Texas Plan to Claw Back $4 Billion in Power Charges Fizzles
(Bloomberg) -- A move in Texas to wipe out more than $4 billion in electricity overcharges from last month’s devastating blackouts appears dead in the water after deeply divided lawmakers left town without taking final action on the proposal.
“Repricing push ends with a whimper,” Josh Price, an analyst for Height Capital Markets, wrote in a note to clients on Friday. He added that the House is adjourned until Monday with no plans to pass the Senate repricing bill ahead of the Saturday deadline.
The move is a blow to retail electricity providers and generators including Exelon Corp. that were forced to buy power at sky-high rates during the outages, which at its peak left more than four million homes and businesses without power. At least four companies have filed for bankruptcy.
Texas’s independent market monitor had recommended that the utility commission correct $4.2 billion of about $16 billion in overcharges that occurred when the state’s grid operator left power prices at a $9,000 megawatt-hour cap for 32 hours after blackouts stopped.
Texas Lieutenant Governor Dan Patrick, the state’s second most powerful politician, led the charge to roll back prices and called it the “right thing to do.” Patrick pushed a measure quickly through the state senate on Monday that required the pricing changes after the chairman of the utility commission refused to order them.
Texas House Speaker Dade Phelan, a Republican, originally appeared cool to the idea of repricing, calling it an “extraordinary government intervention into the free market.”
Adjusting the prices could prompt some investors to avoid the Texas energy market for fear of future retroactive price changes, and may even mean some proposed power plants don’t get built because of a lack of confidence over future payments, Brianna Lazerwitz, a BloombergNEF analyst, wrote in a report Friday. The concerns could even spill into other commodity markets, raising doubts about contracts for oil and natural gas, huge industries in Texas.
“A resettling of prices now could completely undermine faith in the market,” Lazerwitz said. “It would mean undermining the integrity of investing in Texas, with adverse impacts rippling far outside of the state’s power market.”
Retroactively rolling back prices would have been an unprecedented and controversial move, and some large power providers and the Intercontinental Exchange Inc. warned it could undermine confidence in Texas markets.
A House committee advanced five bills on Thursday meant to prevent a repeat of the energy crisis.
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