Texas Supreme Court questions 2021 winter storm power prices that cost billions

AUSTIN – The Texas Supreme Court heard arguments Tuesday in a case challenging a government order that set power prices at sky-high levels during 2021′s crippling winter storm.

At stake are billions of dollars of energy bought and sold during the winter event after the grid’s regulator, the Public Utility Commission, ordered the price of a megawatt-hour set to its then-maximum price of $9,000 – roughly 300 times the typical price of electricity in ERCOT.

The case comes from Luminant, a subsidiary of Irving-based Vistra Corp. that argues the Public Utility Commission exceeded its authority with its emergency pricing order.

The commission has argued in legal filings that the pricing order was a legal act made to save the grid. The commission appealed an Austin appeals court ruling in 2023 that sided with Luminant.

Numerous energy and industrial companies have filed briefs in the case, which is being closely watched by energy insiders.

The case stems from the 2021 winter storm and the ERCOT-ordered blackouts that saved the grid but led to the deaths of more than 200 people.

In the early morning of Feb. 15, 2021, the Texas power grid was on the brink of collapse as roughly half of all power plant capacity was out of commission. Demand was outstripping supply, threatening to force a total shutdown of the grid if no action was taken.

ERCOT, which operates the power grid serving most of Texas, ordered power shut off to millions of Texans to prevent a total collapse. Those who were able to produce electricity sold it to the grid at prices 40 to 80 times the typical cost for a megawatt-hour, according to court filings. But the prices were below the market’s $9,000 cap, with some believing the ERCOT-ordered blackouts were artificially suppressing prices.

More than 12 hours later, the Public Utility Commission issued an emergency order setting the price to its $9,000 maximum. It kept the price there for four days, even after ERCOT was no longer ordering blackouts. ERCOT’s independent market monitor later found the grid operator kept emergency pricing in place for days longer than necessary, resulting in $16 billion in overcharges.

The high prices led to bankruptcies and, in the aftermath, the Texas Legislature passed a bill that provided $10 billion in taxpayer-backed bonds to power and natural gas companies. Texas residents are ultimately on the hook for that money and will be paying off related bond debt through utility bills for decades.

During oral arguments Tuesday in the Austin courtroom, several Supreme Court justices asked if the laws that bound ERCOT at the time prioritized grid reliability over a competitive market or vice versa. ERCOT controls the operations of the grid, including acting as a clearing house for energy sold on the market.

Luminant argued that while the Public Utility Commission has many tools to address emergencies, the Legislature has prohibited it from overruling the competitive market to set prices.

“This is as clear a case as we believe ... of an agency not staying within its lane and busting through the rails, the guardian rails that the Legislature has put in place,” Luminant’s attorney Allyson Ho said.

Macey Reasoner Stokes, an attorney for power plant companies Calpine and Talen Energy, which argued alongside the attorney general’s office against Luminant, said statutes make it clear that the utility commission’s top priority is the reliability of the Texas grid.

She said Luminant was creating a “distraction” in the case by arguing that the emergency pricing order did nothing to save the power grid.

“The court doesn’t inquire into whether it was a correct decision, whether it was a successful decision,” Reasoner Stokes said. “I think this is an attempt to distract from the textual decision that the court has to make here today.”

Justice Jimmy Blacklock asked Luminant whether the Public Utility Commission would ever be able to adjust prices in an emergency.

“Is it really your position that they’re tied to the mast of competition in a way that prevents them from taking that action?” Blacklock said.

Ho responded that the Legislature was clear that the Public Utility Commission may never set prices.

Justice Jane Bland asked whether ERCOT’s regulations setting price caps and market pricing demand curves amounted to similar prohibited acts.

“Are those anti-competitive rules that are invalid?” Bland said.

Ho responded that those rules were on-the-books regulations that power companies tacitly agreed to in their decision to participate in the ERCOT market. The commission’s emergency pricing order was not, and ERCOT had on two occasions rejected requests to create emergency pricing models, she said.

A ruling from the court is expected by the end of June.