TEAM Renews Call For PUC To Re-Price ERCOT Market Consistent With PUC's Emergency Order, Says 30-Day Deadline Only Applies To ERCOT Staff, Not PUC Or Lawmakers -- EnergyChoiceMatters.com

TEAM Renews Call For PUC To Re-Price ERCOT Market Consistent With PUC's Emergency Order, Says 30-Day Deadline Only Applies To ERCOT Staff, Not PUC Or Lawmakers

March 23, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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The Texas Energy Association for Marketers (TEAM) in a new filing with the Texas PUC renewed its request for the PUC, "to enforce its February 16 emergency order ('Order') and protect Texas customers and their electricity suppliers from unauthorized $9,000/MWh pricing and the associated administrative adders on February 18 and 19," as TEAM said that a 30-day deadline for price corrections only applies to those initiated by ERCOT Staff, and does not bind the PUC, Legislature, or Governor

TEAM alleged in its filing that, "Those market participants who oppose the corrections requested by TEAM and recommended by the IMM have made inaccurate claims to resist mitigating the extraordinary governmental intervention in the ERCOT market. First, they ignore that the PUC and ERCOT have authority to perform price corrections, have done so in the past, and a price correction for February 18 and 19 is squarely within that authority. Second, they point to a false perception that settlement timing preferences of the Intercontinental Exchange ('ICE') are immutable and should determine deadlines for Commission decisions that affect the ERCOT market and electric customers in Texas. These arguments ignore the fact that ICE rules give it discretion to delay settlement pricing of futures contracts and to correct pricing of futures contracts. In short, their arguments are incorrect."

"The notion presented by some that the Commission lacks authority to correct ERCOT’s out of market actions that affect pricing is directly contrary to law and precedent. The Texas Attorney General, the State’s ranking legal officer, issued an opinion confirming the PUCT’s authority to order ERCOT to correct wholesale electricity prices.8 The Commission has such authority under PURA § 39.151(a), 16 Tex. Admin. Code § 25.361(b), and ERCOT Protocols 9.5.6, 6.3(4) and 6.3(6)(a)(i). The Commission has taken corrective actions that affect prices in the past, and it should do so here. ERCOT’s actions exceeded the substantive rules of the Commission, contained in the Commission Order, by retaining the administrative price of $9,000/MWh in the last 32 hours of the event after involuntary firm load shed stopped. This action resulted in an 'invalid market solution' caused by ERCOT that can and must be corrected," TEAM said

"Some commenters have indicated that ERCOT decided to retain the $9,000/MWh as a reliability measure after ERCOT’s firm load shed direction had terminated and that ERCOT made this decision after private consultation with the Chairman and one or more Commissioners. These private conversations cannot legally supplant an unambiguous Commission Order that tied the $9,000/MWh prices to ERCOT-directed firm load shed," TEAM said

"There is neither an absolute ban nor a 30-day limit on the Commission’s ability to order ERCOT to resettle any particular Operating Day. The 30-day time deadline that has been referenced applies only to an ERCOT Staff-initiated correction," TEAM said

"Moreover, the 30-day limitation on ERCOT Staff is not even a restriction on the ERCOT Board, much less a restriction on the Governor, the Commission or the Legislature. For example, under the Protocols, 'the ERCOT Board may, in its discretion, direct ERCOT to run a resettlement of any Operating Day, at any time, to address unusual circumstances,'" TEAM said

TEAM said that, "More importantly, the Protocols specifically recognize the 30-day window does not limit the PUC’s authority to correct prices. ERCOT Protocol Sec. 6.3(6)(a)(i) provides: '[N]othing in this section shall be understood to limit or otherwise inhibit any of the following ... (ii) The PUCT’s authority to order price corrections when permitted to do so under other law..'."

Among other precedent, TEAM noted that, "in PUC Docket No. 29210, the PUC ordered ERCOT to resettle ancillary services fees for nearly a 3-month period from January 7, 2003 through March 31, 2003. The Order requiring ERCOT to conduct this resettlement was signed in November of 2004. ERCOT opposed that resettlement in part based on impacts to the other market participants. The PUC held however: 'ERCOT’s argument that no adjustment should be required because to require adjustments at this late date would be unfair to Market Participants from whom the overcharge would need to be recovered is rejected. ERCOT is reminded that Complainants in this docket are also Market Participants entitled to fairness.' This precedent supports a determination that initial-statement data can be changed, and that once the error in the data is identified, ERCOT has a duty to resolve the dispute any [sic] make any necessary corrections."

"It is clear that ERCOT’s failure to adjust administrative inputs it made to a pricing formula change in response to the PUC’s February order resulted in an invalid market solution after involuntary firm load shed stopped on February 18. On February 18, after ERCOT instructed the Transmission and Distribution Service Providers to cease firm load shed, an invalid market solution existed because there was no longer any correlation between the $9,000/MWh administratively set pricing and the Commission’s Order. Taking all of the ERCOT market notices into consideration, it is clear that ERCOT communicated to the market that the $9,000/MWh price would only be associated with firm load shed conditions. TEAM is aware that some parties argue that, because some load remained off-line voluntary, scarcity pricing should have remained at its maximum. This argument is without merit because large loads can always voluntarily curtail. Moreover, any such voluntary curtailment is on its face not 'firm' load shed and is inconsistent with ERCOT’s apt description of firm load shedding as 'rolling blackouts,'" TEAM said

TEAM also said that concerns regarding the deadline for settling ICE transactions are unfounded

"The fact that a company operating a futures exchange such as ICE – with its own agenda and fiduciary duty to its own shareholders – relies on ERCOT market clearing prices should not determine whether ERCOT should correct prices in accordance with Commission Orders. It should go without saying that any effect on ICE transactions of Commission action to correct energy or ancillary service prices will be primarily borne by market participants and not Texas end-use customers. The correction is in the best interests of Texans, as well as what is required under the law," TEAM said

In particular, TEAM cited ERCOT's intent stated on March 17 to seek a price correction for Feb. 15 (with such correction increasing adder prices) as illustrating that price corrections may occur after the period for setting ICE transactions has passed. EnergyChoiceMatters.com was first to report ERCOT's intent to see this price correction, see our story here

"There is no support for the contention that there is a deadline by which the Commission must act to direct ERCOT’s resettlement of the energy market consistent with the Commission orders. ERCOT’s market notice on March 17, 2021 providing notice of its intent to seek approval of a price correction for the operating day February 15, 2021 underscores the ability to price correct notwithstanding the fact that the period for setting ICE transactions has passed. Moreover, ICE has demonstrated that it can delay settlement of its financial process for contracts tied specially to ERCOT settlement prices, at its convenience, as it has done so with respect to contracts relating to ancillary services," TEAM said

TEAM cited various ICE provisions that gives ICE broad discretion to delay final settlement pricing or correct settlement pricing pursuant to its rules

In particular, "ICE has discretion to delay final settlement pricing of futures contracts and to correct settlement pricing of futures contracts pursuant," TEAM said

"[ICE's] decision to settle contracts for energy despite the well-publicized calls for resettlement by the IMM and others should not drive the Commission’s decision of whether to enforce the terms of its own Order. Physical contracts for purchased power as well as ICE contracts have provisions that address price corrections. The Commission action is not restricted by these private contracts, and the right decision for Texans should not be driven by hedges on the ICE exchange," TEAM said

"The Commission should make decisions based on controlling law considering only what is in the best interests of protecting Texans from the exorbitant effects of the departure from the established market rules in Texas. Well-functioning markets understand and expect identification and corrections of errors and value adherence to the market rules. TEAM renews its February 19, 2021 request that the Commission not let erroneous prices and charges stand," TEAM said

Separately, Chevron Phillips Chemical Company LP (CPChem) filed a formal complaint at the Texas PUC against ERCOT in which, among other relief, CPChem, "requests that the Commission order ERCOT to correct prices, including at a minimum, from midnight on the night of February 17-18, 2021 through 9:00 A.M. on February 19, 2021 in a manner that disregards all mechanisms employed to maintain a $9,000/MWh price or any other price determined to be artificially inflated."

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