Taking Stock of the Financial Repercussions of Texas's February Power Outages
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- Mar 3, 2021 11:34 am GMTMar 2, 2021 10:37 pm GMT
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As Texas plunged into darkness last month, its power markets turned to chaos. High power prices and supply disruptions for natural gas played havoc with its grid and pipelines, leaving wide swathes of the state without electricity for several days. The financial repercussions of that chaos are becoming apparent now.
The main culprit of the power outages was surge pricing. Often described as a feature (and not a bug) of Texas’s power markets, surge pricing lasts for a couple of hours each summer to allow grid participants to make money. Last month, $9,000 MW/h power prices lasted for a week and resulted in $51 billion worth of power being sold in Texas’s power markets. Entities participating in the markets hemorrhaged cash all around. The Electricity Reliability Council of Texas (ERCOT) owes money to generators while retail electric providers (REPs) owe it money.