Update #2 (May 28 afternoon):
Language Posted For Texas Senate Amendments Providing Financing To REPs For Costs From Energy Prices Maintained At $9,000 After Winter Event Ended; Other Costs

May 28, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Update #2, 4:21 PM ET, May 28

With regards to the relief related to amounts from entities defaulting at ERCOT (short-pays), the Senate version of HB 4492 provides that the PUC may authorize the independent organization to establish a debt financing mechanism to finance the default balance as follows:

"Default balance" means an amount of money of not more than $800 million that includes only:

(A) amounts owed to the independent organization by competitive wholesale market participants from the period of emergency that otherwise would be or have been uplifted to other wholesale market participants; and

(B) financial revenue auction receipts used by the independent organization to temporarily reduce amounts short-paid to wholesale market participants related to the period of emergency.

Under the Senate version of the bill, "default charges" means charges assessed to wholesale market participants to repay amounts financed under this subchapter to pay the default balance. Under the Senate version of HB 4492, the imposition and collection of default charges authorized by the PUC shall be nonbypassable by wholesale market participants

Under the Senate version of HB 4492, the PUC's order must include an adjustment mechanism requiring ERCOT to adjust default charges to refund, over the remaining period of the default charges, any payments made by a competitive load-serving entity toward unpaid obligations from the period of emergency that were included in the financed default balance.

Under the Senate version of HB 4492, ERCOT shall collect from and allocate among wholesale market participants the default charges using the same allocated pro rata share methodology under which the charges would otherwise be uplifted under the protocols in effect on March 1, 2021. The default charges must be assessed on all wholesale market participants, including market participants who are in default but still participating in the wholesale market, and may be based on periodically updated transaction data to prevent market participants from engaging in behavior designed to avoid the default charges.

The Senate version of HB 4492 would bar any entities, including munis and co-ops, which have defaulted at ERCOT and which have not paid ERCOT, or which do not provide for the full and prompt payment of those amounts owed, from being a market participant in ERCOT. The bill would bar ERCOT from scheduling the load or generation of such an entity. Ostensibly, this provision is meant to compel municipal and cooperative utilities to participate in securitization, and has been referred to as requiring munis and co-ops to be subject to competition if they do not use securitization

Turning to the "uplift charges" first discussed and defined in our story below from the morning of May 28, the Senate version of the bill requires that all load-serving entities that receive offsets to specific uplift charges from the independent organization must adjust customer invoices to reflect the offsets for any charges that were or would otherwise be passed through to customers under the terms of service with the load-serving entity, including by providing a refund for any offset charges that were previously paid

Under the Senate version of HB 4492, before a wholesale market participant may receive money from either the default or uplift financing mechanism, the participant must submit to the attorney general:

(A) all documents, e-mails, or text messages relating to financial security transactions used to hedge or offset the cost of fuel or energy in February 2021; and

(B) all documents, e-mails, or text messages relating to qualified cost information for February 2021; and

Information provided to the attorney general under the bill's provision is to be confidential and not subject to public disclosure under Chapter 552, Government Code.

Under the Senate version of the bill, a market participant may not receive money under the financing programs if the participant asserts a privilege as a reason for not fully complying with the requirement to provide the information described above to the AG.

Earlier (May 28, morning):

The text has been posted for the Senate amendments to HB 4492, which is intended to provide certain relief to retail electric providers concerning certain costs from the winter weather event

As previously reported (original story below), with the Senate passing an amended bill versus the version passed by the House, Senate leadership indicated that the bill will go to the conference process (and did not cite the potential for House concurrence)

As previously reported, most notable under the amendments is that the financing relief to REPs under the bill has been extended to cover the difference between ERCOT energy prices that were set at the $9,000 per MWh cap after load shed had ended (the 32 hours) and the market prices that would have resulted absent the PUC setting prices at $9,000

Below is a quick glance at this major new provision of the Senate version of the bill. This is a developing story and will be updated further. Check this page for further updates; you may need to refresh your page for the latest version.

Under HB4492 as passed by the Senate, "uplift balance" means, "an amount of money of not more than $2.1 billion that was uplifted to load-serving entities on a load ratio share basis due to energy consumption during the period of emergency for reliability deployment price adder charges and ancillary services costs in excess of the commission's system-wide offer cap, excluding amounts securitized under Subchapter D, Chapter 41 [a separate cooperative securitization measure]. In addition to that uplifted amount of money, the term includes reliability deployment price adders included in the cost of energy used to supply end-use customers during the period beginning 12:01 a.m., February 18, 2021, and ending 9 a.m., February 19, 2021."

Under the Senate version of the bill, the PUC may contract with another state agency with expertise in public financing to establish a debt financing mechanism to finance the payment of the uplift balance.

Financing provided to REPs and other LSEs for the uplift balance would be recovered via uplift charges, which would be charges assessed to load-serving entities. Except as noted below, these uplift charges would be nonbypassable, except for those entities or specific customers eligible for an opt-out

Under the Senate version of the bill, ERCOT shall assess uplift charges to all load-serving entities on a load ratio share basis, which may be translated to a kWh charge, including load serving entities who newly enter the market, but excluding the load of entities that opt out

In a provision that was not clear from the debate on the amendments, aside from non-competitive entities such as co-ops, the text of the Senate version of the bill states that the ability to opt-out from the uplift charges is only available to transmission-voltage customers served by a retail electric provider; a retail electric provider that has the same corporate parent as each of the provider's customers; and a retail electric provider that is an affiliate of each of the provider's customers. An entity must pay in full all invoices owed for usage during the period of emergency in order to opt out

Otherwise, a REP may not opt out of the uplift charges

The full text of the amendments can be found here

Earlier (From May 27):

The Texas Senate has passed on third reading an amended version of HB 4492, which is intended to provide certain relief to retail electric providers concerning certain costs from the winter weather event

With the bill having been amended versus the version passed by the House, Senate leadership indicated that the bill will go to the conference process (and did not cite the potential for House concurrence)

Text for the amendments was not available as of publication time

As described during a Senate debate early this morning, HB 4492 would address the following:

• Monies owed to ERCOT due to defaults (short pays) not addressed by other avenues such as the cooperative securitization bill (SB 1580). This amount will be subject to securitization

• Ancillary services, addressed via loans from the Economic Stabilization Fund (ESF)

• Reliability Deployment Price Adders, addressed via loans from the Economic Stabilization Fund (ESF)

• Via securitization, the difference between ERCOT energy prices that were set at the $9,000 per MWh cap after load shed had ended (the 32 hours) and the market prices that would have resulted absent the PUC setting prices at $9,000

For the ancillary services and reliability deployment price adders, the eligible amounts are likely to be only those costs above the $9,000 price cap, as addressed in the bill as passed by the House, though Senate-adopted language was not immediately available.

The ancillary services and adder costs will be addressed by loans to market participants from the ESF, provided that such participants have already paid ERCOT for these charges

The loan program is intended to allow such participants to borrow money at a lower interest rate than they may have already done to cover such costs, essentially in a process likened to a reverse mortgage

Additionally, there is an opt-out process for the ancillary services and adder costs program, for entities that have already paid such charges to ERCOT. Entities eligible for the opt-out also include certain large customers and also REPs which self-supply an affiliated customer

Under the amended bill, in order for a wholesale market participant to avail itself of money under HB 4492, they must file supporting information with the state's Attorney General. Furthermore, participants would be required to repay any such monies if they engaged in false, misleading, or deceptive conduct during the winter storm

Additionally, market participants using monies from the fund can no longer pursue litigation against the PUC concerning the winter storm pricing as a condition of receiving the monies.

With respect to the energy prices at the $9,000 cap for 32 hours after load shed had ended, an adopted floor amendment would, as described during the debate, allow LSEs to "securitize" the costs above what the market clearing price would have been, absent the PUC's order establishing prices at $9,000. Further details were not immediately available.

Senators noted that including this provision related to the 32 hours in the bill preserves the ability to address relief concerning the 32 hours in conference with the House

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