Economic activity in the euro zone shrank markedly in January as lockdown restrictions to contain the coronavirus pandemic hit the bloc's dominant service industry hard, a survey showed. Ciara Lee reports
Economic activity in the euro zone shrank markedly in January as lockdown restrictions to contain the coronavirus pandemic hit the bloc's dominant service industry hard, a survey showed. Ciara Lee reports
By Yasin Ebrahim
(Bloomberg) -- Stocks slipped with American equity futures as investors await key U.S. jobs data at the end of a week in which fears of a growth break-out sparked volatility across markets. Treasuries rose and the dollar advanced.Travel and leisure firms led declines on Europe’s Stoxx 600 index. S&P 500 futures traded flat after paring an earlier loss, while contracts on the tech-heavy Nasdaq 100 were lower after a topsy-turvy week that erased this year’s gains. Ten-year Treasuries stabilized, with their yields down two basis points to 1.54%.Oil prices leaped after the OPEC+ alliance surprised traders with its decision to keep output unchanged. West Texas Intermediate crude rose above $65 a barrel for the first time since January 2020.Bond yields have climbed in recent weeks on mounting expectations of stronger economic growth and price pressure, with erratic moves unsettling stocks as well. The February U.S. employment report on Friday will give a much-needed update on the speed and direction of the country’s labor-market recovery.“It makes logical and intuitive sense that Treasury yields should move back up to 1.50% or 2%, but we are concerned with the rest of the market about the speed at which it’s getting there,” said Mona Mahajan, investment strategist at Allianz Global Investors LLC.Powell Sends Dovish Message That Leaves Bond Market DisappointedTreasuries were whipsawed Thursday on disappointment that Federal Reserve Chair Jerome Powell offered no specific course of action to rein in long-term rates. Meanwhile, the U.S. Senate voted to take up a $1.9 trillion relief bill backed by President Joe Biden, with approval expected on the weekend.These are some of the main moves in markets:StocksFutures on the S&P 500 Index decreased 0.2% as of 6:00 a.m. New York time.The Stoxx Europe 600 Index dipped 0.4%.The MSCI Asia Pacific Index declined 0.8%.The MSCI Emerging Market Index fell 0.8%.CurrenciesThe Bloomberg Dollar Spot Index gained 0.4%.The euro dipped 0.3% to $1.1931.The British pound declined 0.7% to $1.3799.The onshore yuan weakened 0.3% to 6.49 per dollar.The Japanese yen weakened 0.5% to 108.54 per dollar.BondsThe yield on 10-year Treasuries declined two basis points to 1.55%.The yield on two-year Treasuries declined one basis point to 0.13%.Germany’s 10-year yield increased one basis point to -0.30%.Japan’s 10-year yield decreased four basis points to 0.096%.Britain’s 10-year yield advanced three basis points to 0.763%.CommoditiesWest Texas Intermediate crude increased 1.9% to $65.05 a barrel.Brent crude gained 2.2% to $68.18 a barrel.Gold weakened 0.2% to $1,694.87 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Mission Advancement Corp., a company co-sponsored by former NFL quarterback-turned activist Colin Kaepernick, was little changed and thinly traded in its debut after boosting its initial public offering to raise $300 million.Shares of the blank-check firm, which boasts of a board made up entirely of “Black, Indigenous and people of color,” were flat at $10.01 Wednesday in New York. The market’s bland reception of the special purpose acquisition company gave it a market value of less than $400 million.The company, which is in part run by Jahm Najafi, who heads private-equity firm Najafi Companies, sold 30 million units for $10 apiece Tuesday. The pair will focus on diversity issues and racial justice and aim to acquire a consumer company with an enterprise value around $1 billion.A representative for Mission didn’t reply to a request for comment.Wednesday’s debut for Kaepernick’s SPAC, marked the second former-professional athlete-backed blank check company to go public in the last 10 days. Former Yankee all-star Alex Rodriguez’s Slam Corp. rose 5.1% in its first day of trading on Feb. 23, but has since trimmed gains to just 0.9%.For comparison, A-Rod’s SPAC had roughly 24.5 million shares traded in its first session compared to 13.9 million for Kaepernick’s.(Updates share movement throughout, adds trading volume in final paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
March 4 marked an outright meltdown in the SPAC market and IPO Edge was right in the middle of the action. We heard from a panel of nine experienced SPAC sponsors and seasoned advisors during market hours who gave their take on the current market turmoil and the next phase of growth. IPO Edge hosted […]
Shares of Broadcom Inc fell on Thursday after the company reported chip sales slightly below Wall Street estimates, joining a growing list of chip industry peers hit by the global semiconductor shortage. Broadcom reported semiconductor solutions revenue of $4.90 billion for its fiscal first quarter ended Jan. 31, slightly below analyst estimates of $4.95 billion, according to IBES data from Refinitiv. Shares of the chip company, which is a major supplier to iPhone maker Apple Inc, were down 1.36% at $437.54 in extended trading.
Traders aren’t sure if OPEC+ will leave output cuts steady in April, or lower them slightly. Prices could firm if the cuts stay at current levels.
(Bloomberg) -- The Nasdaq 100 Index has taken a nasty dip in recent weeks but some tech stocks are rallying -- just not the ones that have ridden on the waves of investor euphoria in recent years.Older technology companies peddling legacy products have rallied in the past two weeks as rising bond yields and an improving economy have prompted investors to sell shares of faster-growing companies like Salesforce.com and buy more profitable ones like HP Inc.HP, Xerox Holdings Corp. and Oracle Corp. have all advanced more than 8% since Feb. 19, making them the best performers in the S&P 500 Information Technology Index. Salesforce, on the other hand, is the second-worst performer in the group with a decline of 16%. That trade was on display again Wednesday with the Nasdaq 100 Stock Index tumbling 2.9% while International Business Machines Corp. and Oracle advanced. The benchmark index is now trading at the lowest since Jan. 6.The rotation that’s taking place within the technology sector is a microcosm of what’s been playing out in the broader market for months as investors have poured money into smaller and cheaper companies that tend to outperform during economic recoveries.At the same time, higher Treasury yields make it harder to stomach paying up for companies whose abilities to generate comparable levels of profitability are uncertain or years in the future.“You don’t have to imagine everything going right for the Oracles of the world to make money,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners. “They are making money now.”Morgan Stanley said earlier this week that investors should look for bargains within less-loved sectors like technology hardware rather than bet on a broad advance for U.S. stocks, which have already priced in much of the expectations for earnings expansion and economic growth in 2021.“With index level upside limited, we think stock selection offers better return prospects,” strategists led by Mike Wilson wrote in a research note. The bank’s top picks for hardware include ATM maker NCR Corp. and data-storage company NetApp Inc.With the yield on 10-year U.S. Treasuries flirting with 1.5% on Wednesday, software makers Twilio Inc. and Zoom Video Communications Inc. were among the biggest decliners, falling 7.6% and 8.4%, respectively. Twilio is priced at 26 times 2021 revenue projections, while Zoom trades at 26. Oracle, which rose 0.4% to a record of $66.91 on Wednesday, has a price to projected sales ratio of less than five times.Bill Stone, chief investment officer at Glenview Trust Co., is a fan of value stocks but warned of pitfalls if companies like HP aren’t able to maintain profitability.“The worry of course is that those legacy companies maybe don’t have as bright of a future,” he said. “It’s really a cash-flow play and you hope that they can keep the cash flow in the future.”(Updates shares beginning in third paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- European equities were little changed as investors rotated into cyclicals and out of defensive shares, while some U.K. firms and sectors rose following the country’s budget.The Stoxx Europe 600 Index closed up less than 0.1%, as gains for carmakers and travel shares offset declines in utilities and health-care shares. The FTSE 100 rallied 0.9% after Britain’s spring budget. U.K. homebuilders climbed after the government confirmed support measures, while Diageo Plc advanced as a planned increase in alcohol duties was canceled in the announcement.Equities in Europe have had a bumpy start to 2021, with a vaccination-driven rally peaking in mid-February. Since then, spiking yields in U.S. treasuries and German bunds have damped investors’ appetite for stocks, particularly weighing on so-called bond-proxy haven sectors.“Markets are transitioning to a more robust and mature phase of the recovery trade,” according to Barclays Plc strategists led by Emmanuel Cau. They expect European stocks to continue to catch up with U.S. peers, because cheaper value shares and non-U.S. equities stand to benefit from rising growth and inflation expectations.Automotive stocks accounted for most of the day’s top performers, buoyed by overall cyclical strength, while UBS Group AG analyst upgrades additionally boosted Renault SA and Continental AG. British insurer Hiscox Ltd. trailed the pack, having scrapped its dividend amid worse-than-expected gross written premiums.You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP key for assistance.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Federal Reserve Chairman Jerome Powell will probably seek to convince suddenly skeptical financial markets on Thursday that the central bank will be ultra-patient in pulling back its support for the economy after the pandemic has ended.Rather than trying to cap rising long-term interest rates, Fed watchers expect Powell to use his appearance at a Wall Street Journal webinar to reaffirm the Fed’s determination to meet its revamped employment and inflation goals by keeping monetary policy looser for longer, and to make clear he’d like to avoid a repeat of last week’s disorderly bond market.“It’s not an issue of trying to talk down the market,” said JPMorgan Chase & Co. chief U.S. economist Michael Feroli. “But you do want interest rates to be aligned with the Fed’s objectives.”That’s important for the economy’s long-run health. If the markets and the Fed are in sync, they’ll work together to attain the central bank’s objectives of maximum employment and 2% average inflation under its new strategic framework.Long-term interest rates have climbed this year -- the yield on the Treasury’s 10-year note was 1.48% at 4:50 p.m. in New York Wednesday, up from under 1% at the start of 2021 -- as more widespread dissemination of vaccines to fight the virus and the promise of stepped-up government spending has fanned expectations of much faster economic growth ahead.Brainard PatientIn what was potentially a preview of Powell’s remarks, Governor Lael Brainard stressed on Tuesday how far the Fed was from meeting its objectives.“We have quite a lot of ground to cover,” she told a Council on Foreign Relations webinar. “It’s appropriate to be patient.”Brainard said that the speed of last week’s moves in the bond market had “caught my eye,” adding that she would be concerned if she saw disorderly trading, or a persistent tightening in financial conditions, that could slow progress toward the Fed’s goals.In congressional testimony on Feb. 23 and 24, Powell played down concerns that rising yields would hurt the economy, instead declaring at one point that they were a “statement of confidence” in the outlook.The markets blew up the next day, with the 10-year Treasury note yield briefly spiking to 1.6%.Investors also moved forward their expectations for the first Fed rate hike to early 2023 as they began to question the central bank’s commitment to keeping policy easy until inflation overshoots 2%.“Early 2023 strikes me as quite early,” said Goldman Sachs Group chief economist Jan Hatzius, who doesn’t expect a hike until 2024.PGIM Fixed Income chief economist Nathan Sheets said this won’t be the last time that the Fed is confronted by escalating long-term interest rates. He sees the 10-year yield climbing as high as 2% during the summer before tailing off by end year.The Fed has a variety of ways of pushing back against a yield run-up if it sees a need to do so.Guidance LiteFirst will come more words. Call it forward guidance lite.The central bank is currently buying $120 billion of assets per month -- $80 billion of Treasury securities and $40 billion of mortgage-backed debt -- and has pledged to keep up that pace “until substantial further progress” has been made toward its goals.To help anchor yields, policy makers could become more explicit about when they’ll begin to scale back purchases. Fed Vice Chairman Richard Clarida took a step in that direction last week, suggesting the current pace of buying would be appropriate for the rest of 2021.Policy makers could also be more definitive about what it would take for them to raise interest rates. They’ve said they will keep rates near zero until the labor market has reached maximum employment and inflation has risen to 2% and is on track to moderately exceed that level for some time. But those thresholds are somewhat amorphous and open to interpretation.After the words, would come action. The Fed could step up its bond-buying program or shift purchases of mortgage-backed securities into Treasuries.Operation TwistAnother option: a reprise of Operation Twist, in which the Fed eliminates its holdings of Treasury bills and puts the money into longer-dated securities. That would have the added benefit of alleviating downward pressure on bill rates, which are threatening to go negative.The Fed could also emulate its Australian counterpart and adopt yield curve control, seeking to cap yields of short-dated Treasuries -- a strategy that Brainard has spoken approvingly of in the past.Wrightson ICAP LLC chief economist Lou Crandall said Powell has to be careful about pushing back on interest-rate expectations baked into the Treasury market. The Fed’s next Summary of Economic Projections, which will be published after its March 16-17 policy meeting, might show a growing number of policy makers penciling in a rate increase in 2023.Powell could instead highlight the Fed’s new modus operandi for monetary policy under the framework it adopted last year.“He may try to focus the market’s attention on how much of a regime change there’s been in the Fed’s thinking,” Crandall said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Oil surged to the highest in nearly two years after the OPEC+ alliance surprised traders with its decision to keep output unchanged, signaling a tighter crude market in the months ahead.Futures in New York climbed 4.2%, rising the most since Saudi Arabia last shocked markets with its January pledge to unilaterally cut output. Global benchmark Brent also jumped on Thursday. The OPEC+ producer alliance agreed during a virtual gathering to hold output steady in April. Saudi Arabia said it is in no hurry to bring back supply and will maintain its 1 million barrel-a-day voluntary production cut.“The decision to maintain the current OPEC+ supply cuts for the month of April has given the oil bulls exactly what they needed as far as the tight-supply narrative goes,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “The Saudis shrewdly recognized that in order to maintain the recent upward price momentum and speculative buying interest in oil futures, they needed to ‘feed the bull.’”OPEC+ has helped drain a global glut that accumulated during the pandemic through its supply management, pushing crude futures up more than 30% so far this year. The strength is evident across many corners of the oil market, with key timespreads widening further in a bullish backwardation structure -- an indication of tightening supplies -- and data from brokers showing rallies in key swap markets in the North Sea.Meanwhile, Brent options volume rose to the highest since March 2020, according to preliminary trade data compiled by Bloomberg.The OPEC+ decision represents a victory for Saudi Arabia, which has advocated for production restraints to keep crude prices supported. However, higher prices could spur additional drilling activity by U.S. shale explorers, with domestic oil rigs already at the highest since May 2020. Saudi Arabia appeared unfazed by that risk: Saudi Energy Minister Prince Abdulaziz bin Salman told reporters after the meeting that the U.S. mantra of “drill, baby, drill is gone forever.”See also: Russia Needs April Oil Output Hike Due to Seasonal Demand: Novak“It’s going to get tight,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis. “The longer prices stay up, the greater the likelihood we will eventually see a supply response from the U.S. But, it’s not going to be as immediate as it would have been in the past.”OPEC+ had been debating whether to restore as much as 1.5 million barrels a day of output. As part of the agreement, Russia and Kazakhstan were granted exemptions. The group’s next meeting is scheduled for April 1 to discuss production levels for May.The ramifications of a swiftly tightening oil market may also impact prices at the pump, with U.S. retail gasoline prices approaching $3 per gallon for the first time in six years.The rally in crude prices that’s helped send fuel prices soaring is being compounded by refined product supply declines in the U.S. after a deep freeze paralyzed much of the Gulf Coast refining sector late last month. Gasoline futures in New York climbed above $2 a gallon on Thursday before settling just under the key level.Meanwhile, tensions are gathering in the Middle East after Yemen’s Houthi rebels claimed attacks on Saudi targets. The rebels, who are backed by Iran, said they bombed an airbase in Saudi Arabia’s southwest with a drone and hit a Saudi Aramco crude facility in Jeddah. Aramco and Saudi officials didn’t immediately respond to requests for comment.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Some households are collecting a big pile of federal money in 2021.
The president has agreed to a compromise making millions ineligible for the third checks.
A firm hired to monitor Texas' power markets says the region's grid manager overpriced electricity over two days during last month's energy crisis, resulting in $16 billion in overcharges.
Wall Street slumped on Thursday and global stock markets declined after U.S. Federal Reserve Chair Jerome Powell repeated his pledge to keep credit flowing until Americans are back to work, rebutting investors who have openly doubted he can stick to that promise once the pandemic passes. Benchmarket U.S. Treasury yields rose toward last week's highs as Powell spoke, and the dollar hit a three-month high. With COVID-19 vaccines rolling out and the government fiscal taps open "there is good reason to think we will make more progress soon" toward the Fed's goals of maximum employment and 2% sustained inflation, Powell told a Wall Street Journal forum.
Bitcoin (CRYPTO: BTC) may be headed for the $100,000 mark by the end of this month, according to Mike McGlone, a Bloomberg analyst. What Happened: McGlone, who previously ascribed a $50,000 plus level for the cryptocurrency, said in a March outlook report that if the Grayscale Bitcoin Trust (OTC: GBTC) closing at its steepest discount ever is an indicator, then it may “signal [Bitcoin’s] march to $100,000.” The Greyscale premium, a metric watched closely, ended February with a 2.7% discount. McGlone pointed to March 2017, when BTC backed up to nearly $1,000 on the way to its peak near $20,000 in December of that year. “Sharp reductions in the GBTC premium have often marked bottoms in Bitcoin,” wrote McGlone. “The increasing probability of [exchange-traded] funds in the U.S., on the back of launches in Canada are adding pressure to the trust price, but we see sustaining the upward trajectory as the more likely outcome.” Bitcoin traded 8.48% lower at $47,120.70 at press time. GBTC closed 10.31% lower at $41.40 on Thursday. Why It Matters: The Grayscale premium is a reference to the difference between the value of the holdings of GBTC versus the market price of its holdings. McGlone also noted the increased replacement of Gold in portfolios with BTC. “In 2020, the benchmark crypto gained legitimacy with declining volatility vs. the opposite in most assets. In 2021, we see little to stop the process of old-guard gold allocators simply focusing on prudent diversification,” wrote the analyst. On Thursday, Kraken CEO Jesse Powell said that BTC could replace all of the world’s currencies and hit a million-dollar price target within the next ten years. “The younger demographic is certainly taking notice of it and they see it as a better version of gold,” said Powell. Read Next: 'Morons:' Crypto Enthusiasts Burn Banksy's Real Artwork To Turn It Into Digital Token See more from BenzingaClick here for options trades from BenzingaHow Square's Purchase of Jay Z's Tidal Could Popularize Blockchain'Morons:' Crypto Enthusiasts Burn Banksy's Real Artwork To Turn It Into Digital Token© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
(Bloomberg) -- Major oil sands producers in Western Canada will idle almost half a million barrels a day of production next month, helping tighten global supplies as oil prices surge.Canadian Natural Resources Ltd.’s plans to conduct 30 days of maintenance at its Horizon oil sands upgrader in April will curtail roughly 250,000 barrels a day of light synthetic crude output, company President Tim McKay said in an interview Thursday. Work on the Horizon upgrader coincides with maintenance at other cites.Suncor Energy Inc. plans a major overhaul of its U2 crude upgrader, cutting output by 130,000 barrels a day over the entire second quarter. Syncrude Canada Ltd. will curb 70,000 barrels a day during the quarter because of maintenance in a unit.The supply cuts out of Northern Alberta, following a surprise OPEC+ decision to not increase output next month, could add more support to the recent rally in crude prices. OPEC+ had been debating whether to restore as much as 1.5 million barrels a day of output in April but decided to wait.The Saudi-led alliance closely monitors other major oil producers as it seeks to manage the entire global market, and surging production in North America was its biggest headache in recent years -- especially from U.S. shale but also from Canada.“The U.S., Saudi Arabia, Russia, Canada, Brazil and other well endowed countries with hydrocarbon reserves -- we need to work with each other, collaboratively,” Saudi Energy Minister Prince Abdulaziz bin Salman said after the group’s meeting on Thursday.Read More: Saudis Bet ‘Drill, Baby, Drill’ Is Over in Push for Pricier OilCanada’s contribution to balancing the market with less production, much like slowing output in the U.S., is not a deliberate market-management strategy but significant nonetheless.Even though the output cuts are short-term, the battered oil-sands industry shouldn’t be a concern for the Saudis in the long run either, judging from McKay’s outlook for the industry.“I can’t see much growth in the oil sands happening because there is going to be less demand in the future,” he said. “The first step is we have to get our carbon footprint down.”After years of rising output turned Canada into the world’s fourth-largest crude producer, expansion projects have nearly halted on the heels of two market crashes since 2014.Adding to its struggles, Canada’s oil industry is being shunned by some investors such as Norway’s $1.3 trillion wealth fund amid concern that the higher carbon emissions associated with oil sands extraction will worsen climate change. These forces help make future growth in the oil sands unlikely, said McKay, whose company is among the largest producers in the country.Oil sands upgraders turn the heavy bitumen produced in oil sands mines into light synthetic crude that’s similar to benchmarks West Texas Intermediate and Brent. Syncrude Sweet Premium for April gained 60 cents on Thursday to $1.50 a barrel premium to WTI, the strongest price since May, NE2 Group data show.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
GameStop shares closed up 6.4% at $131.93 after earlier hitting $147.87, their highest since a surge in the heavily shorted stock late last month. One analyst and some Twitter users pointed to a cryptic tweet by Ryan Cohen, a major shareholder of GameStop and founder of e-commerce firm Chewy.com, as a plausible reason for the move, although Reuters could not independently determine causation. The late afternoon rally in GameStop began roughly around the time that Cohen tweeted what appeared to be a screenshot with the puppet dog advertising mascot of Pets.com, a famous casualty of the dotcom bubble two decades ago.
Mortgage rates have risen past a psychological benchmark for the first time since they fell to historic lows during the pandemic. The average rate on a 30-year fixed-rate mortgage increased to 3.02% this past week, according to Freddie Mac’s Primary Mortgage Market Survey—the first time since July that the rate has risen above 3%. “Since reaching a low point in January, mortgage rates have risen by more than 30 basis points,” wrote Freddie Mac’s chief economist, in a release.
(Bloomberg) -- A firm hired to monitor Texas’ power markets says the region’s grid manager overpriced electricity over two days during last month’s energy crisis, resulting in $16 billion in overcharges.Amid the deep winter freeze that knocked nearly half of power generation offline, the Electric Reliability Council of Texas, known as Ercot, set the price of electricity at the $9,000-a-megawatt-hour maximum -- standard practice during a grid emergency. But Ercot left that price in place days longer than necessary, resulting in massive overcharges, according to Potomac Economics, an independent market monitor hired by the state of Texas to assess Ercot’s performance. In an unusual move, the firm recommended in a letter to regulators that the pricing be corrected and that $16 billion in charges be reversed as a result.Potomac isn’t the first to say that leaving electricity prices at the $9,000 cap for so long was a mistake. Plenty of power companies at risk of defaulting on their payments have said the same. But the market monitor is giving that opinion considerable weight and could sway regulators to let companies off the hook for some of the massive electricity charges they incurred during the crisis.The Arctic blast that crippled Texas’s grid and plunged more than 4 million homes and businesses into darkness for days has pushed many companies to the brink of insolvency and stressed the power market, which is facing a more-than $2.5 billion payment shortfall. One utility, Brazos Electric Power Cooperative, has already filed for bankruptcy, while retailers Griddy Energy LLC and Entrust Energy Inc. defaulted and have been banned from participating in the market.“The market is under quite a bit of duress,” Kenan Ogelman, Ercot’s vice president of commercial operations told Texas lawmakers Thursday. Moody’s Investors Service downgraded Ercot one notch from A1 to Aa3 and revised the grid operator’s credit outlook to “negative.”Retroactively adjusting the power price would ease the financial squeeze on some of the companies facing astronomical power bills in the wake of the energy crisis. EDF Renewable Energy and Just Energy are among those asking the Public Utility Commission to reset the power price for the days after the immediate emergency while others have also asked regulators to waive their obligation to pay until price disputes are resolved.“If we don’t act to stabilize things, a worst-case scenario is that people will go under,” said Carrie Bivens, the Ercot independent market monitor director at Potomac Economics. “It creates a cascading effect.”The erroneous charges exceed the total cost of power traded in real-time in all of 2020, said Bivens, who spent 14 years at Ercot, where she most recently was director of market operations before becoming its watchdog. “It’s a mind-blowing amount of money.”While prices neared the $9,000 cap on the first day of the blackouts, they soon dipped to $1,200 -- a fluctuation that the utility commission later attributed to a computer glitch. The panel, which oversees the state’s power system, ordered Ercot to manually set the price at the maximum to incentivize generators to feed more electricity into the grid during the period of supply scarcity. The market monitor argues that Ercot should have reset prices once rotating blackouts ended because, at the point, the emergency was over.It’s asking the commission to direct Ercot to correct the real-time price of electricity from 12 a.m. Feb. 18 to 9 a.m. Feb. 19. Doing so could save end-customers around $1.5 billion that otherwise would be passed through to them from electricity providers, Bevins said.But power generators that reaped substantial profits from the high prices during the crisis week are likely to push back. Vistra Corp. on Thursday submitted comments to the utility commission arguing against repricing. During a Texas senate hearing the same day, utilities South Texas Electric Cooperative and the Lower Colorado River Authority also voiced opposition.Texas Competitive Power Advocates, a trade association representing generators, said retroactively changing prices could discourage future investments in Texas’s electricity market. “Changing prices after the fact creates additional instability and uncertainty,” Michele Richmond, the group’s executive director, said in an email.Bivens acknowledged the market monitor isn’t typically in favor of repricing, but noted in her letter to the commission that the move wouldn’t result in any revenue shortfalls for generators. Instead, the new price would reflect the actual supply, demand and reserves during the period.“This isn’t some Monday morning quarterbacking,” she said in an interview. “Ercot made an error and we don’t let errors slide.”The utility commission on Wednesday adopted a prior recommendation made by the market monitor, voting to to claw back some payments to power generators for services they never actually provided during energy crisis. The commissioners also expressed support for capping the price of certain grid services -- a request made by several retailers -- but didn’t take action on it. Another commission meeting is scheduled for Friday.(Adds Ogelman quote, Moody’s downgrade in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
It appears the breakdown is underway, and this could turn into an outright collapse into mid-March.