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Texas Retail Provider: "Volatile And Enormous" UFE Charges From ERCOT Related To Weather Event Could Spell "Life Or Death" For Market Participants

Says UFE Should Be Audited By IMM Before Being Invoiced

Also Says Other ERCOT Invoices & Uplifts Should Be Frozen Until Unoccupied Leadership Positions At ERCOT & PUC Are Filled, Reviewed By IMM

March 10, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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Texpo Power LP d/b/a Texpo Energy filed further comments at the Texas PUC concerning ERCOT invoices resulting from the recent weather event, drawing attention to, in particular, concerns about Unaccounted for Energy (UFE) calculations by ERCOT

In addition to alleging previously reported energy and A/S pricing decisions by ERCOT that Texpo termed "errors", Texpo further said, "an additional error and level of extreme volatility is now manifesting itself with ERCOT claiming, through recently distributed resettlement invoices, that ERCOT underestimated the load of load-serving-entities in its initial invoices for the Weather Event to the tune of billions of dollars on an aggregate level."

"Over the past three days, ERCOT has issued settlement statements for the days of the Weather Event claiming, via recalculated levels of UFE (Unaccounted for Energy), that load serving entities' load had been originally underestimated (erroneously) by enormous amounts far out of proportion to historical levels. Overall, expressed as a percentage, typical UFE levels are below 1 % overall (and often negative such as in 2017), according to ERCOT's latest Annual UFE Report," Texpo said

"Accordingly, usually UFE does not impose substantial danger of disrupting the entire market. However, for the days at issue during the weather event, ERCOT claims its resettled UFE costs were too low and now claims, as a result of UFE calculations, Texpo's load during the Weather Event was actually 15% to 20% higher than what ERCOT typically calculated in its original invoices to Texpo. This latest 'swing of the pendulum' is another enormous change. Combined with the skyrocketed balancing energy prices and ancillary services prices, the result of such 'swings of the pendulum,' back and forth, are dangerous and destabilizing," Texpo said

"To put a 20% change in load (attributable to UFE) in dollar terms, this is like saying an REP (initially stated by ERCOT to have 1,000 MW of load every hour during the Weather Event) actually had 1,200 MW of load. What's worse, such 200 MW of extra claimed load (per ERCOT's volatile unaudited calculations) multiplied by artificially high balancing energy price further magnifies the results of such errors. For the REP in the above example, when balancing energy hit $9,000/MWh for 96 hours during the weather event, this extra 200 MW of UFE attributed 'usage' accounts for additional charges totaling $172,000,000 (96 hours x 200 MW x $9,000 per MWh) for a single four-day period. This example does not even include the other resulting increased ERCOT (and ancillary service) charges based on load and the inflated balancing energy price, including Day Ahead and Real Time RRS and Load Allocated Reliability Deployment AS Imbalance (LARDASI), with real time RRS and LARDASI not being hedge-able. Nor does this example include the impacts of UFE inflating every other Market Participant's real time balancing energy, day ahead, and Ancillary Service charges, which is likely to lead to even more parties short paying ERCOT, and thus more uplifts to parties like Texpo (short pay uplifts are likewise not hedge-able). Like the falling of dominos being triggered, swings in ERCOT's UFE calculations are thus having a dangerously compounded effect," Texpo said

"Accordingly, an exception should be made to the usual settlement and resettlement timing and procedures within ERCOT given the latest unusual circumstances and considering the unfilled positions at the Commission and within ERCOT, along with the extent to which the impacts of this ERCOT levy are exacerbated and inflated by the $9,000 per MWh balancing energy prices and skyrocketed ancillary services prices: (a) such multi-billion dollar irregular UFE charges should await reliable market information and then be audited by the IMM before being invoiced to the market; and (b) a forensic analysis should be performed to trace which market participants would be the biggest beneficiaries of this atypical UFE activity," Texpo said

"The UFE calculations thus far coming from ERCOT are so volatile and enormous by any standard that any error could spell life or death for the parties to be charged. Many REP's pass through UFE to their industrial customers, which in many cases, include other governmental entities; this is an enormous issue for the State of Texas collectively. Overall, the usual sort of resettlement process may work when typical amounts of money are at issue. However, when the underlying amounts at issue are in many cases more than 100 times the normal amounts, and when so many leadership positions remain unfilled, ERCOT's normal day-to-day course of conduct is destabilizing the markets. This situation has been a crisis for weeks, and it now threatens to irreparably disrupt not just the ERCOT market but also the entire Texas economy," Texpo said

"Aside from implementing Lt. Governor Patrick's March 8,2021 Instructions to ERCOT and the Commission with Regard to Two Substantial and Obvious Errors, ERCOT should immediately freeze or delay (Extend) all further invoices and Uplifts until (a) the unoccupied leadership positions at ERCOT and the Commission are filled; (b) the IMM or an independent auditor calculates and affirms all calculations, invoices, settlements, and resettlements of ERCOT relating to the periods comprising the Weather Event," Texpo said

"The market needs clarity. Texpo believes the Commission's consideration and adoption of Texpo's proposals would help achieve that clarity. First, in its March 4,2021 comments, Texpo opposed some of the emergency relief requests of other REPs to the extent they seek to delay or postpone their payment obligations. However, Texpo clarifies in these comments that it does not oppose, and indeed Texpo strongly encourages, ERCOT and the Commission approving such delays, so long as ERCOT also postpones the short-pay adjustments or related uplifts associated with such delayed payments for the commensurate period. In other words, if a market participant is granted additional time to pay invoices pending a dispute or audit of their ERCOT invoices, such delayed payment should not be deemed a 'short payment' in the interim, and the rest of the market should not be invoiced by ERCOT to make up for the short-payed amounts. Otherwise, Texpo and other similarly situated market participants will be put into the unenviable position of being a 'lender' to its competitors who receive extensions, without any recourse against those companies," Texpo said

"Second, if additional time is granted for market participants to make payments to ERCOT, such invoice due date extensions should be made publicly and transparently in a nondiscriminatory manner, with it also being clarified that the remedies in ERCOT Nodal Protocols Section and are likewise postponed. Further, as noted in Texpo's March 4 filing, market participants who receive payment extensions should be required to suspend enrollments of new customers while receiving invoice extension relief. Such suspension of new enrollments will give the market participant an incentive to make payments to ERCOT and resume the normal invoicing cycle as soon as is possible," Texpo said

"Third, ERCOT's calculations, invoices and resettlements related to the Weather Event involve historically unprecedented amounts of money and should be subject to further review, increased oversight, and additional quality control measures. Never before has the Texas electricity market been without leadership in so many key positions. As it stands, (a) ERCOT has no permanent CEO, (b) ERCOT is missing 6 Board Members, and (c) the Commission is in the unenviable position of needing to act without a full three-person Commission, following the resignation of the Commission's Chair last week along with another Commissioner's resignation yesterday on March 8,2021. In the meantime, ERCOT personnel appear to be moving billions of dollars between market participants based in part on erroneous, premature and un-reviewed (and unaudited) information," Texpo said

Texpo further said, "In sum, with regard to all additional invoices and resettlements comprising the Weather Period, once ERCOT immediately implements the effects of Lt. Governor's Letter dated March 8, 2021, the PUC and the State of Texas should immediately freeze (postpone) all further invoices and uplifts pertaining to the Operating Days underlying the Weather Event until (a) the unoccupied leadership positions at ERCOT and the Commission are filled; (b) the IMM or an independent auditor calculates and affirms the calculations of ERCOT relating to the Weather Events; and (c) relax the related collateral calls from ERCOT back to normalized levels. This will be a necessary initial next step towards preventing further fall out from the Weather Events."

"[A]side from Griddy and a few other unscrupulous actors, the parties at fault here are not the load serving entities or REPs. Retail energy providers provide a critical function in Texas. These entities and their customers should not be forced to bear the brunt of the outcomes of the system wide failures resulting from un-weatherized generation plants, un-weatherized gas pipelines, uninspected generation plants and equipment, and interrupted operating conditions within ERCOT," Texpo said

Docket 51812

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