See below for initial comments by Public Utility Commission Chair Arthur D’Andrea, who is currently providing testimony to and answering questions from House State Affairs regarding the impact of the winter storm last month. This meeting is currently ongoing and Chair D’Andrea or other PUC staff may be recalled speak further. Please see here for a livestream link to the ongoing House State Affairs hearing and here for the committee’s agenda.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

Arthur D’Andrea, Chair PUC

  • Here to discuss repricing; notes that they have “flip-flopped” on this issue several times
  • Repricing does not help/hurt consumers with one exception
  • One of the deadlines to reprice has passed
  • Would be illegal to me as a chair to reprice, would be the legislature’s job
  • Paddie – Can you speak to the $16 billion we are hearing about?
    • It is not a real number, but was first proposed by the independent market monitor
    • They revised position to $3.2 billion yesterday
  • Paddie – Consumers are top of mind; can you speak to what effect this could have on consumers
    • Would not help/hurt would take money away from generators and give it to retail electric and their banks
    • The retail electrics are not going to give that cost back to their customers
    • Can step up education efforts to remind customers they can shop for providers
    • The exceptions are city-owned powerplants and rural co-ops; if repricing would happen, you are taking Texans’ money away and giving it to retail electric providers
    • Repricing would help more co-ops than you hurt, and take pressure off of places like Rayburn Co-op, Brazos Electric, and retail electric providers
    • 80% of the problem is Brazos, they had no collateral and filed for bankruptcy; giving money to them would be complicated
    • LCRA and City of Austin told us they would be bankrupt if we repriced
  • Paddie – Is this a pricing error?
    • Is not a repricing error; were surprised by the output, but that is the formula everyone agreed to
  • Paddie – No cap for ancillary charges?
    • Correct, was no cap; it makes sense there should be one, but is not the market we have right now
  • Paddie – May need to recognize the rules of the game need to be changed; are some areas we need to take a look at
    • Correct
  • Paddie – If we decided to do this, can we? Do we have the legal/regulatory authority? How much of this is settled already?
    • Does not believe he can personally, are getting sued no matter what; legislature would have more authority than the PUC
    • Our interest is protecting the ratepayers; by missing the ICE repricing deadline, the futures market has been set already
    • Was at $9,000, all money has already been set internationally
    • ICE has diverse futures to place hedges at, have been told if you retroactively price, will become expensive for people in Texas to buy contracts in ICE to keep their businesses going
    • Bankers and those at the Dallas Fed have noted they are afraid that we will reprice
  • Paddie – Is your opinion that since these have been settled, what mechanism would we have to “claw” that back?
    • ICE monies cannot be “clawed” back; can try to unwind ERCOT, but would create winners and losers
  • Raymond – You feel like you would be breaking the law if you changed the price?
    • Yes, violating civil laws that constrain the agency
  • Raymond – A majority of the legislature does not agree with you; if you do not think there is anything to be done, then maybe the Governor should appoint someone who would
    • Got a letter from the Senate urging me to reprice, signed by 28 senators and the Lt. Governor
  • Raymond – $16 billion popped up from somewhere, remind me what that is? Does not have confidence in them if they are now projecting $3.2 billion, could change
    • Have an independent market monitor, and was their first pass
    • Paddie – Aim to have them here next week with the Dallas Fed, ICE and other stakeholders
    • $3.2 billion is what you move from one pocket to another
  • Raymond – Notes the South Texas Co-op has been hit hard; likens fixing this to attesting charges on a credit card
  • Raymond – The sooner we turn this back the other way, the better; need General Paxton here next week to discuss price gouging
  • Raymond – If you are going to stay in this job, need to fix this because it does not make sense; do not want to milk the system because that is a criminal offense
    • Aims to work with the legislature on this issue
    • Raymond – This is not complicated in my mind, you overbilled and need to fix this; are not going to let Brazos and South Texas go down
  • Raymond – Can you come back here and help us figure this out?
    • If you reprice, South Texas will get hammered and have to take out a large loan
    • Raymond – So they are against repricing?
    • They are, they own generation and it showed up and produced; they made money, so if you reprice the consumers will be paying that loan back for a decade
    • Make a commitment to figure this out, but needs to be solved from the back end
  • Hunter – Notes he is the only commissioner left; asks about the letter from the senate, and you disagree?
    • Urges to reprice the last 32 hours and to lower the cap for ancillary services during the winter storm; yes, disagree
  • Hunter – What is LCRA? They told you what? What region do they serve? Who else will go bankrupt?
    • Lower Colorado River Authority; one of the repricing options form the Lt. Governor would bankrupt them
    • Here in Austin in surrounding areas; not sure the specific service area
    • South Texas Electric Co-op told me they would get hit extremely hard, covers a large service area
    • STEC will get hit hard, Golden Spread will get hit hard with maybe an $80 million loan and Austin Energy will get hit
  • Hunter – Everyone forgets the rate payer because all I hear about is corporations; biggest concern for the PUC is their focus on the public
  • Hunter – Still have note gotten an answer for why the lights are on one side of the street and off the other; who gave the list to turn people off?
    • Will get that to you
  • Hunter – Members are frustrated because $16 billion down to $3.2 billion was such a large mistake; we need accurate information to make a plan
  • Hunter – Need stability information in this committee; corrects them on a former quote, public is our priority
    • Yes
  • P. King – Thanks him for a recent appointment; LCRA said it would lead from bankruptcy, a statement from them just noted that they have never made such a statement
  • P. King – They do note that repricing ancillary services would hurt the entire market
  • P. King – Option as to why Brazos immediately took such a large hit?
    • A lot of market participants were surprised; were not collateralized since ERCOT does not require a lot of collateral
    • They had to buy off the market
  • P. King – Are you an attorney? There is confusion as to what authority you have as a singular commissioner, would like to speak to you about this
    • Yes
  • Lucio – Explain if you reprice, they have to take out a loan? That is the issue, you are talking to those stakeholders; need to look at the other side
    • Talked to a lot of providers; need to know if repricing decision will hurt consumers who are a part of a municipal or co-op
  • Lucio – If we reprice the charges of the consumers during the storm, the only way to be sympathetic would be if there overhead was way above
    • Is a gas problem
    • Lucio – Should narrow the repricing to the fixed cost on the gas end, not on substantial windfalls
  • Lucio – Cannot rely solely on the stakeholders on the advice we need to make decisions; if we only listened to lobbyists, we would not get the people’s work done
  • Howard – We need to recognize there are increases on the gas end, like Lucio said; the independent market monitors are not a vested interest?
    • Yes
  • Howard – Regarding PUC order to raise the rates for scarcity, asks about the 32 hours of the price remaining high despite load shed being over
    • Load shed for residential was over during those 32 hours, but there is an argument that since industrial load shed was still occurring load shed was not over
  • Howard – Need to clarify about where load shed occurred, if price remained high when load shed stopped, that is an error on PUC and ERCOT’s side to follow the rules
  • Howard – Are winners and losers already due to the current market system
    • Market broke down in a significant way, and we will fix those; repricing issue is difficult because the deadline was last Friday
    • We know who is hurt, so we need to “stick to the status quo” and help those who have been hurt instead of fighting about the money
  • Howard – You noted that industrial load shed was not something that you even though about; breakdown in communication throughout the whole industry
  • Howard – Since these things seem to be happening more regularly, need to plan for them
    • Agrees
  • Hernandez – Have we done repricing before? Why do you think it is illegal now?
    • Have repriced before; rule is that we reprice when ERCOT makes a mistake
    • If this is just something we do not like, then there is no authority for that
  • Hernandez – So you do not believe this was an ERCOT mistake?
    • Yes, was a whole market issue; lost half our gas fleet, which caused industrial issues and our emergency operations plans were not ready for this
    • Prices “spit out” were the ones the formula agreed on
  • Hernandez – The formula does not take into account the $9,000 cap?
    • Formula is a computer program, but does not believe the formula considers the $9,000 cap
  • Deshotel – Repricing may not be the right word, cost of natural gas went up? What lead to that increase?
    • Is either market or greed, not sure; they would tell you the demand was high and the supply was stressed
    • That price was really high though
  • Deshotel – Would not this be a chance where you could take the money the gas companies got and give it back to consumers?
    • Does not have authority over gas, but electricity
    • Deshotel – What about service stations who charge more for gas during a hurricane?
    • That would be price gouging
    • Deshotel – Then how is this different?
    • Paddie – Notes it would be more appropriate to have this conversation in the Energy Resources Committee
  • Deshotel – Need to look over in the oil and gas also, maybe you are taking the heat over things you have no control over
  • Shaheen – Am getting confused by your use of the word “repricing,” and the Senate says correct the billing errors?
    • They mean the same thing
    • Reiterates it was not an error; signed up for a formula we do not like now
  • Shaheen – Understanding is power plants started failing in succession, first time hearing gas prices could be a cause
    • High gas prices did not cause people’s lights out, winterization was the issue there
  • Shaheen – Is it inaccurate to say the increase in gas caused electricity prices to increase?
    • Yes; price of gas is financial pressure
    • Shaheen – Those emergency operation plans are the main failure
    • Notes he supports Lucio’s winterization bill
  • Raymond – Notes he may be misreading the letter, reads the section that emergency pricing intervention, so you do not think there was an error there?
    • They are not lawyers, the ones cited there; does not agree the emergency pricing should have ended when they did
    • ERCOT did not do anything wrong when it came to this specific issue
  • Raymond – Does the PUC have absolute authority over ERCOT? You are ERCOT; reiterates if D’Andrea does not believe there is an issue, then we need someone else in their place
    • Yes; commits to working with you
    • Raymond – This is fixable, need to correct what went wrong, if we are the ones to fix it, then we better do it soon
  • Deshotel – Can you speak more about the deadlines?
    • ICE market deadline was March 5
    • Deshotel – Got a letter from ICE on March 8 that those contracts were delayed were ERCOT funds
    • Talked to ICE yesterday, and they told us and the Fed that the deadline has passed; will get clarification on that letter
  • Deshotel – The cost of electricity has nothing to do with the price the generators pay for natural gas?
    • It does
  • Paddie – Will finish this conversation later; $16 billion is not the real number? You do not view this as an error, but is a system issue?
    • Correct, and yes the system needs to be changed
  • Paddie – If we were to reprice, would not help the consumer? Would be picking different winners and losers?
    • Only those who sell electricity would get the money back because a majority are on fixed rate contracts
    • Correct, is a zero-sum game
  • Paddie – You believe you do not have the authority to do this because it was not an error? Failure to cap ancillary services, but there is no legal cap?
    • Correct, need to change the rules
    • Is no legal cap, may be in the future
  • Paddie – Need to make sure we know all the facts before we solve the problem; is concerned about if the only issue would be penalizing those who were just following the rules
  • Paddie – South Texas Co-op did everything right, and we are contemplating penalizing them for doing the right thing?
  • Paddie – A lot has to be considered before we head down the road of changing the rules of the game and getting involved in markets