Texas wholesale electric prices spike more than 10,000% amid outages

Reuters ^ | Feb 15, 2021 | Tim Mclaughlin

[george76]

The spot price of wholesale electricity on the Texas power grid spiked more than 10,000% on Monday amid a deep freeze across the state and rolling outages among power producers, according to data on the grid operator’s website.

Real-time wholesale market prices on the power grid operated by the Electric Reliability Council of Texas (ERCOT) were more than $9,000 per megawatt hour late Monday morning, compared with pre-storm prices of less than $50 per megawatt hour, according to ERCOT data..

The surge reflects the real-time megawatt hour price of electricity and the cost of congestion and losses at different points across the grid. Early on Monday, ERCOT said extreme weather conditions forced many power generating units off the grid, upending the supply of electricity.

ERCOT did not respond to an email message about the spike in wholesale electricity prices.

On Feb. 10, well before inclement weather hit Texas, spot wholesale prices on ERCOT settled around $30 per megawatt hour at the end of the day, ERCOT data show. But on Sunday, the price per megawatt hour surged past $9,000 on the grid.

ERCOT can be more susceptible to wholesale price spikes because it does not have a capacity market, which pays power plants to be on standby during peak demand and weather emergencies, for example. ERCOT’s model means consumers are not paying for generation that may never be called into action.

But early on Monday, ERCOT said extreme weather conditions caused many generating units – across all fuel types – to trip offline and become unavailable. That forced more than 30,000 megawatts of power generation off the grid, ERCOT said in a news release.

[Chgogal]

Every year the utility has to go through an audit by the state government. The utility is supplier of last resort. It looks like the utility's peak day portfolio had too much interruptible electric supply, aka wind and solar, (which may have been deemed as firm by left wing bureaucrats) in the utility's peak day portfolio. The truth will come out a year from now, after months of discovery, testimony and cross examination.

[Chgogal]

25% of Texas’ energy supply on a non peak day comes from renewables. In the past 48 hours, 0% of the available energy came from the contracted renewables. Try to find 29% of your energy portfolio on the coldest day in the open market when you didn’t plan on it, meaning you don’t have contracts with suppliers to perform. Good luck with that, suckers! My guess, the renewable energy suppliers declared Force Majeure.

[DoodleDawg]

Yeah but at least they have their own grid. Their windmills may be frozen, their coal and gas plants may be shutting down, but it’s all theirs.

[DoodleDawg]

So did the fact that Texas has four seasons just like everyone else not register on whoever bought the wind-generating electrical equipment? And that ice and snow in winter is not uncommon?

[Chgogal]

I have no idea who in Texas approves a utility’s energy portfolio. But if in fact 25% of a daily energy portfolio is dependent on “renewables” something is rotten in the state of Texas.

[DoodleDawg]

But if in fact 25% of a daily energy portfolio is dependent on “renewables” something is rotten in the state of Texas.

Twenty percent or more of the electricity in countries like Norway and Sweden is generated from renewable sources and their winters are way more severe than Texas winters are. Texas just made bad decisions on their equipment.

And it just isn't renewable sources. Coal and gas powered plants are closing as well due to the weather.

[SSS Two]

We'll get a chance to test our theory. REPs aren't charging people with fixed rate contracts outrageous rates, but some people chose to enter a contract where they paid the wholesale price for electricity. Those people are getting bills for thousands of dollars. I bet that Griddy does't survive.

People who got these wholesale pricing plans were stupid. They were collecting nickels and dimes in front of a steamroller. The steamroller eventually got them.

[BiglyCommentary]

Were those floating/spot rate plans?

Here’s the boiler plate that’s in most set price contracts:

“The Price is subject to change during the Initial Term of this Agreement only if there are changes in TDSP charges; changes to the Electric Reliability Council of Texas (“ERCOT”), or Texas Regional Entity (“TRE”) administrative fees charged to loads or changes resulting from federal, state or local laws or regulatory actions that impose new or modified fees or costs that are beyond Company’s control.”

[SSS Two]

FYI — Got my bill for the month ending Friday, February 19, 2021. It’s $95, $8 less than last month.

[SSS Two]

This is from the Winter Storm FAQ of my electricity provider:

Will my rate increase as a result of the recent spikes in real-time market prices?

Direct Energy's residential fixed rate and month-to-month plans are not tied to real-time market prices, insulating our residential customers from extreme wholesale power price swings.

[BiglyCommentary]

I think Abbott’s statement on this prevented some of the shifty ones from trying to use those weasal words in the contracts.

[SSS Two]

The contracts Direct Energy and similar REPs have with their customers prevent them from charging wholesale rates. After all, people like me signed contracts with Direct Energy to remove the risk of large swings in wholesale prices. Furthermore, I would like to think that reputable REPs like Direct Energy secure their expected needs in advance and participate in the wholesale market only at the margins.

It will be interesting to see how the people who signed up to pay wholesale prices will fare. Sure, they saved two cents per kwh in normal times. I could never evaluate the risk on wholesale electricity prices from an extreme event like the winter storm earlier this month. I doubt the people who agreed to pay wholesale rates were able to evaluate that risk either, but it didn't stop them from signing up. Perhaps they counted on going to the media and demanding someone else assume the risk when a major event inevitably occurred.