Austin News

An energy provider is challenging the legal authority of the Public Utility Commission of Texas orders to reset electric prices to $9,000/Mwh during the February winter storm.

Exelon Generation Co. filed a motion with the PUC on March 12 challenging the commission's orders to the Electric Reliability Council of Texas (ERCOT) to ignore previously set prices set and to reset prices to the cap in the Texas' administration code of $9,000 per MWh. 

"The Commission ordered ERCOT to ignore the prices set pursuant to its protocols and instead reset energy prices to the system-wide offer cap specified in 16 Tex. Admin. Code § 25.505(g)(6)(B) of $9,000 per MWh," Exelon's filing states. "The orders had the effect of changing ERCOT protocols, which act as agency rules, without following any procedure outlined in PURA or in the APA, and with no notice, no opportunity from market participants to comment, and no record evidence."

Energy Alliance's Bill Peacock | Energy Alliance

Exelon said that price remained continuous for almost four full days without any time allotted for companies to change hedge positions they held.

"Market participants had no time to unwind the hedges that they had entered into prior to the Orders or to shield themselves from the effects of Commission decisions made in less than 7 minutes on Feb. 15 and in 15 minutes on Feb. 16," Exelon's filing states.

Exelon adjusted its earnings forecast for the first quarter as a result of the winter storm and the company said it planned to separate its regulated and unregulated businesses into two publicly traded companies, Reuters reported.

Exelon argued in its filing that many Texas customers were severely impacted by PUC's decision. 

"Many customers--including small Texas commercial and industrial loads, municipalities and cooperatives, and even some residential customers--buy power on indexed retail rates (i.e., rates that track market-clearing prices), and are thus directly and severely harmed by the Commission's decision," the company indicated in its filing.

The company also said that granting their request does not amount to "repricing." 

"The Commission's orders themselves replaced the market clearing prices set by ERCOT protocols that were approved by the ERCOT Board and filed with the Commission. They were the rules of the road, upon which market participants relied, and the Commission diverged from them...Section I of the Commission's Order and was not valid and should not have supplanted the market rules, which were working as designed," the filing stated.

Exelon argues that market participants require "certainty of, and adherence to, market rules. However, in all the talk about the importance of price certainty and concern for the impact on hedges that were taken on in reliance of the $9,000/MWh prices, there is little recognition of the impact that the Commission's abrupt decision had on the hedges (including bilateral sales) that the market participants already had in place. Certainly, suppliers could not have anticipated when pricing those contracts that the Commission would step in and unilaterally establish prices at $9,000/MWh for four straight days during and event (i.e., firm load shed) that was expressly omitted from the scarcity pricing in the ERCOT protocols."

Exelon also reserved its right for a judicial review of PUC's actions and indicated that if the PUC declines to reconsider its decision for establishing the price, it wants the commission to clarify in new orders its legal authority to take such actions. 

"Exelon also files this motion to preserve its right to judicial review of the Commission's action. The orders do not specify under what authority the Commission acted when it issued them. The orders and the process under which they were issued do not fit squarely within any known procedure of the Commission - be it rule making, emergency rulemaking or contested case review," the filing states. "Therefore, in an abundance of caution, Exelon files this motion for rehearing within 25 days of the date of the orders to preserve its right to judicial review under APA § 2001.146. Exelon further requests that even if the Commission declines to reconsider the substantive decision discussed herein, it reissue the Orders to clarify under what legal authority it has purportedly acted."

Critics have questioned the commission's authority to set rates during the February winter storm.

Energy Alliance Policy Director Bill Peacock said that PUC should have never increased the price of electricity as Texans will be paying a hefty price for last month's storm, the Lone Star Standard reported.

“The PUC should have never increased the price of electricity--it failed to bring any more generation online,” Peacock posted on Twitter. “Its refusal to fix its mistake will put billions of dollars into the pockets of generators and Wall Street bankers at the expense of Texas consumers."

Reports indicated that residents were overcharged at least $16 billion in electricity costs during and in the aftermath of the storm.