Board Votes to Fire ERCOT CEO

Board members of the Electric Reliability Council of Texas (ERCOT), the entity that operates and manages the electricity grid that covers much of Texas, voted late on March 3 to fire ERCOT CEO Bill Magness. The move comes as state and federal officials continue to investigate the actions of the grid operator that led to a days-long blackout for millions of Texas electricity customers during a major winter storm in mid-February.

The board voted in favor of a “60-day termination notice” for Magness after meeting in a private executive session for more than three hours Wednesday night.

The vote came just hours before Potomac Economics, the independent market monitor for the state’s Public Utility Commission (PUC), made a filing that said ERCOT made a $16 billion pricing error in the week of the winter storm. Potomac said ERCOT kept market prices for power too high for more than a day after widespread outages ended late on Feb. 17.

“In order to comply with the Commission Order, the pricing intervention that raised prices to VOLL (value of lost load) should have ended immediately at that time (late on Feb. 17),” Potomac Economics said. “However, ERCOT continued to hold prices at VOLL by inflating the Real-Time On-Line Reliability Deployment Price Adder for an additional 32 hours through the morning of February 19,” the group said in its filing, noting the decision resulted in $16 billion in additional costs to ERCOT’s markets.

The Texas PUC on Friday said it would not budge on the alleged overcharges. New PUC Chairman Arthur D’Andrea said it would be too difficult to reprice the energy markets, particularly with the number of uncertainties involved. “It is nearly impossible to unscramble this sort of egg,” D’Andrea said.

Officials Friday also the grid operator faces a $2.5 billion shortfall as more than a dozen energy companies face default. ERCOT on Thursday had released more detailed data on the power outages by state generators during the winter storm.

Significant Leadership Shakeup

Magness’ departure comes after DeAnn Walker, head of the state’s Public Utility Commission (PUC), resigned on Monday, just days after several ERCOT board members quit the organization, including a handful who were criticized for not living in Texas.

Bill Magness joined ERCOT in 2010, and became the organization’s president and CEO in January 2016. Courtesy: ERCOT

The remaining board members voted 6-1 to give Magness 60 days’ notice of termination per his contract with the organization. The board released the following statement late Wednesday:

­­­­­­­­­­­­“The ERCOT Board of Directors met this evening and directed the Corporate Secretary to exercise the 60 days’ termination notice to ERCOT President and CEO Bill Magness pursuant to the employment agreement with ERCOT. During this transition period, Bill will continue to serve as President and CEO and work with state leaders and regulators on potential reforms to ERCOT. The ERCOT Board is expected to begin an immediate search for a new President and CEO, and will continue to discuss the transition plan at future meetings during this time period.”

An executive search firm is expected to be hired to find Magness’ replacement. Magness joined ERCOT in 2010, and served as the grid operator’s general counsel before becoming the group’s president and CEO in January 2016 under this employment agreement.

Criticism from State Lawmakers

Both Walker and Magness were sharply criticized by state lawmakers during and after hearings in the legislature last week about the widespread power outages that left more than 4 million Texans without electricity during a week-long period in mid-February. The blackouts, which also led to a water crisis—officials this week said “hundreds of thousands” of residents remain without water, or are still under “boil water” notices—also have been blamed for more than 40 deaths in Texas as people shivered in their homes without heat in temperatures far below freezing.

Texas Lt. Gov. Dan Patrick on Monday had called for both Magness and Walker to resign, which Walker did later that day. The former PUC chair—the PUC oversees ERCOT—was critical of ERCOT and largely blamed the grid operator for the power outages.

Gov. Greg Abbott on Wednesday named Arthur D’Andrea as the state’s new PUC chair. Abbott appoints the PUC commissioners; the move is a promotion for D’Andrea, who was appointed by Abbott to the PUC board in 2017. He is a lawyer who previously worked in the office of the state attorney general.

Magness was questioned by state lawmakers for more than five hours on Feb. 25 about ERCOT’s actions during the storm. Legislators said the grid operator didn’t do enough in the days leading up to the start of the severe snow and cold event to alert state officials and the public to the possibility that demand for electricity and natural gas could overrun supply.

Massive amounts of power began to trip offline on the morning of Feb. 15 as power demand soared far beyond what was expected. ERCOT grid managers then ordered utility companies to start controlled power outages to prevent the entire electric system from collapsing. ERCOT officials on Feb. 18 said the system was “seconds and minutes” away from what would have been a catastrophic failure.

Magness on Feb. 17 said if grid operators had not acted to initiate rolling blackouts early on Feb. 15, blackouts in the state “could have occurred for months,” leaving Texas in what he called an “indeterminately long” power crisis.

At least one Texas power company has filed for Chapter 11 bankruptcy protection in the wake of the blackouts, which led to power prices soaring. Brazos Electric Power Cooperative made its filing Monday, saying it cannot pay a $2.1 billion bill from ERCOT for charges incurred during the week-long winter storm.

Darrell Proctor is associate editor for POWER (@POWERmagazine).

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