Court rescinds winter storm emergency pricing order that cost Texans billions

AUSTIN — A Texas appeals court on Friday ruled that the Public Utility Commission exceeded its authority when it allowed wholesale electricity prices to soar during 2021′s crippling winter storm.

The order by the state 3rd Court of Appeals in Austin resurrects talk that consumers and companies that suffered from what one expert said were $16 billion in overcharges might someday see reductions in their power bills.

The court ruled that the Public Utility Commission exceeded its authority and violated Texas law when it ordered the price of electricity pinned to a $9,000 per megawatt-hour cap during the crisis. That price is more than 300 times the price per megawatt-hour on a normal day.

The commission kept the price at the $9,000 cap for four days as the state saw power cut off to nearly half of Texans on the Electric Reliability Council of Texas’ power grid. More than 200 people died in the storm.

ERCOT is an “energy only” market — one in which generators can only make money on electricity they produce based on prices that are offered in a free market. According to the court, the PUC violated the tenets of ERCOT’s competitive market design outlined in state law when it set the price at the so-called high cap, the maximum price that was allowed at the time. (The PUC has since reduced the cap from $9,000 to $5,000.)

“In extreme circumstances under extraordinary pressure, the Commission exceeded its power by eliminating competition entirely,” Justice Edward Smith wrote for the court.

The court remanded the case for further hearings, though it was unclear if further action would be argued at the court or the PUC. The commission refused to comment on the litigation.

The lawsuit from Vistra Energy subsidiary Luminant challenged two PUC orders made on Feb. 15 and Feb. 16, 2021, after the state power grid nearly collapsed. Record low temperatures, ice and snow placed intense pressure on the grid while power plants, natural gas wells and fuel delivery infrastructure failed across Texas.

As power plants continued to fail, the grid’s frequency dipped to dangerously low levels and came within minutes of a complete shutdown. A statewide outage would have taken months to restore.

To prevent this, ERCOT ended up shutting off power to 4.5 million households and businesses. The outages were so widespread the planned rotating blackouts proved impossible because of threats to critical infrastructure. At its peak, 49% of the state’s power generating facilities were offline.

As commissioners at the PUC monitored the situation, former chair DeAnne Walker inferred that ERCOT’s scarcity pricing model was not functioning because prices had not hit the $9,000 per megawatt-hour rate, the ruling states. The commission ordered the price set to the cap, an order it reapproved the following day.

The commission kept the price at the cap for four days, a decision later criticized by ERCOT’s independent market monitor, who said the PUC orders resulted in $16 billion in overcharges.

Several energy companies and utilities reported astronomical losses, which forced some into bankruptcy after they had to buy electricity at the PUC’s set price.

Vistra Energy sued the PUC about two weeks after the order. Other energy companies, including Calpine and Exelon, also joined the suit as intervenors.

“We agree with the decision today by the Court of Appeals in Austin, but this is an ongoing legal proceeding and we cannot predict the final outcome,” Vistra spokesperson Meranda Cohn said in an emailed statement.

While the impact of the ruling remains unknown, it opened the door for the PUC and ERCOT to revisit prices charged during the crisis and possibly void and reprice disputed invoices — something that had been considered either impractical or impossible immediately after the storm. Writing for the court, Smith acknowledged the potential financial impact of the ruling.

“Our decision in this appeal may have very real material consequences for all involved,” he said.