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Texas Power Companies Face Liquidity Crisis as Bills Mount

Billions of dollars in invoices outstanding: grid operator Next two days critical to resolving financial obligations

February 25, 2021 Stu Turley Electrical Generation / Utilities, Finance, Top News

A worker repairs a power line in Austin - Bloomberg

Texas’s grid operator has already seen some retail electricity providers default as bills for last week’s grid emergency come due, officials said Wednesday.

The Electric Reliability Council of Texas, known as Ercot, is working to manage ongoing financial stress in the power market as several billions of dollars in invoices are still outstanding from the grid emergency that saw power prices hit $9,000 a megawatt-hour for several days, according to Kenan Ögelman, vice president of commercial operations. The next two days will be critical in resolving financial obligations, he said during a board meeting Wednesday.

The revelations come as Texas continues to recover from a deep winter freeze that forced nearly half of power-plant capacity offline and and left more than 4 million in the dark for days. In the wake of the crisis, six members of Ercot’s board have resigned, including the chair and vice chair, after Governor Greg Abbott criticized the grid operator’s handling of the event.

Several retailers “are currently in payment breach” under Ercot protocols, but the grid operator “has not yet taken action to revoke their rights” or terminate their agreements, according to an Ercot statement late Wednesday. Additional defaults are likely. Some retailers have appealed to the Public Utility Commission of Texas for emergency relief.

If Ercot is unable to collect the revenues necessary to cover defaults, those costs would flow to other market participants, who could then pass those charges onto consumers, Chief Financial Officer Sean Taylor said during the meeting.

Ercot paused collateral collection on Monday but resumed it again a day later due to concerns about downstream financial impacts. Another pause is still under consideration, Ögelman said. However, disrupting the collection process “has a lot of liquidity risk” and could have “chilling consequences,” he said.

The grid operator doesn’t anticipate any issues handling the financial transactions, said Taylor said.

About Stu Turley 4816 Articles

Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor. He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino. Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.

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