Texas Lt. Gov.: Intent Of Uplift Financing Program Is Not To Give Taxpayer Dollars To Companies That Profited During Winter Storm; Urges Netting

August 16, 2021

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

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Texas Lieutenant Governor Dan Patrick has written a letter to the Texas PUC Chair and Commissioners stating that the Texas Senate would not have passed a bill giving taxpayer dollars to companies that profited during the winter storm, and said that HB 4492 requires netting

HB 4492 creates a program to finance, and provide funds to LSEs, Reliability Deployment Price Adder ("RDPA") charges and Ancillary Service costs above the Commission's system-wide offer cap for the period beginning 12:01 a.m., February 12, 2021, and ending 11:59 p.m., February 20, 2021 (known as "uplift")

As previously reported by EnergyChoiceMatters.com, Texas State Representative Chris Paddie sent a letter to the Texas PUC stating his opinion that HB 4492 does not authorize any "netting" of an LSE's costs under the program against any affiliate or other company

"I have reviewed the August 2, 2021 , letter Chairman Chris Paddie wrote to you where he makes the claim that House Bill 4492 from the 87th Regular Legislative Session 'does not contemplate or authorize any 'netting' between companies.' That may have been his view, but it was never presented or shared in the Texas Senate. The Senate would not have passed a bill giving taxpayer dollars to companies that profited during the storm," Patrick wrote

"If you review the Senate floor debate, you can plainly and clearly hear Senator Kelly Hancock, the Senate sponsor of the bill, state the $2.1 B cap includes netting," Patrick wrote

"House Bill 4492 had no reason to exist other than to provide relief for ERCOT market participants who were adversely affected by exorbitant ancillary service prices and help alleviate charges that would be passed on to customers," Patrick wrote

"Chairman Paddie's interpretation is in stark contrast to the intent and plain reading of the bill. If it was his intent to give taxpayer dollars to companies that profited during the storm instead of to those who were actually exposed to extraordinary costs and damages, I can confidently say that was not the understanding or intent of the Texas Senate when it passed HB 4492," Patrick wrote

"Chairman Paddie, who inexplicably and without notice removed the $2.1 B cap all-together from the conference committee report, only to replace it the next day once discovered by the Senate, has once again tried to alter the purpose of this bill from what the Senate passed," Patrick wrote

"I urge you to follow the plain meaning of HB 4492 as the Texas Senate considered and passed it and calculate cost exposure on a net basis," Patrick wrote

Separately, PUC Staff filed testimony in a docket concerning the financing program stating that an LSE's exposure, "should be calculated on a net basis taking into consideration the larger corporate structure of an LSE and the other market participants within that corporate structure."

As previously reported, Staff had previously expressed support for netting in a brief filed with the Commission

"Because of the extraordinary nature of the February market event, RDPA charges were uplifted to LSEs (through QSEs) to provide make-whole payments to generators for energy that was not needed or produced. There is no financial hedge that an LSE can use to avoid these RDPA charges. However, if an LSE is part of a larger corporate structure that includes affiliated Resources that received these payments, the larger corporate entity will only be 'exposed' to the remaining balance, if any. Therefore, the appropriate policy outcome is to net the charges and payments. Similarly, revenues for AS over the SWCAP represent a windfall for affiliated Resources, as such prices exceeded any submitted offer and any potential real-time clearing prices for energy," Staff said

Docket 52322

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