Texas Retail Provider Invokes Regulatory Change Clause To Pass-Through Costs From Increased Procurement Of Ancillary Services By ERCOT

Freepoint Energy Solutions has informed certain large commercial customers in Texas that it is invoking a "regulatory change" provision in the customers' electricity supply contracts to pass-through the costs of ERCOT's increased procurement of certain ancillary services.

In a letter to applicable large commercial customers, Freepoint Energy Solutions states, "Ancillary services are necessary to maintain and support the reliable and continuous operation of the electricity grid and are required for all customers receiving electricity. ERCOT (the operator of the Texas electricity grid) procures ancillary services on behalf of load (end-use customers), and then allocates each retail electric provider a share of the cost for all ancillary services based on the load of its customers."

"In order to enhance the reliability of the Texas electricity grid in the wake of the February winter storm, on July 12, 2021, ERCOT initiated increased procurements of certain ancillary services, notably non-spinning reserves," the letter states

"Freepoint will start passing through the costs associated with ERCOT's increased procurements of ancillary services pursuant to the 'Regulatory Change' provision in your large commercial electricity supply agreement," the letter states

Although not specifically referenced in the letter (other than the reference to "large"), it is believed the letter is applicable to customers over 50 kW.

The letter does not specifically cite whether the customer, under the regulatory change provision in the contract, may reject the contract as a result of Freepoint invoking the regulatory change provision