Lt. Gov. Dan Patrick Calls for Payback of ERCOT Overcharges

By Bill Oakey – March 9, 2021

The unbelievable $16 billion in utility overcharges that followed the February storm will have to be paid back by ERCOT, and the Public Utility Commission will not be able to stop it. Lt. Gov. Dan Patrick called for the action on Monday, citing ERCOT’s own regulations requiring the paybacks to be made within 30 days (Nodal Protocol Section 6.3 (6) (a).

“Unscrambling the egg” to make it happen will no doubt require armies of lawyers and rooms full of accountants. In addition to the large block of overcharges that happened after the storm was over, Patrick cited other billing errors that came from stratospheric pricing well beyond the State’s already high approved cap. The cap was set at $9,000 per megawatt-hour. But IMM, the outside firm that monitor’s ERCOT’s operations identified sporadic charges as high as $24,000 per megawatt hour. Those errors must now also be corrected.

In the meantime, heads are rolling at all level’s at the State’s utility authorities. On Monday, a second member of the three-member Public Utility Commission resigned. Shelly Botkin’s departure was effective immediately, leaving just Chairman Arthur D’Andrea in place. Then, early Tuesday morning, the Texas Observer reported that ERCOT is refusing to turn over records related to their preparedness and their response to the winter storm. They are seeking an opinion from the State Attorney General to avoid disclosing the information. ERCOT insists that it is not subject to the State’s open records laws because it is not a State agency. The result could be a long legal dispute that ends up at the Texas Supreme Court.

Stories of astronomical electric bills from ERCOT’s demand-based pricing system and the billing errors abound. On Monday, the City of Denton filed suit against ERCOT over an electric bill for $207 million. This compares to their entire annual budget of around $230 million. On a hopeful note, there is word emerging of a huge Tesla “secret battery” that is being constructed at a site close to the ERCOT grid. If all goes well, this could become part of a much needed solution to our power generation woes.

The Legislature is currently rolling out a bucketful of bills to deal with some of the immediate problems. I will not be surprised if they have to appoint a two-year interim committee to hammer out long term reforms to fix the entire tangled up mess. The question remains as to what might happen if we get another severe winter storm before enough current power generating facilities are sufficiently weatherized and enough new ones can be brought online. In my view, the best way to protect citizens from serious danger and costly water-related repairs would be to focus on strategies to implement effective rolling blackouts.

Good News From Austin Energy!

While many Texas utilities faced devastating losses during the storm, Austin Energy estimates that it earned $54 million. That’s because our City-owned utility has done an excellent job weathering its generating facilities. The actual amount of revenue that Austin energy receives, however, could be anywhere between minus $16 million and plus $104 million. It all depends on how well ERCOT “unscrambles the egg” to reprice the State’s power purchase transactions. In any case, our utility’s ratepayers should not be saying “yikes” to massive spikes in forthcoming bills.

But…wait! You might be wondering why we had to freeze in the dark if Austin Energy weatherized most of its power plants, and they were working during the storm. That’s because our electricity goes into the ETCOT grid, where it is sold statewide through a convoluted demand-based bidding process. A process that we now know can lead to other-worldly prices, and become riddled with pricing errors.

Where Is Austin Energy’s Reward for Weatherizing Power Plants?

Under the current system, why doesn’t Austin Energy get some kind of financial reward for better management of its facilities? This is definitely an issue that our City Council and our Legislative delegation needs to look into. The reward for well-managed utilities could come in the form of discounts applied to power purchased from the grid. Or, the State could hold some revenue in reserve from power that is sold. Then, they could do an annual review and issue payments to well-managed utilities, based on a certain set of criteria.

Perhaps there is some provision buried deep within the  troves of ERCOT and PUC regulations that we just don’t know about. If not, let’s hear it for a new bill at the State Capitol to give utilities like Austin Energy and their ratepayers proper compensation-for now, and into the future.

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