SPP recalculates prices after winter storm led to gas, power record highs

New York — Southwest Power Pool has recalculated prices for several intervals on Feb. 14 due to system/software error after a massive winter storm struck the region and caused record-high gas prices that led to record-high power prices.

Prices for 37 intervals were recalculated with the substitute prices included on the settlement statements for the operating day as set by the settlements calendar, according to the notices issued Feb. 24.

"Repricing is the process, defined under SPP's [Federal Energy Regulatory Commission]-approved tariff, by which we adjust the price of energy in our market to ensure buyers and sellers are invoiced in a manner that best reflects what prices would have been if not for data or software errors," SPP spokesman Derek Wingfield said.

During the cold-weather event that affected the entirety of the SPP region beginning Feb. 13, natural gas prices reached historic highs, Wingfield said.

Texas-Oklahoma Panhandle spot gas prices were $224.56/MMBtu for Feb. 13-16, a record high for the location, according to S&P Global Platts pricing data.

"With natural gas generators burning high-priced fuel, this in turn drove up the price of electricity offered into our market," Wingfield said. "The event marked the first time in the history of SPP's wholesale electricity market that we saw power offered at prices above $1,000/MWh, with market prices in the day-ahead market reaching an all-time high of $4,274.96/MWh on Feb. 15."

By comparison, the average price of energy in the SPP day-ahead market for the entire year of 2020 was $17.81/MWh, Wingfield said.

SPP is working with its wholesale market participants to ensure that buyers and sellers are invoiced accurately, and is collaborating closely with its independent market monitor, who validates all offers above $1,000/MWh, and FERC to ensure the market continues to function fairly, equitably and in support of regional reliability, Wingfield said.

FERC probe

Following price spikes and outages that accompanied extreme weather blanketing Midwest and South-Central states in mid-February, FERC said Feb. 22 its enforcement office is examining wholesale gas and power market activity to "determine if any market participants engaged in market manipulation or other violations."

Spot gas prices across Kansas, Oklahoma, eastern Arkansas and Texas surged into the hundreds, with several locations trading near or above $1,000/MMBtu.

On the power side, real-time wholesale power prices in the Electric Reliability Council of Texas averaged at or near the systemwide offer cap of $9,000/MWh, which is roughly 360 times the average real-time systemwide on-peak locational marginal price for all of 2020.

SPP set record-high prices Feb. 18 for both on-peak and off-peak at both hubs, surpassing highs reached Feb. 15. SPP South Hub on-peak day-ahead locational marginal prices hit $3,821.05/MWh for Feb. 18 delivery, as off-peak day-ahead LMP peaked at $4,072.14/MWh, according to SPP data.

SPP on-peak day-ahead LMPs Feb. 15-19 averaged 11,280% higher than the five-year average for that period, according to SPP data.

Winter storm impact

The SPP system set a new winter peakload record of 43.661 GW Feb. 15, according to SPP data.

As demand surpassed available supply, SPP directed member utilities to shed power Feb. 15 and 16. On Feb. 15, 641 MW were interrupted for about 50 minutes, representing about 1.5% of total load at the time, while on Feb. 16 there was 2.7 GW interrupted for more than 3 hours, representing about 6% of load, SPP officials said during update calls last week.

In a Feb. 18 press release, SPP also pointed to an inadequate supply of natural gas required to power some generating units.

Natural gas-fired generation output averaged roughly 7.45 GW for Feb. 10-20, an increase of about 24% from the three-year average, according to SPP data.

The extreme cold weather created energy deficiencies across SPP's region and marked the first time in its 80-year history that it had to declare Energy Emergency Alert Levels 2 or 3 for its entire region or had to direct member utilities to implement controlled, temporary service interruptions to prevent widespread blackouts, according to a Feb. 18 news release.

SPP declared conservative operations Feb. 9 in anticipation of the winter storm and that status remained until Feb. 20.