Texas Supreme Court affirms winter storm emergency pricing that cost Texans billions

Luminant, a subsidiary of Irving-based Vistra Corp., argued that Texas’ power grid regulator, the Public Utility Commission, exceeded its authority by ordering electricity prices pegged at $9,000 per-megawatt-hour.

During the freeze and blackouts, which led to the deaths of more than 200 people, the commission ordered the price artificially set at the cap price for four days. Several companies and utilities went bankrupt after paying about 300 times more for electricity than is typical in Texas. Luminant lost roughly $1 billion during the freeze, according to court documents.

In the aftermath, every member of the Public Utility Commission and ERCOT’s leadership resigned or was fired. The commission has since lowered the cap to $5,000 per megawatt-hour.

The court ruled 7-0 against Vistra, reversing a ruling from the Austin-based 3rd Court of Appeals, which said the emergency pricing order violated ERCOT’s state-mandated competitive market design. Supreme Court Justices Rebeca Huddle and Evan Young did not participate.

“The Commission has the expertise to manage the electric utility industry; the courts do not,” Chief Justice Nathan Hecht wrote in the ruling. “The court of appeals thus strayed from its lane by inquiring whether the Orders could have used ‘competitive rather than regulatory methods’ to any greater extent than they did.”

Vistra did not immediately respond to an email and phone message seeking comment.

Texas electricity customers remain on the hook for sky-high electricity and natural gas prices paid during the winter storm. Through government backed bonds, Texans will be paying off the 2021 winter storm energy bills for decades to come through a surcharge on their monthly utility bills.

During the February 2021 freeze, the Electric Reliability Council of Texas saw cascading power plant failures, prompting the power grid’s operator to shut off power to 4.5 million households and businesses to prevent the grid from a catastrophic failure. At its peak, 49% of the state’s power generating facilities were offline.

At the time, ERCOT officials contacted the Public Utility Commission after they observed that power prices were hovering far below the cap. The commission filed emergency orders artificially lifting electricity prices to the $9,000 cap in hopes of increasing power generation.

The cap price remained for several hours after power had substantially been restored to affected Texans. ERCOT’s independent market monitor later estimated that $16 billion in overcharges resulted. Texas’ yearly expenses on electricity in the ERCOT grid are estimated at around $22.5 billion.

Vistra Energy sued the PUC shortly after power was restored. Other energy companies, including Calpine and Exelon, also joined the suit.

The Texas Supreme Court also dismissed a similar lawsuit Friday brought by renewable energy companies RWE Renewables Americas and TX Hereford Wind, ruling that the companies lacked standing to sue the Public Utility Commission over the emergency pricing order.