Muni utility sues ERCOT as fallout from Texas’ electric power crisis continues

Municipal utility CPS Energy filed a lawsuit against the Electric Reliability Council of Texas (ERCOT) in a move it said was intended to protect customers from “excessive, illegitimate, and illegal prices” stemming from a mid-February winter storm.

A utility statement said that “ERCOT’s failure” during the days-long weather event and related power shortages led to “one of the largest illegal transfers of wealth in the history of Texas.”

The San Antonio-based utility alleged in its lawsuit that ERCOT “ran up $20 billion in charges” for five days of energy supply due to its “lack of oversight, preparedness, and failure to follow its own protocols.”

In early March, an Independent Market Monitor concluded that ERCOT likely overcharged market players to the tune of $16 billion, and recommended that regulators direct that the amount be reversed. Resignations have cut the number of regulatory commissioners from three to one, and that remaining Public Utility Commission (PUC) member, Arthur D’Andrea, has stood firm against such calls.

“I totally get how it looks like you’re protecting consumers” by readjusting electric prices, D’Andrea was quoted as saying in early March. “But I promise you you’re not.” D’Andrea was named by Gov. Greg Abbott to replace DeAnn Walker as chair following her resignation over the PUC’s handling of the power crisis. Commissioner Shelly Botkin also resigned.

In its lawsuit, CPS Energy asked the court to act to prevent harm to CPS Energy and its customers. It alleged breach of contract, negligence, and violation of the Texas Constitution.

The lawsuit said that as the electric power crisis deepened, it became clear that there was not enough power available to meet demand. The PUC and ERCOT raised prices from $30/MWh to $9,000/MWh and “held them there for an extended period of time.”

That move was compounded by the addition of ancillary services prices, which reached as high as $25,000/MWh, a level that CPS Energy called excessive.

Allegations

The lawsuit alleged that ERCOT issued a call to the market to curtail more than 10 GW of load on Feb. 15. Regulators also issued orders on Feb. 15 and again on Feb. 16 in which they said that energy prices across the system were clearing at less than $9,000/MWh, and that prices should “reflect scarcity of the supply.”

In other words, if customer load was being shed, then scarcity by definition was at its maximum. That means the market price for energy also should have been at its highest, according to the lawsuit’s explanation of regulators’ thinking.

However, according to the Independent Market Monitor, ERCOT recalled the last of its instructions to shed firm load at 11:53 p.m. on Feb. 17. The lawsuit said that prices that had been at the System-Wide Offer Cap of $9,000 “should have ended immediately at that time.”

Instead, ERCOT held market prices at that level for an additional 32 hours through the morning of Feb. 19.

On March 1, the largest power cooperative in Texas filed for Chapter 11 bankruptcy protection, saying it received a $1.8 billion bill from ERCOT that it is unable to pay. Brazos Electric Power Cooperative Inc. filed for reorganization in the U.S. Bankruptcy Court for the Southern District of Texas.

In a statement, Brazos said ERCOT sent it “excessively high invoices” with payment required “within days.” The company said that it “cannot and will not foist this catastrophic financial event” on its members and consumers.