McGuireWoods partner Brian Kelly, head of the firm’s energy industry team, was quoted in a March 11, 2021, S&P Global Market Intelligence article titled “Watershed February Freeze Upends Booming ERCOT Wind Hedge Market.”
The article examined the upheaval created by hedge contracts, the preferred contract structure in Texas, after a February 2021 freeze in the Electric Reliability Council of Texas Inc. (ERCOT) region caused billions of dollars of losses for power plant owners. Electricity generation came to a halt as the unusual cold snap caused wind turbines to freeze, shutting down 57 percent of the state’s wind fleet and leaving many wind project owners reeling. The problem was exacerbated by a Public Utility Commission of Texas (PUCT) emergency order to shed certain non-essential electrical loads and raise electric energy prices to the market cap of $9,000/MWh.
“For some projects, four years’ worth of revenue was lost in a matter of days,” Kelly noted. “To say the market dynamics changed 180 degrees [during the event] isn’t close to sufficient. The market disruption caused by the weather event and the PUCT’s subsequent response was unprecedented,” he said.