When It Comes To Fixing Its Electricity Woes, Texas Leaders Are ‘Out Of Altitude, Airspeed, And Ideas’

Texas politicians and regulators are flailing about for solutions to the state’s electricity woes. … [+] Last month’s deadly ...


Chuck Spinney, a military veteran and longtime Defense Department analyst who gained renown for his critiques of the Pentagon, is famous for noting that among pilots, it’s dangerous to be “Out of altitude, airspeed, and ideas.” 

That description fits the current situation in Texas where politicians and regulators are flailing about for solutions to the state’s electricity woes. As one media outlet put it, last month’s deadly blackouts left a political and economic mess but “there’s no clear understanding of who’s at fault and no consensus on what should be done.”

That’s a problem because billions of dollars, or perhaps tens of billions of dollars, are at risk. In theory, Texans owe more than $50 billion for the electricity that was delivered during Winter Storm Uri, the deadly blizzard that walloped the state last month. But it’s not clear where all that money went nor is it clear how much low- and middle-income ratepayers will have to pay to clean up the mess. 

Several retail electric providers (REPs) including Griddy, and the state’s largest generation and transmission cooperative, Brazos Electric Coop, have already declared bankruptcy. About 20 retail electric providers are trying to convince the Texas Legislature to roll back some $16 billion in excess charges that the Electric Reliability Council of Texas levied during the blizzard. 

Sources here in Austin tell me that some legislators are talking about a bailout that would be paid back over a multi-year period by adding a surcharge to ratepayers’ bills. That was the solution adopted by California politicians two decades ago (and two electricity crises ago) to keep that state’s electric utilities from failing. 

Texas legislators, many (or most) of whom don’t know a watt from a watt-hour, are trying to sort through the mess. But there’s a dire lack of expertise and leadership at the two agencies – the Texas Public Utilities Commission and ERCOT – that are central to unraveling the mess that has its roots in the 2001 law that deregulated the Texas electricity market. The PUC doesn’t have any commissioners. Last week, the agency’s chair,  Arthur D’Andrea, the last remaining commissioner at the regulatory agency, announced he was resigning his post. D’Andrea got the top job about two weeks ago after he replaced the chair at the time, DeAnn Walker, who resigned on March 1. The other commissioner, Shelly Botkin, resigned a few days after Walker. 

Meanwhile, the ERCOT board has five open seats and the grid operator, which manages the electricity supplies for about 26 million Texans, doesn’t have a CEO. ERCOT’s former CEO, Bill Magness, was fired by the board on March 3.

Adding more murk to the madness: Last Friday, the Texas Supreme Court, in a 5-4 ruling, said that due to a legal technicality, it cannot decide whether or not ERCOT has sovereign immunity from lawsuits. The ruling was made in a lawsuit that was filed against ERCOT in 2016 by a company called Panda Power, which claimed that the agency had “flawed or rigged” projections regarding electricity demand in the state. Panda said it was induced to spend some $2 billion on power plants in Texas based on those projections. 

Friday’s ruling takes on greater significance because ERCOT is now facing additional lawsuits due to the blackouts. On March 12, CPS Energy, the electricity and gas utility owned by the city of San Antonio, filed a lawsuit against the grid operator in state district court in Bexar County alleging that ERCOT engaged in “one of the largest illegal wealth transfers in the history of Texas.” CPS

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is the largest municipally-owned gas and electric utility in the country. It sued ERCOT on five counts, including gross negligence and breach of contract and it is seeking $18 million it says it is owed by ERCOT. The lawsuit also claims that ERCOT does not have sovereign immunity from lawsuits because the prices and overcharges made by ERCOT, “are a violation of the Texas Constitution.” The city of Denton has also sued ERCOT to prevent the operator from passing the costs of its electricity purchases onto its utility, Denton Municipal Electric.

From a political standpoint, the ERCOT mess is one that nobody wants to own. The energy-only market that led to the disaster was created by Republican politicians two decades ago and the Republicans who are now at the Texas Capitol see no political payoff in trying to fix it. Furthermore, only a relatively small number of people in the state are qualified to sit on the PUC and of those people, precious few (or perhaps none) are eager to sit on a commission that will be the focal point of litigation, political wrangling, and recriminations for years to come. 

The lack of political appetite to address the crisis worries Brandon Young, the CEO of Payless Power, a REP that provides pre-paid electricity service to about 32,000 customers in the state. Payless is one of about 20 REPs who have formed Texans for Fair Energy Billing, a group that wants the legislature to reverse the charges imposed by ERCOT and freeze “all pending energy and natural gas transactions, terminations, and penalties” that were incurred during the week of the blizzard. 

In an interview yesterday, Young told me that his company will probably survive the crisis, but for other REPs and participants in the ERCOT market, “The key issue is how many of these companies can stay alive long enough before the legislature takes action?” 

As legislators dither about what to do next on the electricity side, some clarity will be delivered later this week in the natural gas market. The gas contracts for February will be settled on Thursday, March 25. (Gas contracts are usually settled 25 days after the month the gas flows.) CPS Energy reportedly owes its gas suppliers $800 million. On March 19, CPS filed a lawsuit against two of those suppliers.

This morning, John Harpole, the president of Denver-based gas broker Mercator Energy, told me “On Friday we will know who the survivors will be on the gas side. It’ll be the first shakeout that shows who survives and who fails.” In other words, more bankruptcies are coming. They will be the result of a government failure of epic proportions. The Texas Legislature turned the state’s electric grid into a weather-dependent casino that rewarded crisis and high prices instead of reliability and stable prices. And there’s little doubt that consumers and taxpayers are going to end up footing the bill for that weather-dependent casino.

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When It Comes To Fixing Its Electricity Woes, Texas Leaders Are ‘Out Of Altitude, Airspeed, And Ideas’
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