87th Legislature – Week 8
Here is an update on last week’s hearings on the winter storm and a preview of what’s on the horizon for this week.
House and Senate hold marathon hearings on ERCOT. Thursday and Friday saw the House and the Senate take hours and hours of called testimony regarding the power outages during the winter storm. Power generators, the Public Utilities Commission, ERCOT, gas pipeline companies, the renewable energy industry and others were questioned as to their role in the grid failure with little in the way of final resolution.
ERCOT receives scrutiny. As we suspected, ERCOT received most of the scrutiny from lawmakers. Power generators and ERCOT told different stories regarding the root cause of the power outages, with ERCOT pointing the finger at generators being unable to withstand the winter storm while power companies like Vistra blamed ERCOT for mismanagement of the grid. We expect the scrutiny on ERCOT to continue, with continued personnel changes likely. (See below.)
Lawmakers also questioned PUC’s oversight of ERCOT. Some lawmakers also focused on the PUC’s role in overseeing ERCOT. We view this conversation largely as a political tactic designed to shift blame to Republican leadership; the Governor appoints the PUC commissioners and the legislature both confirms those nominees and has legislative oversight over the board. We expect this storyline to continue.
ERCOT Board members resign. Seven ERCOT board members resigned last week in the wake of the hearings. Most of these board members reside out of state – a fact that came to light during the winter storm and one that caused quite a stir among lawmakers. We expect more personnel changes at ERCOT, especially as revelations about the compensation of ERCOT executives continue to percolate.
ERCOT experiences the first non-payment from electric retailer Griddy. Griddy was unable to make payments to ERCOT, after it could not collect payment from its customers. As a result, ERCOT has reassigned its remaining customers. Large integrated power companies, such as Vistra (which is the largest generator of electricity in the state and also owns TXU a retail provider), stand to benefit the most as they absorb many of the displaced retail customers – a ironic result given the wholesale prices Vistra and other large generators were able to charge during the winter event. Griddy markets electricity direct to consumers, passing along the wholesale market price. Griddy charges customers a flat fee for its service. While Griddy has been the focus of much media coverage, the sky-rocketing wholesale prices during the winter storm likely present financial issues for many other retail electric companies, and thus for ERCOT. Griddy provides what is known as variable rate plans, but even fixed rate plans will be confronted with the problem of how to recoup the costs of the higher wholesale rates they paid if they are unable to charge or collect on higher bills to consumers. Moreover, ERCOT socializes missed payments like Griddy among its other retail electric providers, potentially causing issues for many other retail electrics who may be asked to absorb these unpaid bills. As a result, we expect Griddy to be the first of these financial troubles, not the last. These financial troubles may spark litigation against ERCOT and have already raised questions about ERCOT’s alleged immunity from suit.
Senate Finance continues hearings on the state budget. The Senate Committee on Finance has three meetings scheduled for this week, starting Monday at 10:00. (Watch here.) They will hear testimony on Article VI (Natural Resources), Article VII (Business and Economic Development), Article VIII (Regulatory), and Article V (Criminal Justice).
House appropriations subcommittees will begin hearings on the budget; other committees will hold their initial meetings. House committees will have their first full week of hearings. The appropriation subcommittees will meet several times this week, and most other House committees will hold initial, organizational hearings with some invited testimony. The full schedule can be found here. The House of Representatives did begin referring bills to committee this past week. In total, the House referred nearly 500 bills.