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Texas House members unveil series of bills in wake of power outage hearings

March 9, 2021

by Paul Ciampoli
APPA News Director
March 9, 2021

Texas House Speaker Dade Phelan on March 8 unveiled the first phase of House legislative reforms in the wake of recent hearings in the Texas Legislature that examined rotating outages implemented by the Electric Reliability Council of Texas (ERCOT) in February after an arctic blast hit the state.

Members of the Texas House have filed or will file the following legislation:

Reforming Electric Reliability Council of Texas Leadership: HB 10 restructures the ERCOT board, replacing the unaffiliated members with members appointed by the Governor, Lt. Governor, and Speaker of the House. HB 10 also requires all board members to reside in the state of Texas and creates an additional ERCOT board member slot to represent consumer interests.

Protecting Consumers and Hardening Facilities for Extreme Weather: HB 11 requires electric transmission and generation facilities in the state to be weatherized against the spectrum of extreme weather Texas may face. Utilities will be required to reconnect service as soon as possible and prevent slower reconnections for low-income areas, rural Texas, and small communities, Phelan’s office said.

Alerting Texans During Emergencies: HB 12 creates a statewide disaster alert system administered by Texas Division of Emergency Management (TDEM) to alert Texans across the state about impending disasters and extreme weather events. The alerts will also provide targeted information on extended power outages to the state’s regions most affected. This system builds off the model used in Amber, Silver, and Blue Alert systems.

Improving Coordination During Disasters: HB 13 establishes a council composed of ERCOT, Public Utility Commission of Texas, Railroad Commission, and TDEM leaders to coordinate during a disaster. The committee will identify challenges with fuel supplies, repairs, energy operations and prevent service interruptions from the wellhead to the consumer.

Weatherizing Natural Gas Infrastructure: HB 14 requires the Railroad Commission to adopt rules requiring gas pipeline operators to implement measures that ensure service quality and reliability during an extreme weather emergency, which covers winter and heat wave conditions.

Defending Ratepayers: HB 16 bans variable rate products for residential customers. These types of speculative plans resulted in exorbitant bills. “This bill will provide consumer protection to residential customers while still allowing the competitive market to flourish,” Phelan’s office said.

Protecting Homeowner Rights: HB 17 prevents any political subdivision or planning authority from adopting or enforcing an ordinance, regulation, code, or policy that would prohibit the connection of residential or commercial buildings to specific infrastructure based on the type or source of energy that will be delivered to the end user.

Texas lawmakers hold series of hearings over recent power outages

Texas lawmakers in early March held a series of hearings tied to ERCOT last month entering emergency conditions and initiating rotating outages in the state in the wake of an arctic blast.

Texas Lt. Governor says there may be a move to make ERCOT a state agency

March 9, 2021

by Paul Ciampoli
APPA News Director
March 9, 2021

In the wake of rotating outages implemented by the Electric Reliability Council of Texas (ERCOT) in February after an arctic blast hit the state, there may be a move to turn ERCOT into a state agency, Texas Lt. Gov. Dan Patrick recently said.

In an interview with a local Texas television show, Patrick was asked whether he thinks ERCOT should be “brought back into the fold” as a state agency. ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature.

“I don’t have that answer today,” Patrick said. “I’m starting with a clean sheet of paper. I’m starting from scratch and if that needs to happen then it should happen.”

ERCOT is a “private company that was basically hired by the PUC to” run the grid, he said. “But we as elected officials are held responsible for those actions. I don’t like being held responsible to a company that I have little to no control over,” Patrick said.

 “I think that we may see a move to bring ERCOT back in as a state agency or if it’s still a private  company, we’ll have many more controls including who sits on the board because we want to know who those people are,” he said.

Patrick calls for correction to $16 billion error

Meanwhile, Patrick on March 8 called on the Public Utilities Commission of Texas (PUCT) and ERCOT to correct the emergency pricing error that continued after the power shortage had ended and the major threat to the Texas grid had passed.

Patrick noted that in response to grid wide power shortages starting February 15, the PUC ordered ERCOT to institute the $9,000 per megawatt hour cost cap, which is designed to encourage increased power generation during an extreme shortage.

However, according to ERCOT’s Independent Market Monitor (IMM), Potomac Economics, ERCOT incorrectly extended that pricing intervention after the power shortage had ended. The $9,000 price should have ended at 11:55 PM on February 17. Instead, it continued throughout the entire day of February 18 into February 19th — 32 hours total ­– which resulted in an additional $16 billion in charges, Patrick said.

“The IMM identified a second significant error that also must be corrected immediately. ERCOT failed to cap ancillary service prices at $9,000 which resulted in prices rising as high as $24,000 a megawatt hour at intervals during the storm. Pricing should never have exceeded the $9,000 cap at any time,” he said in a news release.

The IMM has recommended that the PUCT exercise their authority to direct ERCOT to correct both these pricing errors, but the PUCT has declined to do so, Patrick noted.

The PUCT on March 5 declined to take action in response to a report from the IMM for ERCOT that a decision by ERCOT resulted in $16 billion in additional costs to ERCOT’s market, of which roughly $1.5 billion was billed to load-serving entities (LSEs) to provide make-whole payments to generators for energy that was not needed or produced.

Patrick also said that ERCOT has a procedure for correcting pricing errors, but has also declined to act so far.

“According to the ERCOT Nodal Protocol Section 6.3 (6) (a), ERCOT has 30 days from the event to correct errors in pricing. Today I am calling on both the PUC and ERCOT to follow the recommendations of the IMM and correct these mistakes,” he said. “Correcting this $16 billion error will require an adjustment, but it is the right thing to do. It will ultimately benefit consumers and is one important step we can take now to begin to fix what went wrong in the storm.”

PUC Commissioner resigns

In other news, PUC Commissioner Shelly Botkinhas resigned her role with the PUCT, effective immediately, the Commission said on March 8.

DeAnn Walker on March 1 resigned as chairwoman of the PUCT, days after she faced questions from state lawmakers at a hearing that examined the rotating outages implemented by ERCOT in the wake of an arctic blast.

Texas AG expands win­ter storm inves­ti­ga­tion into nat­ur­al gas price increases

March 9, 2021

by Paul Ciampoli
APPA News Director
March 9, 2021

Texas Attorney General Ken Paxton on March 8 said that he has issued a civil investigative demand (CID) to Intercontinental Gas Exchange, a natural gas exchange.

Paxton’s office said that the exchange “saw massive price increases during the February winter storm that swept through Texas.”

The CID issued to Intercontinental Gas Exchange follows on the heels of CIDs issued to ERCOT and other power companies regarding power outages, emergency plans, energy pricing, and more related to the winter weather event.

CIDs were sent to:

The CIDs sent to these entities are available here.

Paxton sues power provider

Paxton on March 1 filed a lawsuit against Griddy LLC “for violating the Texas Deceptive Trade Practices Act through false, misleading, and deceptive advertising and marketing practices,” Paxton’s office said in a news release.

“During the February freeze, Texas power companies failed to withstand the winter storm and left millions of Texans without power and heat during lethal, record-low temperatures across the state. Compounding this disaster, Griddy passed skyrocketing energy costs to customers with little to no warning, resulting in consumers paying hundreds or even thousands of dollars each day for electricity,” the news release said.

The lawsuit seeks injunctive relief from Griddy “to ensure that the Texans it serves will receive truthful and accurate energy service in the future, and to have the court order refunds from available sources,” Paxton’s office said.  

ERCOT in a Feb. 26 market notice said that it had revoked all rights of Griddy Energy LLC to conduct activity under the ERCOT protocols due to a payment breach.  

ERCOT said in the notice that it had initiated the mass transition of Griddy Energy customers on February 26 and that it was working closely with PUCT staff and affected market participants to ensure an efficient and effective transfer of customers to designated providers of last resort.

RFP seeks solar generation PPA bids for several AMP member utilities

March 9, 2021

by Paul Ciampoli
APPA News Director
March 9, 2021

American Municipal Power Inc. (AMP) recently launched a request for proposals (RFP) to procure renewable generation for several of its member utilities.

AMP is seeking responses for projects in the PJM Interconnection and delivered to the Louisville Gas and Electric Company (LGEE) interface. LGEE is an interface from PJM to the LGEE control area.

Total contract capacity ranges from 100-150 megawatts ac with a maximum capacity of 50 MW ac for the LGEE delivered project. Term preference for these projects are between 10-30 years.  Products are to include energy, capacity, and environmental attributes.

AMP is seeking bids for full attribute, solar generation power purchase agreements with a preferred commercial operation date of 2023. Key tenets of project consideration are project viability, price, congestion risk, and deliverability.

The Energy Authority (TEA) is the administrator for the RFP.

Responses are due by April 19, 2021 and the RFP is available here.

AMP is a nonprofit wholesale power supplier and service provider for 135 members, including 134-member municipal electric systems in the states of Ohio, Pennsylvania, Michigan, Virginia, Kentucky, West Virginia, Indiana, and Maryland and the Delaware Municipal Electric Corporation, a joint action agency with eight members headquartered in Smyrna, Delaware.

DOE offers up to $100 million in funding for clean energy technology R&D

March 9, 2021

by Paul Ciampoli
APPA News Director
March 9, 2021

The U.S. Department of Energy (DOE) recently announced up to $100 million in funding for clean energy technology research and development through its Advanced Research Projects Agency-Energy’s (ARPA-E) “OPEN 2021” funding opportunity.

“The first of billions of dollars of DOE R&D opportunities to be announced this year, this funding will help identify cutting-edge, disruptive clean energy technologies to address the climate crisis,” the DOE said in February.

Potential applicants can visit ARPA-E’s newly launched OPEN 2021 website to access information and resources, including a teaming partner list for help forming new project teams and identifying potential collaborations, and webinars featuring program directors discussing technical areas they hope to pursue.

To apply for funding through OPEN 2021 click HERE.

The DOE said that since its founding in 2009, ARPA-E has provided $2.4 billion in R&D funding, and ARPA-E projects have attracted more than $4.9 billion in private sector follow-on funding to commercialize clean energy technologies and create sustainable clean energy jobs.

Power plant in Holland, Mich., prepares to retire $91 million of debt this year

March 9, 2021

by Paul Ciampoli
APPA News Director
March 9, 2021

Holland Energy Park (HEP), a power plant in Holland, Mich., is preparing to retire $91 million of debt this year, during only its fourth year of operation, pending final approval from the Holland City Council.

Additionally, there is a plan to retire an additional $40 million over the next two years, completely retiring the debt in a total of nine years since it was issued in 2014, the Holland Board of Public Works (BPW) said on March 8.

The $240 million power generation facility was financed with $160 million of debt and $80 million of reserves.

Originally, the Holland BPW planned to service the bonds for 25 years. Retiring the debt early will save tens of millions of dollars in interest.

The reduced cost results in a proposed rate decrease of about 10% for Holland BPW electric customers.

HEP is a combined-cycle power plant that produces electricity using natural gas. The plant has strengthened the community-owned electric utility since it came online in 2017, Holland BPW noted.

HEP provides the Holland BPW with more electricity than is needed, allowing excess capacity to be sold to other providers in Michigan.

The utility and the City of Holland have received significant value from selling HEP’s excess capacity, Holland BPW said.

In 2018, Holland BPW was able to reduce electric rates by an average of 6% for customers. This year, Holland BPW electric customers will receive another rate reduction, the second reduction in three years.

Also, the wholesale revenue made possible by HEP has allowed the Holland BPW to increase its annual contribution to the City of Holland from $6.6 million to $8 million.

Holland BPW said its electric rates rank among the lowest in Michigan. This year’s proposed rate decrease, which averages 10% across all customer classes, will save the average residential customer about $60 on their energy charges over the year.

If approved by the City Council in May, the new rates will go into effect on July 1, 2021.

The average Holland BPW residential customer now enjoys nearly a 40%, or $35 per month rate advantage to the investor-owned utilities in Michigan, Holland BPW noted.

Environmental paybacks are proven through reduced carbon dioxide emissions, the utility said.

HEP, along with investments in renewable energy sources, reduced CO2 emissions from Holland BPW’s portfolio by 46%. Additionally, HEP “has virtually eliminated emissions of sulfur dioxide, lead, and mercury from power generation sources in our community,” Holland BPW said.

Texas PUC declines to take action in response to report on $16 billion in additional costs

March 8, 2021

by Paul Ciampoli
APPA News Director
March 8, 2021

The Public Utility Commission of Texas (PUCT) declined to take action in response to a report from the independent market monitor (IMM) for the Electric Reliability Council of Texas (ERCOT) that a decision by ERCOT resulted in $16 billion in additional costs to ERCOT’s market, of which roughly $1.5 billion was billed to load-serving entities (LSEs) to provide make-whole payments to generators for energy that was not needed or produced.

“I think these are difficult decisions and they always have been,” said PUCT Chairman Arthur D’Andrea in commenting on repricing requests made by the IMM at a March 5 PUCT meeting.

“The IMM raised some good points and I think they’re very interesting and so we definitely should consider them,” he said.

With respect to the IMM’s suggestion of repricing the energy market, “it’s my understanding that unless we wanted to really disrupt the ICE [Intercontinental Exchange] markets, their deadline is today at 4 and so we would have to decide that now if we wanted to reprice that and I’m not inclined to do it today,” D’Andrea said.

“We did get a letter” from Texas Sen. Drew Springer “addressing this issue and I’m so grateful for legislative feedback on these questions,” he said. “On this question right now, we need to be just standing shoulder to shoulder with them. There cannot be any daylight between us,” D’Andrea said.

“On my part, I don’t intend to make any huge decisions without talking to all of them first,” he said

The PUCT didn’t vote to reject the IMM’s suggestion, “leaving the door open for a change of policy in coming weeks,” the Wall Street Journal noted in a March 5 article.

Texas public power utilities take action to help customers financially

March 8, 2021

by Paul Ciampoli
APPA News Director
March 8, 2021

Texas public power utilities are taking a number of actions to help protect customers financially in the wake of the Electric Reliability Council of Texas (ERCOT) last month entering emergency conditions and initiating rotating outages in the state in the wake of an arctic blast.

Austin Energy

The Austin, Texas City Council on March 4 approved $10 million in emergency bill relief for customers experiencing financial difficulty as a result of Winter Storm Uri or COVID-19.

The approved funding is effective immediately and is made possible through a combination of rate reductions, utility bill credits and a funding infusion to the “Plus 1-Customer Assistance Program” from Austin Water and Austin Energy. 

The Plus 1–Customer Assistance Program, which increased funding levels in April 2020, on March 4 received an additional $5 million funding infusion from Austin Water and $5 million from Austin Energy.

It has helped nearly 16,000 individual households and provided more than $11.7 million in assistance to Austinites experiencing financial difficulty due to COVID-19, serious illness, recent job loss or other emergencies. 

The Austin City Council also approved a series of measures designed to avoid high utility bills as a result of last month’s extreme freezing temperatures.

CPS Energy

Meanwhile, San Antonio-based CPS Energy on March 5 said that it is continuing to fight for customers to keep their bills affordable while pursuing prudent business practices that ensure the utility and San Antonio remain financially stable and strong. 

CPS Energy will begin releasing February 2021 bills on March 8, 2021, it noted.

CPS Energy said it is currently assessing the validity of the additional fuel and purchased power costs from the winter storm and is currently not passing them through to customers.  

As a precaution, CPS Energy officials suspended billing for customers on February 19 to confirm that energy bills did not include any rate changes or fuel adjustment costs related to the historic winter storm, and to ensure that billed usage is based on actual meter reads and not estimations. “That important step has been completed; February bills do not include any additional exorbitant fuel or purchased power charges from the winter storm,” the utility noted.  

Additionally, CPS Energy is also reviewing the accounts of customers who were most impacted by the February 2021 extreme winter storm and expects to provide helpful credits in those cases. The company’s credit plan will be announced in the next 30 to 45 days. 

Electronic and paper bills began to be released on March 8. Depending on a customer’s billing cycle, it could take until Saturday, March 13, 2021 for a customer’s delayed bill to be sent. 

As a result, customers may receive their February bill close to their March bill. CPS Energy said its energy advisors were standing by to work with all customers to discuss their bills and to assist with helpful payment arrangements. Additionally, no late fees will be charged to customers for their February bills or in the case of a customer being on a payment plan.  

CPS Energy noted that the suspension of energy disconnections announced in March 2020 is still in effect and late fees are waived on unpaid balances for customers who participate in a payment plan. 

Meanwhile, the Residential Energy Assistance Partnership (REAP), a partnership of CPS Energy, the City of San Antonio and Bexar County, provides energy bill assistance twice a year to those in need, CPS Energy said. 

And the utility’s new Energy Angels program fills a need not currently met by REAP. The Energy Angels program allows an individual to give the gift of energy to a specific individual or business account. This financial gift is not tax deductible, but the recipient is not required to meet an income-qualifying threshold. The gift will appear on the recipient’s bill as a credit to their account.

To help customers during the COVID-19 pandemic and winter storm disaster, CPS Energy is actively making phone calls to customers to share bill assistance and REAP information with them.

Bryan Texas Utilities

On March 3, Bryan Texas Utilities (BTU) said that it was continuing to monitor the financial issues and discussions surrounding the recent historic winter weather event as it affected the energy market.

“While there are financial settlements still to be resolved in ERCOT and the situation changes daily, BTU expects no changes to customer rates. The Bryan City Council, BTU Board and staff will work diligently to ensure rates are kept as reasonable and predictable as possible,” the public power utility said.

GEUS

In order to maintain strong financial stability, the Greeneville Electric Utility System (GEUS) Board of Trustees will consider securing short-term financing, GEUS said on March 5. A public hearing will be held to discuss this matter on March 11.

Short-term funding will provide GEUS with the ability to pay the increased energy costs for the month of February while continuing to manage the financial health of the utility, it noted.

“At this time, the costs of this event are being absorbed by GEUS,” said GEUS Board of Trustees Chair Sue Ann Harting.

GEUS said that “there are many questions about the legitimacy and even legality of some costs that were incurred during this event. We will continue to monitor the developments affecting pricing as financial settlements are resolved and will diligently work to ensure no unfair costs are passed on to GEUS customers.”

City of Georgetown

The City of Georgetown, Texas, on March 5 said it plans to issue $47.8 million in a 10-year bond to pay for energy used during February’s winter storm. The City Council in a March 2 meeting directed staff to pay the debt over 10 years from electric utility revenues at current rates.

“Even as we got word on the exorbitant cost of energy while we were in the middle of the disaster, there was never a question of whether we would not keep the power on as much as we could,” Mayor Josh Schroeder said. “Our focus was delivering electricity to our customers and controlling the variables we could. Another variable we have some control over is the burden placed on Georgetown electric customers as a result of this event, and the steps we took Tuesday will mitigate additional costs for our customers,” he said in a statement.

As a result of the planned bond issuance, Georgetown electric customers will see no difference in their electric rates, despite the high energy costs during the storm.

The city’s bill currently is due at the beginning of April. However, what the city owes continues to change as electric generators and providers, Public Utility Commission of Texas (PUCT), and legislators evaluate the financial situation and weigh options, it said. Any changes to rates or the bond needed because of an amended bill will be brought before the council for discussion and direction.

At the direction of the city council, the city plans to use the existing power cost adjustment (PCA) of $0.01375 per kilowatt hour to help cover the cost of the bond as it is paid back over 10 years. The PCA was on track to be eliminated in 2022 due to the end of a purchased power contract. The current PCA generates about $6 million a year, which would cover the additional, annual debt payment of $5.4 million from the 10-year bond.

The city also is pursuing a surety policy to cover an additional $6.4 million in reserves, which will be required to maintain debt service coverage ratios after the costs from the winter storm. The one-time, up-front payment (expected to be in the hundreds of thousands of dollars) for the policy will be paid for using existing revenues.

Georgetown said that customers might see higher-than-normal electric bills for February due to increased usage. Even with the mandated power outages from ERCOT, heating and reheating of a home consumes considerable energy and is likely to result in higher bills this month, it noted.

The city “has multiple options to help you pay your electric bill, such as funding assistance through partner agencies and in-house customer programs you may qualify for,” it noted.

On March 11, Schroeder, City Manager David Morgan and electric general manager Daniel Bethapudi will participate in a presentation and live question and answer about the electric costs facing the City of Georgetown as a result of February’s winter storm.

ERCOT board dismisses CEO in wake of power outages

In other news, the Board of Directors of ERCOT on March 3 voted to dismiss ERCOT President and CEO Bill Magness in the wake of rotating outages implemented by ERCOT after an arctic blast hit the state last month.

“The ERCOT Board of Directors met this evening and directed the Corporate Secretary to exercise the 60 days’ termination notice to ERCOT President and CEO Bill Magness pursuant to the employment agreement with ERCOT,” ERCOT’s Board of Directors said in a March 3 statement.

“During this transition period, Bill will continue to serve as President and CEO and work with state leaders and regulators on potential reforms to ERCOT. The ERCOT Board is expected to begin an immediate search for a new President and CEO, and will continue to discuss the transition plan at future meetings during this time period,” the board said.

DeAnn Walker on March 1 resigned as chairwoman of the Public Utilities Commission of Texas, days after she faced questions from state lawmakers at a hearing that examined rotating outages implemented by ERCOT in the wake of an arctic blast.

On Feb. 25, Walker appeared before a hearing held by the Texas Senate’s Committee on Business and Commerce. Magness also participated in the hearing.

TMPA’s Bob Kahn selected to serve on ERCOT’s board

Bob Kahn, general manager of the Texas Municipal Power Agency, has been selected to serve on the board of ERCOT, the Austin American Statesman reported on March 7.

Kahn served as President and CEO of ERCOT from July 2007 to November 2009.

Kahn was an ERCOT board member from 2002 to 2006 and was also the deputy general manager at Austin Energy.

PUCT votes to claw back ERCOT ancillary services payments made to generators

Meanwhile, the PUCT on March 3 voted to “claw back” ERCOT payments made to generators for a special category of power reserves they failed to deliver.

Known as ancillary services, the electricity reserves are contracted in advance to help ERCOT support the transmission of energy to users while maintaining reliable operation.

The PUCT situation was brought to the PUC’s attention by ERCOT’s Independent Market Monitor? who identified a number of instances between Feb. 14 and 19, in which ancillary services were not provided in real time because of forced outages or decreases in the available capacity of electric generating units.

While ERCOT operators would traditionally note the ancillary services’ “failure to provide” so that payments would not be made, the pace of activity surrounding the grid event caused this function to be overlooked, the PUCT said. As a result, the ERCOT payments must be returned.

U.S. House subcommittee launches probe of ERCOT’s role in Texas power crisis

On March 3, U.S. Rep. Ro Khanna, D-Calif., and Chairman of the House Subcommittee on the Environment, sent a letter to Magness, seeking information and documents “regarding the lack of preparation” by ERCOT for the recent winter storm. The subcommittee is also seeking information regarding ERCOT’s response to the winter storm and its preparedness for future storms.

“Extreme winter weather events in Texas have occurred repeatedly over decades and ERCOT has been unprepared for them,” wrote Khanna.

“ERCOT’s own consultant has predicted that such extreme winter weather events will continue to occur every decade. The subcommittee is concerned that the loss of electric reliability, and the resulting human suffering, deaths, and economic costs, will happen again unless ERCOT and the State of Texas confront the predicted increase in extreme weather events with adequate preparation and appropriate infrastructure,” the lawmaker said.

U.S. House Energy and Commerce Committee Chairman, others seek answers from ERCOT

Meanwhile, House Energy and Commerce Committee Chairman Frank Pallone, Jr., D-N.J., Energy Subcommittee Chairman Bobby L. Rush, D-Ill., Oversight and Investigations Subcommittee Chair Diana DeGette, D-Colo., Rep. Marc Veasey, D-Texas, and Rep. Lizzie Fletcher, D-Texas wrote to Magness on March 4 to inquire about ERCOT’s role in preparing for and responding to the recent extreme weather event.  

“The ongoing crisis raises significant questions regarding Texas’ grid resilience and regulatory regime, and ERCOT’s stewardship of the grid prior to and during this crisis,” the lawmakers wrote. “According to reports, ERCOT was aware of the possibility of a significant winter weather event as early as Tuesday, February 9, 2021, but may not have appreciated the seriousness of the event or its possible implications.”  

The lawmakers stressed in their letter that more must be done to protect communities disproportionately impacted by winter power outages. 

They pointed to a 2011 report from the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) that made a number of recommendations for the electric and natural gas industries intended to help prevent blackouts and natural gas curtailments after another major storm event that year.

“Several of these recommendations were directed at ERCOT, but it is unclear the extent to which ERCOT implemented any of these recommendations,” the lawmakers said. “With extreme weather events becoming more frequent due to climate change, it is critical that ERCOT and Texas apply lessons from earlier emergency events in order to increase the strength and resiliency of the grid and prevent future blackouts.”

The lawmakers requested a briefing and information regarding the outages, including:

Kansas governor signs bill to protect Kansas cities from surging costs

March 8, 2021

by Paul Ciampoli
APPA News Director
March 8, 2021

Kansas Gov. Laura Kelly on March 3 signed a bill to protect Kansas cities from potential price surges in electricity bills caused by extremely cold temperatures in February.

Senate Bill 88 establishes a $100 million low-interest loan program for municipal utilities facing high utility bills after last month’s frigid temperatures. 

“This loan program was absolutely necessary for our cities to manage the surging utility costs,” Kelly said. “It gives cities the immediate relief they need to avoid dire financial decisions while we pursue other, long-term solutions.”

The loan program will be administered by the Kansas State Treasurer’s Office using Pooled Money Investment Board (PMIB) funds.

The City Utility Low-Interest Loan Program is a backstop for cities in Kansas with public power or public gas systems that were financially devastated by the February extreme winter weather event, noted Colin Hansen, Executive Director of Kansas Municipal Utilities (KMU).

“Dozens of cities across Kansas face exorbitant natural gas and power supply costs. For many, six days of usage in February cost multiple times more than an entire year’s gas or power budget,” he said.  

The legislation enacting the City Utility Low-Interest Loan Program went from a hearing on the morning of March 3 to passage on emergency action by both the full House and Senate later that day, Hansen said, with Kelly signing the measure that evening. The State Treasurer was accepting applications 24 hours after the measure was enacted.  

“We are incredibly appreciative of the Governor, State Treasurer and our legislative leaders all joining together on a measure needed to help Kansans in such an incredibly abbreviated timeframe,” Hansen said.

“The loan program will enable cities that were using words like ‘insolvency,’ ‘bankruptcy,’ and ‘dissolution’ the time to begin to address the financial crisis caused by outlandishly high natural gas and electricity prices,” he said.

Monitor says ERCOT decision resulted in $16 billion in additional costs to market

March 5, 2021

by Paul Ciampoli
APPA News Director
March 5, 2021

An Electric Reliability Council of Texas (ERCOT) decision last month resulted in $16 billion in additional costs to ERCOT’s market, of which roughly $1.5 billion was uplifted to load-serving entities (LSEs) to provide make-whole payments to generators for energy that was not needed or produced, the independent market monitor (IMM) for ERCOT’s wholesale electricity markets said.

The IMM, Potomac Economics, on March 4 submitted a filing to the Public Utility Commission of Texas (PUCT) in a proceeding related to rotating outages implemented by ERCOT in February in the wake of an arctic blast that hit the state.

Potomac Economics said that it agrees with the PUCT’s order from Feb. 15, 2021, which mandated that real-time energy prices reflect firm load shed by setting prices at the value of lost load (VOLL). “This is essential in an energy-only market because it provides efficient economic signals to increase the electric generation needed to restore the load and service it reliably over the long term,” the IMM said.

“Conversely, it is equally important that prices not reflect VOLL when the system is not in shortage and load is being served. The Commission recognized this principle in its order, expressly stating it is only ERCOT’s out-of-market shedding firm load that is required to be reflected in prices,” Potomac Economics said.

ERCOT recalled the last of the firm load shed instructions at 23:55 on February 17, 2021. “Therefore, in order to comply with the Commission order, the pricing intervention that raised prices to VOLL should have ended immediately at that time,” the IMM told the PUCT.

 However, ERCOT continued to hold prices at VOLL by inflating the real-time on-line reliability deployment price adder for an additional 32 hours through the morning of February 19, Potomac Economics said.

This decision resulted in $16 billion in additional costs to ERCOT’s market, of which roughly $1.5 billion was uplifted to LSEs to provide make-whole payments to generators for energy that was not needed or produced.

Although most energy costs can be hedged by ERCOT’s LSEs through bilateral contracts or generation, “these make-whole payments are particularly harmful because they are uplifted to all loads through the Real-Time Ancillary Service Imbalance Charge. Therefore, they cannot be hedged and will likely result in substantial adverse economic effects, including higher levels of defaults,” the IMM said.

“Therefore, the IMM recommends that the Commission direct ERCOT to correct the real-time prices from 0:00 February 18,2021, to 09:00 February 19,2021, to remove the inappropriate pricing intervention that occurred during that time period,” Potomac Economics said.

“From a practical standpoint, this will primarily be accomplished by removing most, if not all, of the Real-Time On-Line Reliability Deployment Price Adder during these intervals, which will substantially eliminate the Real-Time Ancillary Service Imbalance Charge,” it said.

The IMM said that adopting this recommendation will not result any revenue shortfalls for ERCOT’s generation as the corrected prices will cover the generator’s as-offered costs, and efficiently reflect the actual supply, demand, and reserves during this period.

“We recognize that revising the prices retroactively is not ideal. In this case however, given that the prices are inconsistent with ERCOT’s protocols and the Commission order and that allowing them to remain will result in substantial and unjustified economic harm, we respectfully recommend that the Commission take the action described above to correct ERCOT’s real time prices,” Potomac Economics said.

In a March 1 filing in the proceeding, the IMM offered several recommendations “related to ancillary services in light of certain market outcomes.”

Among other things, Potomac Economics recommended that for operating days February 15 through February 20, 2021, there should be a repricing of all day-ahead ancillary services clearing prices to cap them at the System-Wide Offer Cap of $9,000 per megawatt hour.