Blunder That Sent Power Prices Surging 24,000% Ends Up on Bills

(Bloomberg) -- When Kristen Kern left for work the morning of May 30, she switched off the lights in her Houston apartment and turned down the air conditioning.

Two weeks later, she was unpleasantly surprised to see her monthly electric bill had soared to nearly $200 -- more than 40% higher than normal. Kern, it turned out, is among the untold number of customers saddled with big bills after a single error by a Calpine Corp. technician made Texas’s power market go haywire for a few moments, sending prices spiking.

“I was shocked,” Kern, 25, said in an interview. “We thought they had made a mistake because it had never been that high.”

It’s a misfortune unlikely to happen outside Texas, where the power market is completely deregulated and dozens of retail electricity providers compete for customers. Unlike in other states, Texas retail electricity prices aren’t set by regulators, leaving many customers exposed to the ebbs and flows of wholesale markets. Now the grid operator and a power trader are battling over who should pay for the error that inflated bills for Kern and other customers.

It began shortly before 3 p.m. on May 30 when a technician at Houston-based Calpine mistakenly alerted the manager of the state’s electric grid the company had taken roughly 4,000 megawatts of generating capacity offline. That’s enough to power all of San Antonio. Demand suddenly appeared wildly ahead of supply, and wholesale prices spiked to $9,000 a megawatt-hour from $37, an eye-popping 24,000%.

Calpine engineers spotted the error within minutes and asked the grid operator to reset the price, Brett Kerr, a spokesman for the company, said in an email. But the Electric Reliability Council of Texas, which runs most of the state’s grid, refused. It later said in a filing that it’s not responsible for data errors made by market participants.

Aspire Commodities LLC, a wholesale electricity broker, says the mistake was costly for it. The company filed a complaint with state regulators against the grid operator, known as Ercot, asserting that the mistake cost the market a total of $18 million.

“We had the correct position yet we lost money,” Adam Sinn, Aspire’s president, wrote in the complaint.

‘Way Off’

Ercot disputes Aspire’s estimate of $18 million in its response to the claim but didn’t provide an alternative figure. The grid operator asked the Public Utility Commission of Texas to dismiss the complaint, saying it can’t change prices every time someone provides bad data and that it shouldn’t be required to claw back the money from generators.

Kerr, the Calpine spokesman, said Aspire’s $18 million number is “way off.”

Griddy Energy LLC, Houston-based company that lets homeowners buy electricity at real-time wholesale prices, initially sent its customers a text message to ignore the spike, assuming Ercot would correct the error. The company agreed to absorb the cost after realizing the price would hold, Chief Executive Officer Greg Craig said in an interview. He declined to disclose how much it cost the company.

“It was a very short blip,” Craig said in an interview. “We were like ‘eh, it’s OK.’”

Kern, meanwhile, was relieved to see her bill closer to normal in July.

To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net;Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Joe Ryan, Reg Gale

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