ERCOT Financial and Regulatory Update – Feb 23, 2021

By March 3, 2021 News

The events of last week in Texas and the Midwest have left many retail consumers of power and natural gas worried about potential impacts to their energy spend. While the immediate event is over, there are ongoing concerns and potential changes coming to market rules, particularly in Texas. This edition of the Market Edge is dedicated to providing some insight into these questions.

Understanding the Financial Impact to Retail Power and Gas Bills

Retail customers on fixed price contracts (gas or power) should be insulated from the severe price spikes seen in the market last week. However, consumers with certain variable based contracts should be concerned. Customers with contracts where the following cost components were not fixed, but instead indexed or passed through, could see a meaningful increase their February bills.

  • Electricity indexed to either the Day-Ahead or Real-Time markets
  • Ancillary service costs treated as a pass-through cost
  • Line losses treated as a pass-through cost
  • Natural gas costs indexed to Gas Daily prices (note that contracts indexed to First of the Month prices will likely not be impacted)

Additionally, natural gas customers that were subject to utility curtailment or Operational Flow Orders (OFOs) could have exposure to Gas Daily prices if they did not fully comply with the curtailment or OFO.

Energy Edge is poised to help customers perform the following in an effort to help them understand the potential economic impact to their February electricity & gas invoices if they are exposed to the above costs.

  • Estimated Invoice:  We can help create an estimated invoice based on types of costs indexed or passed through using either actual metered data or estimated usage.
  • Invoice Validation: Once invoices are issued by a supplier we can validate if the charges have been correctly calculated.

In addition to the above, Energy Edge can help in addressing:

  • Disputes with suppliers about curtailment orders and Operational Flow Orders
  • Price discrepancies
  • Declarations of force majeure by power and/or gas suppliers
  • Other contractual questions or disputes

Recent Regulatory Actions Following Winter Storm Event

In the aftermath of last week’s events in Texas, a number of regulatory and legislative actions have taken place.  Below is a summary of these events.

TEAM Files Emergency Petition to Correct Wholesale Prices
On Friday February 19, the Texas Energy Association for Marketers (TEAM) filed an emergency petition with the Texas Public Utility Commission requesting a revision to real-time market prices. Specifically, TEAM is requesting the PUCT to instruct ERCOT to remove the administrative price adders that set prices at the high offer cap of $9,000/MWh effective February 18 at 1:05 am and revise real-time prices accordingly.

On Monday February 15, the PUCT issued an emergency order directing ERCOT to count firm load shed volumes in the calculation of real-time prices. This effectively set real-time prices at the high offer cap of $9,000 / MWh for as long as there was firm load-shedding on the grid. At 1:05 am on Thursday February 18, ERCOT suspended all load-shedding instructions but kept in place its EEA3 emergency status and continued imposing the administrative adder aimed at keeping real-time prices at $9,000/MWh. Accordingly, TEAM is requesting real-time prices be revised to comply with the PUCT’s instruction that prices should be administratively adjusted to the high offer cap only as long as firm load-shedding was being implemented.

ERCOT to Use “Available Discretion” to Adjust Collateral Calls
On Friday February 19, ERCOT stated in a market notice that, “In an attempt to protect the overall integrity of the ERCOT market by mitigating the disruption of supplier defaults, ERCOT is using its available discretion under the Protocols to adjust collateral for Counter-Parties (CPs) on a case-by-case basis, dependent upon the CP’s activity in and risk to the market.” ERCOT encouraged Qualified Scheduling Entities (QSEs) to contact ERCOT in advance of an invoice payment due if they believed they may be unable to pay the invoice in part or in full.

Concerns Over Estimated Meter Reads; Retail Invoice Delay
In a PUCT Open Meeting on Friday February 19, the PUCT expressed concern regarding retail invoices being issued to consumers using estimated meter reads. Estimated meter reads are common with smaller electricity meters and do not reflect the actual consumption used. If invoices are based on estimated meter reads, they would not accurately reflect customer outages or curtailments. The PUCT strongly encouraged retail electricity providers to delay invoices to ensure they are based on actual metered consumption.

PUCT Orders Suspension of Disconnections for Some Electric and Water Customers
On Sunday February 21, the PUCT suspended its rules relating to assessments of late fees and the disconnection of service for non-payment. These exceptions applied to investor-owned utilities (AEP, Centerpoint, Oncor, and Texas New Mexico Power) and retail electric providers serving residential and small commercial customers. No changes were made to the rules governing medium and large commercial and industrial customers.

Legislation Introduced in Response to Winter Weather Event
Senate Bill 680 seeks to clarify that electricity is a necessity during a declared disaster under the Deceptive Trade Practices Act and would add electricity as a service covered under an anti-price gouging statute.

House Bills 1965 and 2016 both seek to authorize the PUCT to obtain “emergency reserve power generation capacity” when appropriate to prevent blackout conditions. If passed, these bills would direct the PUCT to establish rules under which the emergency actions would be implemented.