The Electric Reliability Council of Texas, or ERCOT, has started to settle massive debts incurred by companies forced to buy electricity at extremely high prices during last February’s massive blackout. The next step will determine who pays what.
ERCOT is the clearinghouse for trades on the Texas competitive energy market, kind of like an eBay for electricity. During the February freeze. It pushed energy prices to the max that left tons of buyers so deeply in debt that they couldn’t pay sellers. It also left ERCOT holding the bag, since it’s the group that clears those trades.
Under a plan approved by lawmakers, the grid operator is now applying for almost $3 billion in state-guaranteed loans. If the Public Utility Commission approves the plan, it allows ERCOT to settle the bills, and allows the companies that owe the money to pay ERCOT back over the next 30 years.
Caitlin Smith, an energy adviser with AB Power Advisors, says one thing that’s still up in the air is exactly who owes how much.
“And the big debate in this case is going to be how to allocate that,” Smith said.
Last spring, Texas lawmakers approved these types of financial arrangements, called “securitization,” to settle blackout-related bills. Critics have called it a corporate bailout. They point out that it will ultimately leave ratepayers slowly paying off much of the debt over the next 30 years in the form of higher bills.