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February 24, 2022

Former Texas power chief blames governor for winter storm industry costs

Texan courts seek clarity over who kept wholesale power prices at maximum during winter storms.

By Matt Farmer

The former CEO of Texas’ power regulator has told a court that the decision to keep wholesale power prices at maximum during winter storms last year came from the US state’s governor.

On Tuesday, Bill Magness, former CEO of the Electric Reliability Council of Texas (ERCOT), testified that Republican Governor Greg Abbott had instructed him to keep prices up.

He alleged that DeAnn Walker, former chair of the state’s Public Utility Commission, relayed the message from Abbott: “She told me the governor had conveyed to her if we emerged from rotating outages it was imperative they not resume.”

In early 2021, a blizzard in Texas took significant amounts of power generation out of operation. ERCOT kept wholesale power prices at $9,000/MWh to suppress power use while the state’s generation capacity recovered. The alleged instruction from Abbott caused ERCOT to keep prices high for longer than it may have otherwise, devastating the finances of utilities in the area. Several of these utilities are now passing through bankruptcy courts, where Magness testified.

Brazos Electric, one of the bankrupted companies, alleges that ERCOT “recklessly” decided to keep prices high, causing its financial trouble. Company lawyers have said that the decision cost the company an extra $1.9bn and did not help repair generation capacity.

The increase to maximum prices began on 15 February, aiming to incentivise repairs to power plants. On 17 February, ERCOT decided to keep prices at maximum until 19 February. Carrie Bivens, director of ERCOT’s Independent Market Monitor, has said that the decision to keep wholesale prices high cost the state’s overall market an extra $16bn.

Magness’ statement contradicts governor spokesperson Mark Miner, who last year said that Abbott was not involved “in any way”. During the storm, Abbott sent an aide to ERCOT’s operations centre during the crisis, though Miner said this was based on a belief that the regulator was spreading “disinformation”.

Abbott has since denied giving this order. Political opponent Beto O’Rourke has used the testimony to his advantage, saying the governor “once again put the profits of his donors over the people of this state”.

On Wednesday, Magness continued to testify regarding his initial decision to keep prices high. The former CEO said that water plants relying on backup generators had shrinking reserves of fuel remaining at the time. Lowering power prices could have encouraged industrial and consumer electricity demand to return, renewing pressure on water sources, he told the court.

Speaking of the decision on 17 February, Magness said: “We were still seeing 40GW of outages. At the peak we had 52GW [of outages] but 40GW is still a lot. We saw the potential for load shed coming again.”

The bankruptcy hearing continues.

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