Power Trader Challenges Texas Grid Policy Over Price Spikes - Yahoo Finance

Power Trader Challenges Texas Grid Policy Over Price Spikes

(Bloomberg) -- A power trader is challenging Texas regulators over a new policy he says led to billions of dollars in higher wholesale electricity prices.

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In a notice of appeal filed Tuesday in state court by Adam Sinn’s Aspire Power Ventures LP, the company argues the policy — which created a new type of backup power supply for the state’s energy grid — has spurred “market chaos” driven by “illegal competition rules.”

The policy “is needlessly driving up prices and at the same time decreasing grid reliability,” Sinn said in an email. “This isn’t the answer.” Aspire is appealing orders by the Public Utility Commission of Texas that established and shaped the policy.

The policy “merely designates some of existing power companies’ capacity as ‘emergency reserves’ during times of high demand, and Ercot pays them to hold that capacity off-line,” Aspire says in the notice of appeal, referring to the grid operator, the Electric Reliability Council of Texas. The policy “does nothing to increase actual electricity reserve capacity – in fact, it actually decreases capacity when it is most needed,” it contends.

A representative for Ercot declined to comment. A representative for the PUC said the agency doesn’t comment on pending legal matters.

The appeal is the latest chapter in an intense debate over the policy, the Ercot Contingency Reserve Service. ECRS took on new importance after a deadly 2021 winter storm that plunged millions of Texans into darkness and prompted calls for grid reform. In June, Ercot implemented the policy to keep a set pool of reserves on hand that could start in 10 minutes. Tuesday’s filing appears to be the first legal challenge to ECRS.

Read More: Texas Got Early Warnings About Costly Grid Policy, Records Show

Sinn and others say ECRS sidelined cheap electricity supply and led to billions of dollars in higher market prices over the second half of last year. The grid’s independent market monitor in December estimated the policy had inflated wholesale prices by roughly $12 billion in less than six months. Ercot disputes the analysis.

Ercot and the Public Utility Commission, which oversees the grid operator and its market monitor, have defended ECRS, saying it’s a critical source of reserves that helps the state avoid potential shortages, like at sunset when solar power drops. A review of the policy by grid officials is expected to be completed by the end of April.

Sinn was an early and vocal opponent of ECRS, which he said caused him to lose money on a key day in June when roughly 2,000 megawatts of cheap supply sat idle, spiking prices. Not long after, the director of a team at Potomac Economics, a third-party firm that serves as the grid’s watchdog, started raising concerns about the policy. By July, complaints had reached Governor Greg Abbott’s office, according to a text message exchange in which a staff member said “traders don’t love it.”

Sinn has battled with Ercot over market prices before. In 2020 the Public Utility Commission dismissed a complaint filed by his Aspire Commodities that sought to force Ercot to reprice trades made the year before after a generator’s clerical error caused prices to soar.

Tuesday’s notice of appeal was filed by lawyer Chrysta Castañeda, who in 2020 ran unsuccessfully as a Democrat for the Texas Railroad Commission, which regulates oil and gas.

The case is Aspire Power Ventures LP v. Public Utility Commission of Texas, No. 03-24-00102-CV, 3rd Texas Court of Appeals (Austin).

(Updates Ercot comment in the fifth paragraph.)

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