Exelon Seeks Court Order Declaring Texas PUC's $9,000 ERCOT Pricing Orders Invalid -- EnergyChoiceMatters.com

Exelon Seeks Court Order Declaring Texas PUC's $9,000 ERCOT Pricing Orders Invalid

April 21, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Pursuant to Texas Government Code §§ 2001.035(a) and 2001.038(a), Exelon Generation Company, LLC ('Exelon Generation') and Constellation NewEnergy, Inc. ('Constellation') (collectively, 'Plaintiffs' or 'Exelon') sought from Travis County, Texas district court a declaratory judgment invalidating what the Plaintiffs termed a Texas PUC "agency rule" -- namely, the Texas PUC's February 15 and 16 orders setting the ERCOT market price at $9,000 per MWh during the winter weather event.

Alternatively, Plaintiffs seek judicial review of the same orders pursuant to Texas Government Code § 2001.171. Plaintiffs respectfully show as follows:

In the petition, Exelon alleged, "This is a suit for declaratory judgment to invalidate Section I of certain Commission orders dated February 15 and 16, 2021 (the 'Load Shed Rule'),2 which was adopted by the Commission in a manner that did not substantially comply with the mandatory procedures set forth in the Texas Administrative Procedure Act, and because the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, Plaintiffs’ legal rights or privileges."

In the petition, Exelon said, "Plaintiffs alone face estimated losses of between $750 million and $950 million in pre-tax dollars from Winter Storm Uri, with the Load Shed Rule causing a significant portion of that amount."

"Plaintiff Constellation now has retail customers who utilized indexed products who will be unable to pay their bills," Exelon said

Concerning the impact of the PUC's action, Exelon further said in the petition that, "The fallout has been swift and dramatic. The single largest electric co-operative in the state has been forced into bankruptcy. Numerous retail electric providers have been wiped out, and dozens more are fighting for their existences. Many customers saw electricity bills that were almost 100 times their usual amount—adding insult to the injury of enduring blackouts in subzero temperatures."

Exelon said in the petition that, "Despite the fact that it was unavailability -- not a pricing issue -- that caused the outages, the Commission rushed to implement a new rule requiring ERCOT to force maximum energy prices on an already beleaguered electricity market."

Exelon alleged, "Although the Commissioners stated the lack of maximum energy prices was inconsistent with the 'design of the ERCOT market,' it is the Commission’s rushed Load Shed Rule that is inconsistent. The purpose of the Scarcity Pricing Mechanism is to encourage new power plant construction so that there will be more available generation capacity in the future. Imposing maximum prices during the winter storm could not somehow make additional generation appear because it could not thaw natural gas pipes, wind turbines, or other critical generation equipment. And even if there were additional generation that could have been called on to address the shortage, ERCOT has a different mechanism, the Reliability Unit Commitment process, that gives ERCOT the tools to forcibly dispatch generation resources that are physically capable of generating but otherwise would not, if those resources are needed to meet demand on the system. ERCOT Nodal Protocol § 5.5.2. The existing market design had already rejected the inclusion of firm load shed in the HCAP pricing trigger, and provided another procedure for getting all available generation online to meet any immediate needs of the grid and providing assurance of cost recovery. The former Commissioners’ new rule merely raised the costs of an already devastating situation on the Texas market, without actually addressing the emergency power shortage."

Exelon alleged, "The orders devastated the market. The estimated total cost of electricity during the winter storm exceeds $50 billion, as compared to an estimate for the previous week of $4.2 billion. The impact of the Load Shed Rule on commercial and industrial customers, including agricultural facilities, manufacturing facilities, and even large churches, is crushing: these entities will end up paying astronomically high electricity bills as a result of the Commission’s actions. The State’s largest and oldest electric cooperative, Brazos Electric Power Cooperative, has filed for bankruptcy. ERCOT has seen payment defaults of over $2.9 billion from parties including competitive retailers, electric cooperatives, and municipalities. Fitch Ratings has placed all ERCOT retail and wholesale electric utilities on negative ratings watch status."

Exelon alleged, "The former Commissioners’ decision to trigger the Scarcity Pricing Mechanism by fiat during the recent winter storm signifies the arbitrariness that the APA, the Public Utility Regulatory Act, the Commission’s rules, and the ERCOT protocols were enacted to avoid. The Load Shed Rule was issued without notice, without publication, without public comment, and without reasoned justification. Had the Commissioners followed the legal requirements for modifying agency rules, Texas’s electricity market and those it serves could have been spared the drastic and unprecedented economic fallout."

Exelon's petition recites alleged legal infirmities in the PUC's adoption of the orders -- alleged infirmities which were extensively covered in our coverage of a prior Exelon request for rehearing of the orders. See more details on the legal arguments in our prior story here

In the petition, Exelon said that, in 2020, Constellation provided approximately 14 TWh of retail electricity to end-use customers in Texas.

The case, in Travis County district court, is D-1-GN-21-001772

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