A study released June 1 found that electricity prices in the Electric Reliability Council Of Texas market would have been roughly 73% lower during portions of February's deadly winter storm had regulators not inflated them to the $9,000/MWh legal cap.
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The Public Utility Commission of Texas had directed ERCOT to increase electricity prices during the storm in an attempt to increase power supply and reduce consumption as power plants buckled under the high demand caused by the Arctic blast. Prices stayed around the cap for a 32-hour period between Feb. 15 and Feb. 19, running power suppliers' costs into the billions.
Vistra, parent of Luminant, the largest generator in Texas, was one such company hit hard by the sky-high pricing. It commissioned the study, which was conducted by London Economics International, and submitted it to the PUC (Project Nos. 51617 and 51812) as regulators consider requests to reprice transactions. Overall, investor-owned power companies that participate in the ERCOT market reported at least $10 billion in losses from the storm, much of them associated with the abnormally high prices of power and natural gas.
Down to $2,404/MWh
Energy prices would have averaged $2,404/MWh if not for the PUC orders to increase them, according to the study. The study said it would be a "straightforward matter" for regulators to unwind the transactions and revert back to real-time energy prices.
Day-ahead, wholesale electricity prices averaged $38/MWh in ERCOT in 2019, according to the U.S. Energy Information Administration.
Regulators and grid officials defended the decision to increase the prices during contentious legislative hearings earlier in the year. But ERCOT's market monitor in March raised concerns about the inflated prices, and Lieutenant Governor Dan Patrick, who is also the president of the Texas state Senate, argued in favor of the repricing of transactions. Governor Greg Abbott split with Patrick and said that the PUC has no authority to reprice the transactions. Abbott and Patrick are both Republicans.
Lawmakers took no action on repricing by the end of the session on May 31. Instead, lawmakers turned to securitization and dipped into the state's rainy day fund in bills they sent to Abbott's desk. Various parties are asking utility commissioners to consider repricing.