May 7, 2021      5:20 PM

Following Winter Storm Uri, PUC considers changes to scarcity pricing

“We need to provide certainty to the markets when we can and approach these signals in a systematic way,” Commissioner McAdams said. “The rule, as proposed by staff, I believe, provides that certainty for the market in the near term.”

The reconstituted Public Utility Commission has proposed sharply reducing the maximum totals for scarcity pricing of energy, following the lead of disgruntled lawmakers who criticized the massive costs of Winter Storm Uri.

The biggest winners of scarcity pricing were those companies positioned to deliver natural gas when plants were down and lines were frozen. Yesterday, Bloomberg reported Energy Transfer LP – the pipeline company owned by Kelcy Warren – reaped a $2.4 billion profit from its delivery of natural gas during Uri.

Two additional companies – Kinder Morgan and BP – are expected to post $1 billion in profits, followed by other smaller energy companies.

Under the policy amendment, the new low system-wide offer cap – or LCAP – will be tied to actual marginal costs in scarcity pricing situation. The source of the high costs during Uri – tying LCAP to the natural gas price index – is eliminated.

By Kimberly Reeves

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