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February 23, 2022 – Day two of the hearing on the Debtors' motion to reduce a $1.9bn bill received based on the decisions of grid operator the Electric Reliability Council of Texas ("Ercot") in the wake of Winter Storm Uri featured testimony from since-terminated Ercot chief executive officer Bill Magness regarding the decision making that went into the $9,000 per megawatt hour rate set during the weather emergency in February 2021.
Responding to questions posed at the trial by Ercot lawyer Jamil Alibhai, Magness maintained that the situation was handled properly.
“I still believe I did the best I could have done," Magness testified, adding that he wouldn’t have done anything differently, while acknowledging the financial consequences of Ercot's actions on families and electric cooperatives. “I still believe that was the most prudent course to take, and I believe it was effective…It was a horrible event all the way around.”
Magness was questioned on the options available to Ercot during the storm, as well as on why the council left the emergency status in place and, as a result, the higher price, as long as it was.
“We were seeing a lot more reports of coming on, which is great, but we were still seeing reports of coming off," Magness said, pointing out that Ercot was concerned about those generators who were coming off and about the stability of the system at that time, especially in respect of load capacity.
“There wasn’t a whole lot of spare capacity out there," Magness noted. "40% of the capacity was out. There wasn’t a lot of capacity just sitting on the sideline… If the generation is offline (out of fuel), it can't run."
According to Magness's testimony, if rotating outages had begun again, Texas's water system could begin to be impacted as well.
Additionally, Magness testified that the $9,000 per megawatt hour price was consistent with the value of lost load, noting that there still was an emergency and that there wasn’t data suggesting a level under $9,000 would achieve Ercot's objective of urging maximum output.
Magness refuted a suggestion that Ercot made a pricing error in its handling of the storm. "It was a decision. An action," which he said was intended to protect the liability of the system when Ercot didn’t have stability in the generation.
Magness was also questioned about whether Ercot was in compliance with an order by the Public Utilities Commission of Texas when it decided to keep the price per megawatt hour at $9,000 for the last 33 hours of the crisis. He acknowledged that he expected decision to be controversial because people would say the PUC never ordered that, but that Ercot never asked for a further order or clarification.
“We felt like we needed to make a decision by 8 a.m. (during an after-midnight meeting on the topic the night of February 17, 2021,” Magness said, adding that he did not believe he needed to obtain another order from the PUC to do so.
Seeking clarity on the issue, Judge David Jones asked Magness if the order from the PUC required Ercot to impose the price intervention in question.
"There was a choice to be made," Magness testified, referring to Ercot's decision to extend the emergency pricing during the final 33 hours. At that time, Magness said emergency conditions were still in effect and load was being shed. "I had no power to extend an order, no…We felt like what we were doing during that time was consistent with the order. So we stayed where we were… We believe the order allowed, authorized what we did."
The trial is scheduled to continue on February 24, 2022.
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