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ERCOT Overcharged Texas Power Companies $16 Billion After Widespread Outages

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Snow covered road and vehicle in Austin-ERCOT Overcharged Texas Power Companies $16 Billion After Widespread Outages-ss-Featured

The Electric Reliability Council of Texas (ERCOT) overcharged $16 billion from power companies across the state on the week of the winter storm, as per the council’s market monitor filing.

According to Potomac Economics, which works with the Public Utility Commission of the state as an independent market monitor, ERCOT had kept the market prices of electricity at a high rate. According to a letter, this lasted for two days after power outages in the state ended on Feb. 17. ERCOT should have already reset rates the day after outages ended.

As per the market monitor, this move to keep rates high ended up with $16 billion in overcharges to power companies in the state.

A company affected by this overcharge could pass costs to their customers, but this depends on the service contract they have, as per Detlef Hallermann, who serves as the director at Texas A&M University’s Reliant Energy Trade Center.

In the state, supply and demand determine wholesale electricity rates. If the demand is high, ERCOT lets the prices increase. When the storm devastated Texas, PUC told the grid operator to place wholesale prices at $9,000 for every megawatt-hour, which is the maximum.

The instruction to raise prices aimed to give incentive to those generating power in the state. The PUC hopes that these power generating companies would let more power flow into the grid. With this, providers buy the power they supply people from the wholesale market. This is something companies are obligated to do, thanks to a service contract.

Texas Power Companies Forced to Buy at Inflated Rates

Since ERCOT made the error, companies were forced to acquire power from the market at inflated rates.

According to Potomac Economics Vice President Carrie Bivens, it is likely that the error will cause higher levels of defaults. She also said that PUC needs to instruct ERCOT to pull out pricing interventions that happen after the outages are over. She also said that letting them stay can cause “substantial and unjustified” harm to the economy,

The overcharge has led some retail providers to file for bankruptcy.

Since the storm had ravaged Texas, many retail providers have experienced financial distress. A lot of such companies had to buy power on the wholesale market at staggeringly high rates.

One such company is Brazos Electric Power Cooperative. Despite being the state’s largest power cooperative, it needed to file for bankruptcy protection. It incurred $2.1 billion in charges owed to ERCOT, as per documents filed in court on Monday.

Additionally, a lot of retail power companies filed complaints. They claimed that those that generate electricity profited despite not being able to produce enough power during the storm.

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