Texas Opts Not to Fix $16 Billion Power Overcharge

“It is impossible to unscramble this sort of egg,” he said.

Mr. D’Andrea said there were so many hedges and private transactions outside the view of the commission that taking a step designed to help consumers might have unintended consequences. “You think you’re protecting the consumer and it turns out you’re bankrupting a co-op or a city,” he said.

The commission met Friday morning to consider a recommendation from its independent market monitor, which concluded that Texas kept wholesale prices artificially high for 33 hours longer than warranted during a winter freeze last month, resulting in $16 billion in excess charges to consumers.

Amid the freeze, which resulted in mass blackouts that left millions of households in the dark for days, the three-member panel appointed by Texas Gov. Greg Abbott ordered the state’s grid operator to raise wholesale power prices to the peak price of $9,000 per megawatt hour.

The market monitor said in a report filed Thursday that those prices should have been lowered when the grid operator stopped instituting blackouts, not when it ended the energy emergency a day and a half later. It recommended reversing $16 billion in charges.

Earlier this week, the previous commission chair, DeAnn Walker, resigned under criticism, leaving as sitting commissioners Mr. D’Andrea and Shelly Botkin, who also indicated Friday that she wasn’t inclined to order repricing.

Several market participants and consumer groups had urged the commission to reset and lower prices from $9,000. Vistra Corp. VST 1.54% , which is one of Texas’ largest power generators and also owns a major electric retailer, said not repricing “would result in unjust and unreasonable outcomes.”

Texas is grappling with massive financial fallout following last month’s electricity crisis, with the state’s utility commission and power grid operator at odds over exactly what went wrong.

A few hours into the blackouts, the utility commission took the unusual step of abandoning the market-based pricing mechanism and ordering wholesale power prices to be at the $9,000 cap until grid-ordered blackouts ended.

The grid operator complied and kept prices at the cap price after it stopped ordering blackouts, but at that time local electric companies were still struggling to turn the lights back on and some continued to have widespread blackouts.

The extended four days of $9,000 prices—an exponential increase over the normal prices in Texas, which last year averaged $22 a megawatt hour—took a massive financial toll on some market participants.

Vistra said it sustained losses between $900 million and $1.3 billion. Many wind farm operators, which needed to purchase electricity because of hedge contracts, are in financial distress. A major electric cooperative has filed for bankruptcy protection.

The utility commission didn’t vote to reject the independent market monitor’s suggestion, leaving the door open for a change of policy in coming weeks.

Sen. Nathan Johnson, a Democrat from Dallas, said he considered the agency’s decision a mistake. He said he would have supported a clawback to ease concern among power generators and retailers about regulatory intervention in setting market prices.

“That would have sent a stronger market signal,” he said.

—Katherine Blunt contributed to this article.

Write to Russell Gold at [email protected]