Texas power market $1.3b short post crisis

Bloomberg

Texas’s grid operator needs to come up with $1.3 billion to pay power plants for energy they supplied during last week’s historic blackouts, raising the prospect it may require a state bailout.
The Electric Reliability Council of Texas, which manages most of the state’s grid, said it’s still waiting on more than $2 billion in payments from retail power providers and others after a deep winter freeze caused energy prices to skyrocket. The grid operator, known as Ercot, managed to cover part of that debt by transferring $800 million in revenues from another market but remains $1.3 billion short, according to a market notice.
If Ercot can’t come up with the rest, the debt could end being shared by everyone in the market — even consumers. That may prompt lawmakers to step in and make up the difference, said Evan Caron, chief strategy officer of energy technology firm ClearTrace and a former Ercot trader.
“Someone is going to need to pay,” Caron said in an interview. “I’ve never seen anything like this before.”
Ercot did not immediately respond to an inquiry whether it plans to ask for a state bailout. The shortfall comes after this month’s Arctic blast knocked nearly half of the state’s power generating capacity offline, causing electricity prices to jump to $9,000 a megawatt-hour and leaving some buyers unable to pay.
The crisis plunged more than 4 million homes and businesses into darkness for days. Dozens died in the cold.
The $1.3 billion shortfall that Ercot now faces is unprecedented, said Adam Sinn, power trader and owner of Aspire Commodities LLC. “In the past I have only seen a million-dollar shortfall — so a billion dollar one is not even in the ballpark,” Sinn said.
In addition to managing the grid, Ercot is a middleman for transactions between power plant owners and retail energy providers that buy their electricity. Under typical conditions, those transactions are settled every day. But the organisation warned that several retailers were in “payment breach” and that more could default. As a result, some generators haven’t been paid in full. “If there are massive bankruptcies among utilities, then there might be a need for a state intervention of some sort, like a bailout,” said Michael Webber, a professor at the University of Texas at Austin.