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Texas Court Invalidates PUC's Decision on Winter Storm Uri Electricity Prices

April 17, 2023

Market - ERCOT

On March 17, 2023, the Texas Court of Appeals added significant uncertainty to the state’s electricity market. The Court sided with Luminant in their ruling that the Texas Public Utility Commission’s (PUC) decision on February 15, 2021 and February 16, 2021 (in the middle of Winter Storm Uri) to unilaterally set the market price at the cap ($9,000 per MWh) was invalid. The Court’s decision creates unprecedented uncertainty in the electricity market and could lead to ERCOT resettling Real-time Settlement Point Prices for multiple days during that week because of the PUC’s order. 

This case takes us back to Winter Storm Uri, which devastated Texas in February 2021. The storm caused a significant portion of the generation fleet (both natural gas and renewables) to fail. Without sufficient generation, ERCOT was forced to institute widespread outages to avoid a total grid collapse.  The widespread outages reduced demand for electricity, and as result, the energy market started clearing well below the $9,000 per MWh cap.  

On February 15, 2021, the PUC, after a short hearing, unilaterally determined that the market price must artificially be set at the cap in the event of widespread forced outages. This increased market prices from around $1,200/MWh to $9,000/MWh (see Figure 1). On the next day, the PUC met again, and effectively confirmed its earlier ruling. Those orders on February 15th and 16th, dramatically increased electricity market prices until the energy supply shortage ended on February 19th.


Figure 1: By 5

After reviewing the actions taken by the PUC, the Texas Court of Appeals ruled that the PUC, “under extreme pressure…exceeded its power by eliminating competition entirely.” The Court went on to say that, “While the extraordinary circumstances of Winter Storm Uri may have required extraordinary modifications to the [Scarcity Pricing Model] to send appropriate pricing signals to prompt the necessary market response, the Commission here exceeded the Legislature’s limits on its power.” The Court then sent the case back to the PUC to figure out what to do with the fact that billions of dollars in energy prices set between February 15 and February 19 are no longer “valid." 

Not surprisingly, the PUC promptly appealed this order to the Texas Supreme Court. In their filing, the PUC argued that (i) the case is no longer relevant since the orders had long since expired, (ii) the Commission’s orders were well within their authority, and (iii) it is practically impossible to unwind all of the transactions that took place between February 15th and February 19th. Luminant has until May 5, 2023 to respond to the PUC’s appeal.

Topics: Markets ERCOT

Written by 5

Founded in 2011, 5 comprises a team of energy innovators, commodity traders, analysts, engineers, and former energy supplier executives. Together, they serve a broad array of private and public sector clients throughout the United States and Mexico, providing strategic advice on energy-related matters including procurement, demand-side management, rate optimization, regulatory intervention, benchmarking, bill auditing, RFP management, sustainability planning services, renewable power, and distributed generation. With an eye on growth, 5 has initiated a number of strategic partnerships and acquisitions, including the 2019 acquisition of Luthin Associates. 5 has been named to the Inc. 5000 list of fastest-growing companies in the U.S. for five consecutive years. The firm has also received numerous accolades and national awards for its corporate culture, leadership and innovation, including 5 consecutive years as a top 10 Best Company to Work for in Texas according to Texas Monthly Magazine.