ERCOT Market Securitization Bill Sent To Governor, Omits Relief To REPs For 32 Hours At $9,000 After Load Shed Ended

Financing Programs Include Relief For REPs From Ancillary Service, Reliability Adder Charges Above $9,000, As Well As ERCOT Defaults/Short-Pays

Lt. Gov. Calls For Special Session To Include Electricity Ratepayer Relief

May 31, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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The Texas House and Senate have both passed a conference committee version of HB 4492, and the bill has been enrolled and is being sent to the governor

The enrolled version of HB 4492 omits from the "uplift balance" financing program the following costs: "reliability deployment price adders included in the cost of energy used to supply end-use customers during the period beginning 12:01 a.m., February 18, 2021, and ending 9 a.m., February 19, 2021."

In other words, the enrolled HB 4492 does not include a financing program for REPs related to difference in cost from energy prices that were set at the $9,000 per MWh cap after load shed had ended (the 32 hours) and the market prices that would have resulted absent the PUC setting prices at $9,000

Under the bill as enrolled, "uplift balance" means, "an amount of money of not more than $2.1 billion that was uplifted to load-serving entities on a load ratio share basis due to energy consumption during the period of emergency for reliability deployment price adder charges and ancillary services costs in excess of the commission's system-wide offer cap, excluding amounts securitized under Subchapter D, Chapter 41 [the cooperative securitization bill]. The term does not include amounts that were part of the prevailing settlement point price during the period of emergency."

In other words, the enrolled bill provides a financing program available to REPs for ancillary service charges and reliability deployment price adders above the $9,000 cap

The costs (referred to as "uplift charges") under the financing program will be recovered on a nonbypassable basis from all load-serving entities on a load ratio share basis, which may be translated to a kWh charge, including load serving entities who newly enter the market, but excluding the load of entities that opt out

The terms of the opt-out under the enrolled version of the bill are as follows: "The commission [PUC] shall develop a one-time process that allows municipally owned utilities, electric cooperatives, river authorities, a retail electric provider that has the same corporate parent as each of the provider's customers, a retail electric provider that is an affiliate of each of the provider's customers, and transmission-voltage customers served by a retail electric provider to opt out of the uplift charges by paying in full all invoices owed for usage during the period of emergency."

Load-serving entities and transmission-voltage customers that opt out shall not receive any proceeds from the uplift financing.

Under the enrolled bill, all load-serving entities that receive offsets to specific uplift charges from the independent organization must adjust customer invoices to reflect the offsets for any charges that were or would otherwise be passed through to customers under the terms of service with the load-serving entity, including by providing a refund for any offset charges that were previously paid.

Under the enrolled bill, a load-serving entity that receives proceeds from the financing shall return an amount of the proceeds equal to any amount of money received by the entity due to litigation seeking judicial review of pricing or uplift actions taken by the PUC or the independent organization in connection with the period of emergency.

The enrolled bill does not include provisions barring a load-serving entity that receives financial assistance from initiating, pursuing, or continuing a legal action that seeks judicial review of pricing or uplift actions taken by the PUC or ERCOT

The enrolled bill also does not include a requirement for LSEs to submit information to the attorney general concerning their costs in order to participate in the financing program

During final passage of HB 4492, Lt. Gov. Dan Patrick blamed the House for omitting any ratepayer assistance funds from HB 4492, as were authorized under a Senate amendment, and not addressing any relief related to the 32 hours during which pricing remained at the cap after load shed had ended. Patrick called for the special session to address such items, and said that the Senate would not consider further electricity market issues absent the inclusion of ratepayer relief.

Under a separate provision, the enrolled HB 4492 also creates a financing program for default charges at ERCOT (short-pay amounts) up to $800 million.

The enrolled bill maintains a provision designed to compel munis and co-ops to use a securitization program specific to such munis and co-ops by providing that LSEs must promptly pay any amounts owed to ERCOT, and that, "The commission [PUC] may not allow the defaulting market participant to continue to be a market participant in the ERCOT power region for any purpose or allow the independent organization to accept the defaulting market participant's loads or generation for scheduling in the ERCOT power region until all amounts owed to the independent organization by the market participant as calculated in this section are fully paid."

Ostensibly, this provision requires "competition" in the muni or co-op's service area if they do not use the securitization program to pay ERCOT

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