Power Grid that Crashed in Red Ink Now
with Energy Industry in State of Upheaval

Mike Hailey
Capitol Inside
February 27, 2021

Texas lawmakers discovered on Friday that the damage from the epic winter freeze was far more catastrophic than they'd imagined amid revelations on the state electric grid in a deep financial hole and tales of smaller contributors to the state electric grid going bankrupt with larger competitors as eventual beneficiaries.

What began as a search for scapegoats has been tantamount to shock therapy during two days of marathon hearings that provided a crash course on the economics of energy independence and the long-term price of outsourcing public services to the private sector with insufficient government oversight.

But legislative investigators managed to avoid the most critical questions in the post-mortem on the disaster - how much it's going to cost the state and where they will get the money to cover a bill that will be astronomical in the best case scenario.

Lawmakers have to decide with no time to waste whether they want to make a massive investment into the rebuilding of an energy system that failed in every possible aspect last week or take the safer route and redesign the system in a way the federal government would subsidize and regulate.

The Senate Business & Commerce Committee learned on Friday that smaller electric retailers and cooperatives that account for a substantial share of the ERCOT system could be forced into bankruptcy as a result of massive spikes in charges they were forced to pay for natural gas and other energy sources to minimize blackouts with the supply strangled and demand at an all-time peak.

Legislators ended on another grim note before leaving Austin on Friday night that ERCOT is facing a $1.5 billion shortage in funds that are needed to pay generators that provided electricity from reserves to keep blackouts across the state to a minimum. ERCOT said Friday that electric retailers still owe the grid operator more than $2 billion in unpaid bills from last week and plans to cover more than a third of the gap with $800 million in a reserve account.

That's more than the revenue shortfall that the Legislature will have to cover to keep the state in business until the end of August when the current fiscal year ends. ERCOT's problems have been complicated by other companies withholding payments for the grid while protesting charges for electricity that they say had been inflated illegally.

The deficit at ERCOT has raised the specter of a bailout by the Legislature at a time when Governor Greg Abbott has already asked lawmakers to bankroll the winterization of the state energy grid - an undertaking that could have a price tag in the billions.

more to come ...