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Trader: Had Erroneous ERCOT $9,000 Price On May 30 Lasted Longer, "Many" Retail Electric Providers Would Have "Gone Bankrupt"

Trader Files Complaint Seeking Re-Pricing Of Interval

Notes REP With Wholesale Pass-Through Pricing Did Not Charge Customers For Spike, Credited Customers Based On Average Of Other Intervals

June 26, 2019

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Copyright 2010-19
Reporting by Paul Ring •

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of

Aspire Commodities, LLC has filed a formal complaint at the Public Utility Commission of Texas against ERCOT, seeking an order directing ERCOT to re-price the published settlement prices for interval 14:50 on May 30, alleging that the event which led to the spike, citing an ERCOT presentation to the WMS (as alleged by Aspire), was a Qualified Scheduling Entity wrongly setting the HSL and LSL levels for the generation they represented at 0, does not reflect a valid market solution

Aspire alleged in its complaint, "On May 30, 2019 Aspire Commodities, LLC ("Aspire") lost money on ERCOT futures contracts they had transacted on the Intercontinental Exchange. Aspire lost money not because its research was wrong, quite the opposite. In fact, the company's financial position was correct given the actual market fundamentals that existed. Our forecast of load was correct. Our forecast of available generation was correct, as was our expectations about the state of the transmission grid. There was no sudden unforeseen reliability event. We had the correct position yet we lost money because ERCOT at approximately 2:50PM allowed an undisputed mistake to create an invalid market solution."

Aspire alleged that, using average values for locational marginal prices and system load for the intervals 1430, 1445 and 1500 on May 30, 2019, "the 'cost' of the artificial and fictitious price spike created by ERCOT was $18,374,229."

Aspire alleged that, "there can be no doubt whatsoever, that had the exact same conditions existed for a longer time period the market would have ceased to exist because it is highly likely that many of the retail electric providers would have gone bankrupt. The length of time that a 'mistake' is allowed to continue should not be the determining factor in whether it is corrected. An error is an error."

Aspire noted in its complaint that retail electric provider Griddy, which passes-through wholesale costs to customers under a membership program, did not charge customers the $9,000 cost to its retail customers, and instead credited customers back the difference between what the price actually was for the interval and what it should have been (based on the average pricing immediately before and after the spike).

Aspire said, "While Griddy decided it was in their best interest to absorb the costs of ERCOT's error, their customers will, in the long run — like all retail customers in Texas — pay for this error. So too will all businesses who chose to operate in Texas. And every customer anywhere in the world who purchases a product made in Texas will pay a slightly higher price if this invalid market solution is not re-priced. There is no free lunch and every future retail contract offered in ERCOT will have to reflect the fact that prices are allowed to reach $9000 not just because of market fundamentals but also as a result of inefficient, incorrect and unilateral decisions made by ERCOT."

Aspire stated, "These were real prices and real expenditures and represent a very significant unjustifiable transfer of wealth from load to the generators. We simply cannot understand how anybody associated with the market cannot argue that repricing is absolutely required for this interval. Furthermore, we cannot understand how, under any interpretation or [sic] the terms, this result is can be defined as a 'valid market solution' or that the market was 'properly functioning' and produced 'efficient', 'fair', and 'unbiased' outcomes. The integrity of the market, ERCOT and the PUCT is at stake and the loss of integrity will necessarily harm everybody. How can this outcome, if allowed to stand, be explained to electricity consumers in Texas?"

Aspire stated, "Furthermore, the effect of ERCOT's action was not limited to just the cost of power on May 30th. The invalid market solution was solely responsible for lifting the price of power for the July and August futures contract by $6.00 per MW -- from $93.00 to $99.00"

Aspire alleged, "The decisions taken -- or, in this case, not taken -- by ERCOT have far ranging implications that extend far beyond May 30th. Current and future consumers and generators of electricity will feel the consequences, as will entities beyond the boundaries of the State and potentially even the nation."

Aspire alleged, "at no time before or during the interval in question did actual frequency drop to the level of an alert. Thus the ERCOT operators instantaneously knew full well that there had been no sudden loss of generation. They knew immediately with 100% certainty that there was no physical condition on the grid that warranted $9000 prices. Under any definition of the term, it is impossible to understand how the solution obtained by SCED can be considered and defined as a 'valid market solution.' If this situation can be considered a 'valid' market solution the term has no real or effective meaning."

Aspire stated, "we listened closely to ERCOT's explanation of events at the Wholesale Market Subcommittee (WMS) meeting on June 5, 2019 -- namely that a Qualified Scheduling Entity had wrongly set the HSL and LSL levels for the generation they represent at 0. This had the obvious affect of dramatically reducing the amount of capacity available to the SCED process and caused prices to reach the maximum allowed in the market. The nearly instantaneous reliance on QSE provided data, without any apparent or meaningful Quality Control on the part of ERCOT, suggests that it is timely, desirable and necessary to review the pros and cons of other potential electricity market designs currently operating in the United States that use state estimator data rather than relying on flawed — and manipulable — data from Market Participants. At that same meeting we were deeply concerned to hear ERCOT staff publicly state 'there is incorrect data for every interval.' We have never heard staff or management from PJM, MISO, SPP, NYISO, ISO-NE or the CAISO make a similar statement."

Aspire alleged, "The actions of ERCOT, and more importantly their resulting decision not to re-price electricity for the affected interval, despite the indisputable knowledge that the prices were fictitious and artificial, only increases the uncertainty of potential investors in generation, storage, demand side management and interruptible load, not to mention existing plant operators."

Aspire said, "The question is not one of mathematics, but rather what should be done when an undisputed error takes place and the software creates a price that is completely out of line with reality."

Docket 49673

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