Texas PUC Chair: Weather Event An "Unusual Circumstance", But Not One For Which Legal Authority Exists For PUC To Re-price Market

Lt. Gov. Cites ERCOT Protocol Allowing Suspension Of Settlements Due To, "Unusual Circumstances"

PUC Chair: "Market Was Killing People"

March 11, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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During a hearing of the Texas Committee on Jurisprudence, Texas PUC Chairman Arthur C. D'Andrea agreed that the ERCOT weather event was an, "unusual circumstance," but maintained that continued pricing at the $9,000 cap after residential load shed ended was not a "mistake", and that a cited section of the ERCOT Nodal Protocols does not empower the PUC to change the prior prices

Lt. Gov. Dan Patrick, who appeared at the hearing to question D'Andrea, cited Nodal Protocol 9.5.12, Suspension of Issuing Settlement Statements for the Real-Time Market, which states, "The ERCOT Board may direct ERCOT to suspend the issuance of any Settlement Statement for the RTM to address unusual circumstances."

D'Andrea said that he does not believe that such section authorizes re-pricing in this instance because no mistake was made in pricing.

Under questioning from various senators, D'Andrea has agreed that the PUC has absolute authority over ERCOT.

Patrick said that on Feb. 18-19, there was no PUC order in place that authorized ERCOT to set prices at $9,000 per MWh. Patrick said that the PUC's prior order setting such prices had, "expired."

D'Andrea disagreed and said that the PUC's pricing order remained in effect.

Patrick pointedly asked if the system was in "load shed" starting at midnight on Feb. 18, and D'Andrea replied, "Yes," citing industrial load which remained offline.

As previously reported, D'Andrea admitted that when he first saw that the $9,000 prices were continuing after ERCOT had ceased residential load shed, he called ERCOT's CEO and asked, "what the heck is going on, residential load shed is done."

Patrick said in a subsequent phone call between D'Andrea and Patrick, D'Andrea had described his prior thinking of the pricing effective Feb. 18, prior to such conversation with ERCOT's CEO, as being that such pricing, "was a mistake and the wrong decision."

As previously reported, D'Andrea said that ERCOT's CEO convinced him that continuing the $9,000 prices was appropriate due to industrial loads that remained offline and to ensure that adequate generation was online should these loads return.

Earlier in an appearance before the committee, Carrie Bivens, ERCOT's IMM, testified that there was no instruction from ERCOT for industrial customers to shed load

Patrick alleged that in his phone conversation with D'Andrea, that while D'Andrea mentioned the call with ERCOT's CEO, D'Andrea did not mention the issue of industrial load or other reasoning for why the continued pricing at the cap was no longer a "mistake" as D'Andrea had initially thought

Patrick asked D'Andrea that, if the Governor said that the pricing was clearly a mistake or an unusual circumstance, would D'Andrea order re-pricing? D'Andrea again said that he believes that the PUC does not have authority to order re-pricing under the circumstances as no mistake occurred.

Earlier under questioning from senators, D'Andrea said that while the PUC's decisions on pricing, "didn't make economic sense," the focus at the time of the PUC's orders was on restoring power, and ending the emergency

The "market was killing people," D'Andrea said in response to questions about why the PUC intervened to set prices at $9,000 and did not let the market set prices

D'Andrea said that he, "lost faith in the market," because of the amount of time generators were offline despite facing harsh penalties, through market pricing, for not being available

D'Andrea did say, looking back and now knowing how long generation would be offline, he would have decided to "RUC" everyone (reliability unit commitment), and move to a "cost-plus" approach to compensation, rather than market-clearing scarcity prices, though such is a policy question, and D'Andrea maintained that no "mistake" as defined under PUC rules or ERCOT protocols was made.

D'Andrea also repeated that REPs would "pocket" any money they would receive under re-pricing.

Several senators emphasized various existing protocols which also establish ERCOT's authority to fix pricing errors due to inconsistency with the protocols or PUC rules, and that market participants are expected to be well-familiar with the protocols and such authority. Accordingly, any re-pricing would not be disturbing expectations as alleged by opponents, given that the resettlement process is understood by sophisticated market participants

Senator Joan Huffman, Chairwoman of the Committee on Jurisprudence, pushed back against the "angst" about price correction, noting ERCOT's settlement timeline, and that the final statement deadline (55 days) has not passed.

Senator Charles Schwertner likewise said that price corrections in ERCOT are, "not something new," to the market

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