Tag Archives: ERCOT

Regulators issue standards to prevent another Texas grid freeze

By Timothy Gardner

WASHINGTON (Reuters) – U.S. and North American energy regulators on Thursday issued recommendations and mandatory electric reliability standards for utilities they hope will prevent a repeat of February’s deadly power outages in Texas during a deep freeze.

The freeze left 4.5 million without power over several days in the state, killing more than 100 people.

“I cannot, and will not allow this to become yet another report that serves no purpose other than to gather dust on the shelf,” Rich Glick, chairman of the Federal Energy Regulatory Commission (FERC) said about the preliminary recommendations and standards the regulators expect to finalize in November.

FERC and the North American Electric Reliability Corporation (NERC) released the recommendations that include revisions of mandatory reliability standards. The revisions require power utilities to identify and protect cold-weather critical components, build new or retrofit existing units to operate at specific conditions based on extreme temperature and weather data, and develop corrective plans for those that suffer freeze-related outages.

FERC does not have jurisdiction over the Electric Reliability Council of Texas (ERCOT), the operator of the Texas grid. But Jim Robb, president and CEO of NERC, said his organization has jurisdiction in Texas over reliability matters.

In 2011, FERC probed ways to protect the Texas grid from power outages after a cold snap that was milder than the most recent one. Its recommendations included winterization of natural gas and other installations. Texas authorities never implemented those recommendations, leaving its grid vulnerable.

Texas regulators have been working on their own ways to protect the grid from extreme weather.

“The work that the team has done here reflects things that would be additive to what Texas has been working on and not in conflict with,” Robb told reporters.

ERCOT and the Texas Public Utilities Commission, which regulates the state’s grid, did not immediately respond to requests for comment.

(Reporting by Timothy Gardner; additional reporting by Scott Disavino; Editing by David Gregorio)

Texas power demand expected to hit 2021 high during heatwave next week

(Reuters) – The Texas power grid operator on Friday forecast demand next week would reach its highest so far this year as homes and businesses crank up air conditioners to bring relief during another heatwave.

The United States has been beset by several extreme weather events this year, including February’s freeze in Texas that knocked out power to millions and record heat this summer in the Pacific Northwest.

High temperatures in Dallas were expected to reach the upper 90s Fahrenheit (35 Celsius) every day from Aug. 7-17, according to AccuWeather. The city’s normal high is 97 F at this time of year.

The Electric Reliability Council of Texas (ERCOT), which operates most of the state’s grid, projected power use will reach 72,884 megawatts (MW) on Aug. 9, 73,472 MW on Aug. 11 and 73,628 MW on Aug. 12.

Those peaks would top this year’s current high of 72,856 MW on July 26, but would fall short of the grid’s all-time August 2019 high of 74,820 MW. One megawatt can power around 200 homes on a hot summer day.

The February freeze left millions of Texans without power, water and heat for days during a deadly storm as ERCOT scrambled to prevent an uncontrolled collapse of the grid after an unusually large amount of generation shut due to freezing natural gas pipes and wind turbines.

On-peak power at the ERCOT North hub, which includes Dallas, traded around $44.50 per megawatt hour (MWh) for Friday.

That is well below the average of $199 per MWh seen so far in 2021 due primarily to price spikes over $8,000 during the freeze, but is above 2020’s average of $26 and the five-year (2016-2020) average of $33.

(Reporting by Scott DiSavino; Editing by Kirsten Donovan)

Texas power grid passes test, more to come as heat wave lingers

(Reuters) – The Texas power grid passed the first of what could be many tests over the next week by meeting very high demand on Monday without problems as homes and businesses cranked up their air conditioners to escape the latest heat wave.

The United States has been beset by extreme weather events this year, including February’s freeze in Texas that knocked out power to millions, and record heat in the Pacific Northwest earlier this summer.

High temperatures over the next week were expected to reach the mid 90s Fahrenheit (35 Celsius) in Houston and the low 100s in Austin, Dallas and San Antonio, according to AccuWeather.

The Electric Reliability Council of Texas (ERCOT), which operates the grid in most of the state, said power use hit a preliminary 72,856 megawatts (MW) on Monday and would reach 72,925 MW on July 30, 73,275 MW on Aug. 1 and 74,160 MW on Aug. 2.

Those peaks were lower than ERCOT forecast on Monday and would remain below July’s 74,244-MW record and the all-time high of 74,820 MW in August 2019. One megawatt can power around 200 homes in the summer.

Officials at ERCOT were not immediately available to say if Monday’s peak was the highest this year.

ERCOT has already broken monthly records, including 70,219 MW in June and 69,692 MW in February when millions of Texans were left without power, water and heat for days during a deadly storm as ERCOT scrambled to prevent an uncontrolled collapse of the grid after an unusually large amount of generation shut.

Despite Monday’s high demand, real-time prices remained below $100 per megawatt hour (MWh).

That compares with an average of $208/MWh at the ERCOT North so far in 2021 due primarily to price spikes over $8,000 during the February freeze. The 2020 average was just $26.

(Reporting by Scott DiSavino; Editing by Steve Orlofsky)

Results tally up billions in profit from Texas freeze for gas and power sellers

By Devika Krishna Kumar, Scott DiSavino and Jessica Resnick-Ault

(Reuters) – Natural gas suppliers, pipeline companies and banks that trade commodities have emerged as the biggest market winners from February’s U.S. winter blast that roiled gas and power markets, according to more than two dozen interviews and quarterly earnings reports.

The deep freeze caught Texas’s utilities off-guard, killed more than 100 people and left 4.5 million without power. Demand for heat pushed wholesale power costs to 400 times the usual amount and propelled natural gas prices to record highs, forcing utilities and consumers to pay exorbitant bills.

After the storm, few companies wanted to talk about their financial gains, unwilling to be seen as profiting off others’ hardships. But a clearer picture is emerging from quarterly earnings and as utility companies smarting from big bills sue to recoup their losses.

The biggest winners were companies with access to supplies, including leading energy trader Vitol, gas suppliers Kinder Morgan, Enterprise Products Partners and Energy Transfer, and banks Goldman Sachs, Bank of America (BofA) and Macquarie Group.

The firms combined stand to reap billions of dollars in profits by selling gas and power during the storm, according to interviews and reviews of public documents. It is possible that some companies may never collect on those sales due to ongoing litigation, however.

Losers include producers that could not deliver oil and gas due to frozen wellheads, gathering systems and processing stations. The week-long output loss cost shale producer Pioneer Natural Resources $80 million, Chevron about $300 million, and Exxon Mobil $800 million.

Utilities are complaining of price gouging and of unwarranted supply cancellations. The Federal Energy Regulatory Commission is reviewing gas and power markets for potential market manipulation.

Goldman Sachs and Vitol did not comment. BofA did not respond to a request for comment.

‘MAXIMUM WITHDRAWAL’

Energy Transfer, which can store about 60% of U.S. daily gas consumption in areas hit hardest by the February freeze, could report a $850 million profit from selling the fuel to utilities and industrial customers during the storm, according to analysts at East Daley Capital. Other people familiar with its operations say that figure could be higher.

Energy Transfer did not comment for this story. The company reports results on Thursday.

Rival Enterprise Products Partners said the storm led to gains of about $250 million in the first quarter.

Kinder Morgan, another gas storage and pipeline operator, earned about $1 billion during the storm, the vast majority from higher gas prices and sales. Anticipating high demand, Kinder Morgan said it dispatched workers and backup generators ahead of the storm to its gas storage and pipeline facilities.

At the beginning of February, gas prices ranged from $2.50 to $3 per million British thermal unit (mmBtu) at hubs from Houston to Tulsa, Oklahoma. Prices began climbing on Feb. 11 into the hundreds of dollars, with Tulsa’s hub surging to a record $1,192.86 on Feb. 17, according to government data.

“That’s what happens when you go from a very well supplied market to a very tight market, and in this case a catastrophically tight market,” said one natural gas trader. “That was very localized pain, and it really surprised a lot of people.”

Energy traders with three Texas electric cooperatives told Reuters they paid as much as $400 per mmBtu during a four-day stretch that began Valentine’s Day weekend. They requested anonymity because they were not authorized to speak about the crisis. San Antonio’s municipal utility CPS Energy said its gas bill for the week was about $700 million.

“I’ve been tracking natural gas markets for 20 years. I’ve never seen price increases like we saw,” said Tyson Slocum, an energy and environmental advisory committee member at the Commodity Futures Trading Commission and a director at Public Citizen, a consumer advocacy organization.

WINNING AND LOSING

Australia’s Macquarie, the second-largest marketer of U.S. natural gas, said its trading around the storm boosted its overall profit outlook for the year by about 10%, which analysts estimated at about A$400 million ($317 million).

Ahead of the storm, Macquarie traders researched how previous cold fronts disrupted infrastructure to prepare a plan, said sources within the firm, who requested anonymity. The company did not comment for this story.

Texas’s grid operator ERCOT canceled $1 billion in service charges and state officials are considering securitizing unpaid ERCOT bills from electric companies that defaulted.

Many of the firms that profited from trading, such as Goldman Sachs and BofA, are also facing losses from their exposure to utilities and electric co-operatives that have declared bankruptcy, according to court filings.

BofA made hundreds of millions via its trading arm, according to a source with direct knowledge of the matter, but it is owed nearly $480 million by Brazos Electric Power Cooperative, which filed for bankruptcy.

Disputes over price gouging and reneged contracts have also emerged after some suppliers declared the freeze was a force majeure event that allowed them to suspend contracts.

Macquarie was sued by Exxon seeking to void an $11 million gas bill. CPS Energy sued BP, Chevron, Energy Transfer and others for submitting bills that ran into the hundreds of millions of dollars.

Texas wind farm operators also have filed lawsuits against trading arms of JP Morgan Chase and Citigroup, maintaining the cold snap was an extreme event that overrode contracts for power generation and delivery.

(Reporting By Devika Krishna Kumar, Scott DiSavino, Jessica Resnick Ault, and Gary McWilliams; additional reporting by Liz Hampton, Stephanie Kelly and Jennifer Hiller; writing by David Gaffen and Gary McWilliams; Editing by Marguerita Choy)

Texas utility regulator ousted after comments to investors disclosed

By Kanishka Singh and Gary McWilliams

(Reuters) – The third and last remaining commissioner of the Texas utilities regulator resigned under pressure on Tuesday after the release of comments to investors vowing to protect utility profits and dismissing financial hits from a cold snap on municipal power companies.

The resignation came soon after the disclosure of inflammatory comments by the Public Utility Commission Chair Arthur D’Andrea in a March 9 call with Bank of America utilities’ analysts. The call took place two days before he was to consider rescinding billions of dollars in payment to utilities.

His stance against repricing helped sink a proposal this week to cut $4.1 billion from charges in the final hours of a deadly February blackout. The regulator and state grid operator raised power prices to about 400 times the normal rate over five days. But they left the pricing in place for 32 hours after the emergency passed, spurring state officials to call for a partial repricing.

On the March 9 call, D’Andrea told investors and analysts he had “tipped the scale as hard as I could” to prevent repricing and would keep “the weight of the commission” against it, according to a recording of the call published Tuesday by Texas Monthly magazine on its website.

DISMISSES HIT TO CITY-RUN POWER

Municipal power companies that could benefit from repricing proposals would get through the financial hit, he advised the investors. Several have had their credit ratings downgraded, raising future borrowing costs.

Referring to San Antonio’s city-run CPS Energy that has contested $200 million in power charges, D’Andrea dismissed the impact in remarks to Bank of America analysts: “They’ve got a lot of money. They’re fine.”

High costs from the storm have led four Texas power companies to seek protection from creditors in bankruptcy court. Electricity firms have failed to pay $3 billion in storm-related charges, amounts that eventually would be passed to all Texas utilities and their customers.

“Tonight, I asked for and accepted the resignation of PUC Commissioner Arthur D’Andrea,” Texas Governor Greg Abbott said in a statement released late Tuesday. He plans to name a replacement in the coming days.

PUC spokesman Andrew Barlow did not immediately reply to a request for comment.

JOB PROTECTION

In his call with Bank of America, D’Andrea also claimed he had job protection after two of the three PUC commissioners resigned. Lawmakers could “secure promises from me” that they could not get if there were other commissioners, he said.

“I expect it to be this way for a while, at least a year, with just me,” he said of the commission’s makeup.

Earlier in March, Shelly Botkin resigned from her post at the PUC, a week after former Chairman DeAnn Walker resigned.

The Bank of America recording threw new light on the commission’s much-criticized handling of a deadly February blackout that killed more than 56 people in the state and could saddle power companies with bills for decades.

The state’s independent market monitor testified power grid operator ERCOT, which is overseen by the PUC, made a $16 billion pricing error by keeping prices high for 32 hours after widespread outages ended Feb. 17.

Electricity retailer Brilliant Energy LLC on Tuesday became the fourth company to file for bankruptcy protection since the storm. Its bankruptcy court filing came a day after Griddy Energy filed for Chapter 11 bankruptcy with $29 million in charges for power.

(Reporting by Gary McWilliams in Houston, Kanishka Singh and Derek Francis in Bengaluru; editing by Richard Pullin and Marguerita Choy)

Texas utility sues power grid ERCOT over ‘excessive’ cold snap charges

By Gary McWilliams

(Reuters) – The largest city-owned utility in Texas on Friday sued the state’s grid operator alleging it levied “excessive” power prices during a February deep freeze, and seeking to bar the grid from issuing a default that could affect its credit rating.

High prices for emergency fuel and power during a severe cold spell left Texas utilities facing about $47 billion in one-time costs. Those costs have led to two bankruptcies and knocked two other electric providers off the state’s power grid because of payment defaults.

San Antonio’s municipal utility, CPS Energy, faces about $1 billion in extraordinary charges for natural gas and electricity during a five day deep freeze last month. CPS Energy has about 820,000 electricity customers.

“We are fighting to protect our customers from the financial impacts of the systemic failure of the state’s grid operator,” said Paula Gold-Williams, chief executive of the city-owned utility.

The lawsuit, filed in a Bexar County court, alleges grid operator Electric Reliability Council of Texas (ERCOT) mismanaged the cold weather crisis, and overcharged for power. It asked the court to prevent ERCOT from declaring it in default and to prevent ERCOT from charging CPS Energy for other grid defaults.

An ERCOT spokeswoman did not immediately reply to a request for comment. Nearly $3.1 billion in power charges to grid users have not been paid so far, ERCOT said on Thursday.

ERCOT officials hiked power prices by about 400 times the usual rate to $9,000 per megawatt for five days last month in a vain effort to bring in more power. State officials this week called on ERCOT and the utility regulator to cut those charges for high-price power for the 32-hour period after the grid emergency passed.

CPS Energy’s lawsuit called ERCOT’s handling of the crisis “one of the largest illegal wealth transfers in the history of Texas.” It brought the complaint “to protect its customers from excessive and illegitimate power and natural gas costs,” according to the lawsuit.

Credit rating firms have warned CPS and other Texas municipal and rural cooperative power provider could have their ratings lowered. The state’s largest and old cooperative, Brazos Electric Power Cooperative Inc, filed for bankruptcy earlier this month owing $1.8 billion to ERCOT.

(Reporting by Gary McWilliams; Editing by Marguerita Choy)

Texas regulator warns lawmakers against rollback in storm power prices

(Reuters) – The head of Texas’s power regulator told lawmakers on Thursday that any effort to retroactively reduce the power prices levied during a recent storm would lead to lawsuits that the state could lose.

The state’s power grid operator raised power prices sharply during a February freeze that pushed two power companies into bankruptcy. Others have warned of potential bankruptcies. Top officials this week called on the Public Utility Commission (PUC) of Texas to immediately reduce about $16 billion in power prices.

Any repricing would trigger lawsuits that the commission would lose, PUC Chairman Arthur D’Andrea bluntly told lawmakers at a hearing in Austin. Commodity contracts used to hedge power have closed and any repricing “will have consequences” for the state’s power, agriculture and other markets, he said.

“If I do it, I get sued and lose right away,” he told a state committee. The legislature could attempt to change the pricing by passing a bill, but it also would face lawsuits and could lose, he added.

The state independent market adviser has recommended a pricing of the final 32 hours of the five-day emergency and called for some service fees to be cut, citing grid rules. Emergency charges amounted to $16 billion for power and about $1.5 billion for service fees tied to the power price.

The state’s governor, lieutenant governor and 28 of 32 state senators this week also called on the PUC and grid operator to “correct” the final 32 hours of power pricing, citing the recommendation and impact on utilities.

“These corrections are squarely within your authority, whether by your own action or an order to ERCOT,” the senators told D’Andrea in a letter on Tuesday, referring to the state grid operator by its acronym.

“I disagree” with the senators’ call, D’Andrea said. He has continually ruled out a power price rollback, arguing “it is impossible to unscramble” insisting the decision to raise prices during the cold snap was known to all grid users.

D’Andrea pushed back against the market monitor’s estimate of the power overcharges, telling lawmakers the amount was much smaller, about $3.2 billion.

Intercontinental Exchange Inc. (ICE), which handles Texas power trades, last week closed contracts that covered billions of dollars in state power trades and has no authority to reopen settled contracts. ICE has deferred settling four contracts tied to the service fees that are much smaller in value, people familiar with the matter told Reuters.

(Reporting by Gary McWilliams; Editing by Marguerita Choy and Daniel Wallis)

Texas electricity regulator cuts some emergency fees tied to winter storm

By Gary McWilliams

HOUSTON (Reuters) – The Texas electricity regulator on Wednesday ordered cuts to emergency fees paid to generators amid a financial crisis in its power market, but adjourned without acting on calls to protect consumers from price spikes.

A mid-February storm temporarily knocked out up to half the state’s generating plants, triggering outages that killed dozens and pushed power prices to 10 times the normal rate. About $47 billion in one-time costs are threatening companies that sell, transmit or generate electricity in the state. Consumers will see higher prices as the costs are passed along.

In its first meeting since the blackout, Public Utility Commissioners (PUC) agreed to revoke charges for standby power services that were not provided. The size of the charges have not been disclosed.

“The PUC has acted with urgency and taken a big step in the right direction,” said Brandon Young, CEO of electricity provider Young Energy LLC. He said the changes would relieve some of the stress on providers and consumers.

The two-person PUC separately endorsed an independent market adviser’s recommendation for an about $2 billion reduction in other fees but took no immediate action.

As the state and federal governments launched investigations into the storm, commissioners backed a state audit of emergency prices that soared when demand spiked during severe cold weather. U.S. lawmakers on Wednesday demanded the state’s grid operator turn over documents and communications with officials from during the storm.

The state’s independent PUC adviser, Carrie Bivens, recommended cuts that could shave about $2 billion from business fees, though she provided no estimate of the total. Commissioners will meet Friday to consider that recommendation.

“I can’t understand why there was no action on immediate relief for consumers” at the hearing, said Tim Morstad, associate state director for consumer advocacy group AARP Texas. His group asked the PUC for protections for consumers being shifted to new utilities.

If left in place, the service fees could force out a quarter of the state’s about 100 providers and concentrate up to 80% of the market among three large utilities, industry experts said.

“There could be a number of retail service providers who aren’t able to remain in business if ERCOT does not relent on the demand for payment,” said Catherine Webking, an attorney who represents companies seeking fee cuts.

The PUC supervises grid operator Electric Reliability Council of Texas (ERCOT), which is facing a $2.46 billion shortfall from companies that have not paid their bills. ERCOT on Monday said it would begin naming businesses that have failed to pay and disclose the amounts each owed.

The crisis claimed its first victim Monday when Brazos Electric Power Cooperative Inc, whose members provide power to about 660,000 in the state, filed for bankruptcy after receiving bills for $2.1 billion from ERCOT. Brazos this week said storm charges could increase consumer bills by 2 cents per kilowatt hour.

(Reporting by Gary McWilliams; Editing by Leslie Adler and Chris Reese)

Texas electricity firm files for bankruptcy citing $1.8 billion in claims from grid operator

By Gary McWilliams

HOUSTON (Reuters) – Texas’s largest and oldest electric power cooperative on Monday filed for bankruptcy protection in federal court in Houston, citing a disputed $1.8 billion bill from the state’s grid operator.

Brazos Electric Power Cooperative Inc, which supplies electricity to more than 660,000 consumers across the state, is one of dozens of providers facing enormous charges stemming from a severe cold snap last month. The fallout threatens utilities and power marketers, which collectively face billions of dollars in blackout-related charges, executives said.

Unusually frigid temperatures knocked out nearly half of the state’s power plants in mid-February, leaving 4.3 million people without heat or light for days and bursting water pipes that damaged homes and businesses. Brazos and others that committed to provide power to the grid – and could not – were required to buy replacement power at high rates and cover other firms’ unpaid fees.

The state’s grid operator, Electric Reliability Council of Texas (ERCOT), on Friday said $2.1 billion in initial bills went unpaid, underscoring the financial stress on utilities and power marketers. More providers likely will reject the bills in coming days, executives said.

“The municipal power sector is in a real crisis,” said Maulin Patani, a founder of Volt Electricity Provider LP, an independent power marketer that is not a member of the Brazos coop. ERCOT should suspend the service charges to halt further defaults, he said in an interview on Sunday.

An ERCOT spokeswoman did not have an immediate comment. The Public Utility Commission, the state’s regulator that oversees ERCOT, was unavailable for comment.

The city of Denton, in north Texas, last week sued ERCOT in a state court to prevent it from charging it for fees unpaid by other users of the grid. Denton Electric could face tens of millions of dollars for fees that were not collected from others, the suit claimed.

Debt analyst Fitch Ratings last week also warned of potential downgrades to all Texas municipal power firms that use the state’s grid. Costs from the storm “could exceed the liquidity immediately available to these issuers,” Fitch said.

Texas’s attorney general has launched an investigation into the blackout, calling for ERCOT and others to provide documents on the outages, pricing and emergency, saying they mismanaged the crisis.

ERCOT triggered the squeeze when it pushed up spot-market rates to $9,000 per megawatt hour (mwh) over more than four days and levied huge fees for services. The service fees were 500 times the usual rate, according to industry executives.

Brazos Electric coop executive Clifton Karnei, who sat on ERCOT’s board of directors until last week, signed the Brazos coop’s bankruptcy submissions.

An attorney for Brazos did not reply to a request for comment.

(Reporting by Gary McWilliams; Editing by Christopher Cushing, Stephen Coates and Louise Heavens)

Several board members of Texas’s electric grid operator to resign: filing

(Reuters) – Top directors of Texas’s electric grid operator, who faced sharp criticism from the massive failure of the state power system last week that left millions without heat or light, resigned en masse on Tuesday.

The board’s chairman, vice chairman and two other directors of the Electric Reliability Council of Texas (ERCOT) resigned effective on Wednesday, according to a notice to the state Public Utility Commission.

Craig Ivey, who was nominated Feb. 16 to fill a board vacancy, also withdrew before he could be seated, according to the notification.

“To allow state leaders a free hand with future direction and to eliminate distractions, we are resigning,” wrote Chairman Sally Talberg, Vice Chairman Peter Cramton and directors Terry Bulger and Raymond Hepper in a joint resignation.

“Our hearts go out to all Texans who had to go without electricity, heat and water during frigid temperatures and continue to face the tragic consequences of this emergency,” they added.

(Reporting By David Gaffen; editing by Jonathan Oatis and Aurora Ellis)