimate of the total.
 

Rules designed to encourage more power during emergencies pushed wholesale prices to $9,000 per megawatt hour (mwh) and led to $25,000 per mwh service fees. The average U.S. home uses about 900 kilowatt hours per month.

One of Bivens' recommendations would shave two-thirds off the fees charged marketers for the routine services. Another would reverse the fees paid to the generators that failed to provide services during the storm. If left in place, the fees could force out a quarter of the state's about 100 providers and concentrate up to 80% of the market among three large utilities.

Jay Farrell gathers water from his hot tub so that he can flush his family’s toilet as people across the city find themselves without running water after pipes ruptured due to freezing temperatures following an unprecedented winter storm in Houston, Texas, U.S., February 19, 2021. REUTERS/Callaghan O'Hare/File Photo

"There could be a number of retail service providers who aren't able to remain in business if ERCOT does not relent on the demand for payment," said Catherine Webking, an attorney who represents companies seeking fee cuts.

It is unclear how the PUC will act. It supervises grid operator Electric Reliability Council of Texas (ERCOT), which acts as a clearinghouse, collecting money from electricity sellers and paying those that produce the electrons. It is facing a $2.46 billion shortfall from companies that have not paid their bills. ERCOT on Monday said it would begin naming businesses that have failed to pay and disclose the amounts each owed.

ERCOT's plan to name and shame scofflaws "is perfectly fair game," said Patrick Woodson, chief executive of ATG Clean Energy, who said his company is unscathed. However, he added: "I hope they will apply the same standards to identifying the market participants who made massive profits during this disaster."

The crisis claimed its first victim Monday when Brazos Electric Power Cooperative Inc, whose members provide power to about 660,000 in the state, filed for bankruptcy after receiving bills for $2.1 billion from ERCOT.

(Reporting by Gary McWilliams; Editing by Leslie Adler)

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