(Via ZEXPR) With the reports coming in regarding the implications of the Texas deep freeze, it seems like there is an abundance of financial consequences that have been left behind as well. The Texas blackouts hit the state’s electricity market hard and some parties still aren’t able to pay up for the power they received last week.
The total owed amount continues to stretch out from last week, and by adding in the recent account by the Electric Reliability Council of Texas (ERCOT) from this Friday, it seems like the electric retailers failed to make up for the $2.12 billion in required payments. Now, this is almost 17% of the total amount that was owed by them last week.
The pressure is real as ERCOT continues to struggle to collect this money to pay the operators of the power plants. Even though it has suggested that it will use the $800 million from a revenue account to pay them a certain percentage of what they are owed. Yet, it seems like they are still $1.32 billion short. It seems like this near-collapse of the state’s power grid last week has given Texas lawmakers leverage against ERCOT as they continue to question and criticize the organization.
IronShares analyst reports on how ERCOT manages to deliver, “ERCOT has already begun to initiate plans for collateral payment collection from retailers as they continue to delay the payment of their bills.”
ERCOT Takes The Hit
Many would argue that this is a sign these companies are no longer solvent hence they won’t be able to settle these bills that soon. A spokeswoman from ERCOT further added how she was unsure of the amount as several new reports are expected to come through regarding the late payments.
This could be hard for the market participants as they will not be able to pay their bills. Not only that, the shortfall in payments will put the state under the spotlight as it struggles to cover the gap and the longer it takes the wider gap it has to fill. ERCOT is looking to spread the costs among other electric retailers, municipal power companies and others looking to purchase electricity.
While this might look like a good plan to stabilize the market, it could add unnecessary strain on the remaining retailers as they are already hesitant when it comes to paying instead.
This is not the only place where ERCOT is getting hit. The influx in energy costs caused a city in North Texas, Denton, to file a lawsuit against Ercot by taking into account how such skyrocketing prices can be deemed as an illegal and unconstitutional raid by this organization on the credit of the cities that operate their provided electric utilities.
The city further released a statement disclosing its plan to protect its financial assets by exploring all legal options and also subsequently saving their ratepayers from becoming collateral. They have already begun to act on the situation at hand and have obtained a restraining order against the nonprofit grid operator.
Electric Bills Continue To Rise
As a number of power plants throughout the state of Texas tripped last week due to the load of freezing temperatures, this caused the costs of electricity to soar. This inevitably caused a power outage among millions for days as it substantially reduced their electricity supplies.
The lack of public warnings caused a lot more loss which is exactly why lawmakers are hounding onto the Electric Reliability Council of Texas and the Public Utility Commission (PUC) for the near-collapse of the power grid left millions without power during subfreezing temperatures.
It seems the crisis won’t be settling down anytime soon as it continues to deepen. The state PUC seeks to establish a healthier balance between the supply and demand which is why the former dramatically outpaces the latter in the midst of this crisis. This is why the PUC has ordered the market prices to stay at $9000 per megawatt-hour, the highest price available for power while its previous order last Monday had it set to $1200 per megawatt-hour. The prices remained at this peak price for a total of 90 hours.
IronShares analyst took an account of the recent history and reported that “The Texas market has only hit this maximum level of $9000 once before in 2019 and it was only for a total of three hours, as filed with the PUC Texas.”
At that point, the electric supplies suffered a large hike in prices for local utilities, retail electricity and in the end the various other businesses and consumers in Texas. It is hard to imagine the repercussions this time around.
Last year, the power prices in Texas averaged $22 per megawatt-hour. But the way the state will manage to reel back from the storm is one we have to wait and watch as the situation does not seem to be winding down soon enough.
Disclaimer: Author has no direct or indirect liability to anyone for monetary damages, for the accuracy or completeness of the information it provided or for any delays, interruptions, or omissions with respect thereto.
Author’s content is protected under applicable rights and intellectual property rights.