CPS Energy Sues ERCOT Over High Prices; Texas Officials Urge PUC To Lower Costs
This story has been updated to include a statement from ERCOT.
CPS Energy in San Antonio has joined a chorus of criticism against ERCOT and the Public Utility Commission (PUC) over sky-high electricity prices that lasted for days during February’s extreme winter weather. San Antonio’s municipally owned electricity utility announced a lawsuit against ERCOT on Friday.
The concerns boil down to the PUC’s approach to electricity pricing on the wholesale “spot market,” where utilities like CPS go to buy energy in real time. During the storm, many electricity generators — including a CPS coal plant — were impacted by the icey weather, which decreased supply as demand surged, leading to higher prices.
Due to the emergency nature of this scarcity event, the PUC, which oversees ERCOT, then allowed the “spot market” price to rise to its maximum level while also removing a kind of “circuit breaker” that could’ve forced it to drop sooner. Importantly, the price stayed high during the final days of the crisis, even as rolling outages ceased.
CPS owes more than $300 million after buying extra electricity from ERCOT.
San Antonio Mayor Ron Nirenberg said on Friday that it was the largest illegal transfer of wealth in the state’s history. He added that state regulators failed miserably to live up to their responsibilities.
“ERCOTs poor performance and preventable mistakes leave CPS Energy little choice," he said. "Meekly accepting and accepting the illegal burden created by state energy regulators was never considered as an option.”
In a written statement, an ERCOT spokesperson said, "(ERCOT's approach to pricing was) an intentional and carefully considered decision to protect human health and safety while stabilizing the electric grid. It was not an error."
David Patton is the president of Potomac Economics, which contracts with the PUC to serve as the Independent Market Monitor (IMM) for the ERCOT market. In a formal memo, the IMM said the prices shouldn’t have been kept so high after the outages stopped.
“I don’t understand what regulatory basis there was to take that action,” Patton told Texas Public Radio. “Now, I’m not a lawyer, but that action wasn’t authorized in any official manner.”
Patton said the PUC and ERCOT didn’t even follow the commission's own guidelines in keeping the price so high for so long.
“The (PUC) had authorized one thing, and they went beyond what was authorized,” he said.
The IMM said the additional period of high prices resulted in $16 billion in overcharges to electricity providers, but also, “correcting this error will not reduce costs to consumers by $16 billion” because so many providers both generate and use electricity, meaning they are both making and spending money. Overall, the IMM estimates that a retroactive change in price would have an approximately $5 billion impact.
The PUC has indicated that it will not lower prices retroactively, despite the urging of the IMM and state officials.
Most consumers were shielded from short-term bill shocks related to the high prices. Their electricity providers, like CPS, were not. But not all providers fared poorly.
For example, Austin Energy says it made money during the crisis because its generators performed well. CPS, on the other hand, lost a lot. That’s largely because its coal plant dramatically underperformed, forcing the utility to purchase expensive natural gas to fuel that plant. Other providers took losses so great that they are now going under.
The emerging financial crisis has resulted in some providers not being able to pay ERCOT what they owe. ERCOT says it’s been short paid more than $3 billion by the demand side.
Beth Garza, who served as independent market monitor until 2019, said the open IMM recommendation could alleviate the emerging financial crisis.
“We are currently sitting here with a huge, couple-billion dollar tidal wave of money that's sort of floating around that hasn't been paid and is owed, and there's uncertainty around it,” she said. “A way to deal with that is to shrink the volume of dollars flying around. Because we know we have this big uncertainty here — this couple-billion dollar uncertainty. We’ve got to shrink the total pot.”
Officials with the PUC did not immediately reply to requests for comment.
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