87th LegislatureEnergyIssuesState SenateTexas Senate Fast Tracks Electricity Repricing Legislation, Sending it to the House

The Texas Senate expedited legislation ordering the Public Utility Commission to reprice wholesale electricity transactions made during the winter storm blackouts.
March 15, 2021
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After a slow start to the legislative session, Lt. Governor Dan Patrick stepped on the gas Monday as he and the Texas Senate fast-tracked legislation to reprice previous wholesale electricity transactions during the blackouts.

The legislation, which passed the Senate in an abbreviated chain of events by a vote of 27 to 3, explicitly states the PUC has the authority to reprice and directs them to do so.

In a late-Monday press conference on the bill, Patrick stated, “There was consensus [among senators] that they wanted to come in and address this issue today. The governor called on us to do it, and we’ve done it.” He then called on the House and Governor Abbott to swiftly follow suit.

The issue grabbed the legislative spotlight after Texas’ Independent Market Monitor (IMM) — a body of economists tasked with watching the electricity market — released a report estimating $16 billion in overcharges occurred during the blackouts.

The IMM has since clarified the estimate to be $3.2 billion specifically for day-ahead prices. The rest of the $16 billion consists of other types of transactions or indirect market impact.

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Senate Bill (SB) 2142, filed by Sen. Bryan Hughes (R-Mineola) not only orders the Public Utility Commission (PUC) to issue a repricing rule but explicitly stipulates the agency has this authority vested by the legislature.

The bill reads, “[T]here is a compelling public interest in correcting the prices of wholesale power and ancillary services sold in the ERCOT market.”

During that period, load-shedding, or “controlled blackouts” had ceased for residential customers — but remained in place for industrial ones — yet the price of wholesale electricity remained at the $9,000 per megawatt-hour (MWh) cap. The PUC ordered prices up to that cap due to its judgment that they were not “accurately reflecting” the market’s scarcity.

According to testimony last week, the algorithm that sets prices was tripped up by extra reserves the Electric Reliability Council of Texas (ERCOT) had made available in case of another sudden generation failure like that which occurred early morning on February 15. The PUC judged this as an artificially low price and thus ordered a reconfiguration to fully incentivize generators to maximize output.

Without that price incentive, ERCOT and the PUC stated, they could not have kept the industrial consumers off the grid — who were ceasing operations but making up for lost dollars by selling generation back into the market at the exorbitant prices.

But senators are concerned the costs of this overcharge will ultimately be passed on to consumers in some fashion or another. 

The issue itself has created a rift between the state’s top two elected officials. Patrick grilled the PUC chair, Arthur D’Andrea, last week in a committee hearing over his opposition to the repricing without an official order from the legislature. Patrick wanted D’Andrea to reprice swiftly and do it himself, but the PUC chair maintained his opposition, stating the agency lacks the authority to issue such an order when it wasn’t caused by a mistake.

D’Andrea’s opposition was grounded in the belief that doing so would result in a lawsuit the state was sure to lose.

Patrick did not agree, and in a Friday evening press release called on D’Andrea to be removed as chair of the PUC when the currently vacant seats are filled. Governor Greg Abbott, who appointed D’Andrea and for whom D’Andrea served as assistant general counsel before joining the PUC, came to the defense of his appointee.

“The only entity that can authorize the solution you want is the legislature itself. That is why I made this issue an emergency item for the legislature to consider this session,” Abbott fired back at Patrick in his own press release. 

Abbott reiterated that position in a Monday election integrity press conference.

The top two state officials trading barbs via press releases is a far cry from the “Kumbaya session” of 2019, during which state leaders went to great lengths to emphasize legislative and political unity.

Governor Abbott made the issue an emergency item which allows the legislature to consider it before it normally would, bypassing certain embargoes set by the Texas constitution.

On top of that, the Senate moved to suspend certain rules and maneuvered the multi-day bill reading requirement by adjourning and then reconvening — establishing two legislative days on one calendar day.

The three senators who voted against the legislation were Sens. Brandon Creighton (R-Conroe), Sarah Eckhardt (D-Austin), and Kelly Hancock (R-North Richland Hills). Those three were the only ones not to sign on to a letter advocating repricing earlier this month.

Creighton also voted against the bill in committee.

In a statement after the vote, Hancock said of his opposition, “I respectfully voted no on SB 2142 due to sincere concerns that it violates the contract clause of the U.S.
Constitution and Article I, Sec. 16 of the Texas Constitution which state no law may be made ‘impairing the obligation of contracts.'”

“Getting power to Texans when they need it most, and at a competitive rate, should in my view remain the main focus of legislative action.”

Even with the legislation, carrying out such an order will be no easy feat. The transactions already cleared the market exchange on March 5 and so the money has already exchanged hands. But in testimony on the senate floor Monday, Hughes stated the point at which the transactions can no longer be reconfigured is 55 days past their date. 

And whatever the state decides to do or abstain from, it will face many such lawsuits from the industry which has shouldered the bulk of the cost burden — even causing some to declare bankruptcy.

But now the ball is in the House’s court which has been more divided on the issue. The House State Affairs Committee will consider repricing again on Tuesday.

Editor’s Note: This article has been updated from its original version to include statements from Lt. Governor Patrick and Sen. Hancock.

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Brad Johnson

Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.