This editorial first appeared in the Houston Chronicle. Guest editorials don’t necessarily reflect the Denton Record-Chronicle’s opinions.
When we make a mistake, most of us were taught to own it and do what we could to set things right.
“Most of us” does not appear to include the Public Utility Commission, whose commissioners have rebuffed calls to reverse a grave error during the Texas deep freeze that has resulted in in electricity overcharges totaling $16 billion, a staggering sum that has enriched some players in the energy market and beggared others, and led to higher bills for residents, businesses and other end users, too.
The overcharge stemmed from a mistake made by the Electric Reliability Council of Texas, the nonprofit that manages Texas’ electric grid, when it kept energy prices at the highest level allowable — $9,000 per megawatt hour — for 32 hours longer than it should have.
The emergency pricing is intended as a gold-plated carrot to lure more generators into the market in crisis situations where demand far outpaces power supply. But an independent market monitor says ERCOT failed to restore the price to lower levels when the emergency passed and recommended that the overcharges billed to retail electric providers and others after that time be reversed.
The fallout over the statewide power failure that left 4 million Texans shivering in arctic temperatures has been swift.
The president of ERCOT has been ousted. The three-member Public Utility Commission, appointed by Gov. Greg Abbott to oversee ERCOT, is down to one member after the chairwoman and another commissioner resigned. (The lone remaining member of the PUC resigned Tuesday night, at Abbott’s request.)
The last man standing, Arthur D’Andrea, was serving as chairman and had refused to make amends in a way that will ease the pain already traumatized Texans will feel as the higher bills come due.
D’Andrea explained it’s “nearly impossible to unscramble this sort of egg” in an unregulated market as complex as Texas’. Generators relied on the high prices to produce the extra energy, and wholesalers who bought it at high prices did so intending to pass on those costs to their own buyers. Trying to divest the profits from the various stages of the supply chain would be a nightmare, D’Andrea suggested.
To his credit — and we rarely find reason to say that — Lt. Gov. Dan Patrick has called BS on that conclusion, and demanded that PUC and ERCOT correct their mistakes:
“It will ultimately benefit consumers and is one important step we can take now to begin to fix what went wrong in the storm.”
So how did this happen? ERCOT declared an emergency on Monday, Feb. 15, in the early hours of Winter Storm Uri, once it became clear that the cold was knocking offline large chunks of the system’s generating capacity even as demand for electricity surged. The emergency meant that ordinary limits on what electricity generators could charge wholesale suppliers were out the window. Ordinarily, prices are well below $100 per megawatt-hour.
After a delay tied to a computer error, the shockingly high prices began working to induce generators to pull out every stop — extra crews, overtime, you name it — to produce more power. This is the feature of Texas’ unregulated energy market that free-marketers cheer: It creates an opportunity for market-based solutions even during life-threatening crises.
But there’s a catch. The extraordinary prices are supposed to be permitted only as long as they are needed. The minute the crisis is over, ERCOT is supposed to reinstate regular price limits, lest consumers be left at the mercy of price-gouging.
ERCOT’s failure to lower sky-high prices is expected to lead to $1.5 billion in higher electric bills for last month.
Just how and why ERCOT made such a catastrophically bad call is a mystery.
“We’re left with two possibilities here,” says University of Houston energy fellow Ed Hirs. “Either they’re incompetent or dishonest.”
Whatever the reason, Texans deserve answers. We urge lawmakers, including Texas House and Senate committees investigating the blackout, to find them.
We ask the same of the U.S. House Committee on Oversight and Reform, which is examining pricing and other aspects of the near-collapse of the Texas electric grid.
We’re glad to see Patrick is asking questions and demanding that the PUC follow the law, which gives ERCOT 30 days to reset prices. It’s a hard knot to untangle, but it’s the only fair thing to do.
The ouster of a handful of political appointees isn’t enough. Officials responsible for the errors deserve to be held accountable, including Abbott, who has yet to own up to his role in the crisis.
Texas consumers grossly overcharged for electricity deserve relief. No state that grievously fails its people should be allowed to stick them with the bill, too.