As Texas thaws in the wake of a winter storm that has left customers with extremely high electricity bills, state and federal lawmakers are scrambling to find a way to offset the costs. With customers owed billions of dollars, it’s unclear who will be left with the bag.
“We’re all going to pay for it in one way or another, ie taxpayers, shareholders or customers,” said Michael Webber, professor of energy resources at the University of Texas at Austin. “But it will take a few months for the details to dissipate.”
Gov. Greg Abbott announced last weekend that the State’s Utilities Commission has placed a moratorium on customer disconnections for non-payment in order to settle exorbitant bills, and he’s met with lawmakers to find out how the state can help reduce the burden of electricity costs on consumers.
President Joe Biden last week approved a major disaster declaration for Texas, which will provide federal assistance for temporary housing and home repairs. Representative Michael McCaul, R-Texas, told CNN over the weekend that the plan was to use federal aid for building damage and to cover the cost of utility bills.
San Antonio Mayor Ron Nirenberg said in a CNN interview on Sunday that there would be “hell to pay” if residents were to face the bill for soaring electricity costs.
“It would be unacceptable for bills to go up and for bills to be blamed on residents of the state who have been suffering and freezing in their homes since last week through no fault of their own,” Nirenberg said.
As temperatures dropped below freezing, demand for electricity skyrocketed, pushing wholesale electricity prices to $ 9,000 per megawatt hour. Typically, the seasonal average is $ 50 per megawatt hour. The Texas Electrical Reliability Council, or ERCOT, which manages electricity for about 90% of the state’s electrical load, and the state’s power generators were unprepared for the freezing storm. They were unable to generate power to meet demand – a critical part of what runs Texas’ free power grid.
Electricity bills for Texans who have chosen a tariff plan that changes with wholesale prices multiplied by more than 10. Royce Pierce, who owns a three-bedroom house in Willow Park, west of Fort Worth, said that his monthly electricity bill was $ 17,300. Typically, it’s around $ 150 per month. Last week his wife closed the account, automatically billed by Griddy, a wholesale electricity supplier, because it was wiped out, Pierce said.
“I emailed them and said, ‘I can’t afford this. What should I do? What can we do? He said. “We have teenagers and we still have other expenses.”
In Texas, maximum wholesale electricity prices are used under “extreme scarcity conditions” to encourage generators to generate more electricity, according to the state’s Utilities Commission. Prices are paid by wholesale buyers and producers who have not purchased electricity in advance to cover their risks, which is a penalty for producers who do not generate electricity. But during the winter storm last week, those prices were passed on to consumers.
“A lot of conservative economists will say, ‘That’s good. We want discipline, ease of entry, ease of exit. “If someone isn’t well covered, they don’t belong in the market,” said Jay Zarnikau, the former director of electric utility regulation at the Utilities Commission. on the other hand, you have two big competitors, and they’ll probably survive as the smaller retailers that are having problems go out of business – so you’re going to have more focus. “
Dramatic surges in electricity prices have already driven around 20 companies into bankruptcy over the past two decades, leaving a handful of dominant players, including NRG Energy and Vistra, said Zarnikau, who is now an economist at University of Texas at Austin Lyndon B. Johnson School of Public Affairs.
In recent days, Canadian energy retailer Just Energy has said it could struggle to cover around $ 250 million in weather-related costs because of the storm. Dallas-based Atmos Energy Corp. said it plans to raise funds after spending up to $ 3.5 billion to buy fuel during the storm.
“Absolutely, some companies are going to go bankrupt,” said Edward Hirs, an energy researcher at the University of Houston. “Some consumers will be at a disadvantage because they will have to switch to more expensive suppliers – and trust me, they are just waiting for that.”
As Texans fix bursting water pipes and mourn dozens of dead, people on the ground are unsure when help with their assembly bills will arrive. Amanda Powell, a lawyer at Lone Star Legal Aid, said the non-profit firm is focused on providing accurate information to residents who may seek help from the Federal Emergency Management Agency to cover damage caused to their homes.
“We’re going to have to see if they’re going to provide any utility assistance,” said Powell. “As to the answer to what’s going to happen, we just don’t know. I’ve never seen anything like it.”
Four members of the ERCOT board on Tuesday announced their intention to resign. The chair and vice-chair of the board, along with two other board members, issued a joint statement saying their decision was “to leave a free hand to state leaders in guiding future and eliminate distractions “.