Appeals court says state agency set electricity prices too high during 2021 winter storm

A Texas appellate courtroom stunned the electrical energy world Friday by ruling that the Public Utility Fee overstepped its authority in the course of the lethal February 2021 winter storm when it raised the value of electrical energy to the utmost, $9,000 per megawatt-hour.

The worth was set that top on Feb. 15 and 16 by the fee answerable for regulating Texas’ electrical energy in an effort to inform the market that extra energy era was urgently wanted. Its management believed that the monetary device meant to regulate the price of electrical energy was malfunctioning as electrical energy turbines fell offline and grid operators lower energy to properties and companies, the ruling explains.

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The worth of electrical energy is fluid in Texas; it goes up when demand is excessive as a way to incentivize extra manufacturing and preserve the grid from being overloaded. However the state’s electrical energy market monitor mentioned within the aftermath of the storm that Texas overcharged retail electrical energy suppliers by $16 billion for the ability that they then handed on to residents and companies all through the state.

The exorbitant worth of electrical energy in the course of the storm pushed retail energy suppliers and electrical energy cooperatives into monetary misery throughout Texas. Many had been pressured to purchase energy on the wholesale market at excessive costs and filed for chapter within the aftermath of the storm.

Throughout the 2021 legislative session, Texas senators pushed for a monetary treatment to a 32-hour interval in the course of the week of the storm when regulators stored wholesale energy costs on the $9,000 cap after extra era got here on-line, however they couldn’t come to an settlement with their counterparts within the Home. The ability grid laws that handed finally didn’t deal with the difficulty. As a substitute, legislators handed legal guidelines that may permit firms to entry low-cost, long-term loans to keep away from passing the big prices on to shoppers unexpectedly.

The electrical utility Luminant appealed the PUC’s pricing choices within the month after the storm. It argued that the fee exceeded its authority in setting the value on the most, amongst different factors. The Austin-based third Court docket of Appeals agreed within the ruling it issued Friday. However the penalties for its resolution are unlikely to be instantly felt in Texas’ electrical energy market as a result of the courtroom remanded the case for additional consideration.

The Public Utility Fee declined to remark.

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If the order stands, it may theoretically create a “gigantic mess” for the PUC and the state’s grid operator, the Electrical Reliability Council of Texas, to unwind the transactions that occurred in the course of the days when the value was set on the $9,000 cap, mentioned Alison Silverstein, who beforehand labored as a senior adviser for each the PUC and the Federal Power Regulatory Fee.

“You would need to work out who paid what to whom and kind of undo the daisy chain of transactions and gross sales as you’re repricing,” mentioned Silverstein, who now works as an vitality advisor in Austin.

That may be a protracted course of with little probability of benefiting finish customers, she mentioned. “I don’t assume the tip client will ever see a penny of profit out of this.”

However Silverstein and different electrical energy specialists who spoke with The Texas Tribune on background doubted whether or not a authorized treatment would go so far as unwinding the transactions that occurred in the course of the storm. Extra probably is that it might influence different litigation amongst vitality firms nonetheless battling in courtrooms within the aftermath of Winter Storm Uri, or present a particular treatment for Luminant.

“Virtually talking, the chances of getting a significant decision aside from the authorized rules can be very difficult,” Silverstein mentioned. There may be many lawsuits, she mentioned, however “the cash is lengthy gone.”

This text initially appeared in The Texas Tribune at https://www.texastribune.org/2023/03/17/puc-appeals-court-uri-prices/. The Texas Tribune is a member-supported, nonpartisan newsroom informing and fascinating Texans on state politics and coverage. Study extra at texastribune.org.