Who really gets the bag of those sky-high Texas electric bills?


As Texas melts away from a winter storm that left customers with sky-high electricity bills, state and federal lawmakers are racing to find a way to offset the costs. Given that customers owe billions of dollars, it is unclear who will get the bag.

“We’re all going to pay for it in some way, that is, taxpayers, shareholders, or customers,” said Michael Webber, a professor of energy resources at the University of Texas at Austin. “But it will take a few months for the details to clear up.”

Gov. Greg Abbott announced last weekend that the state’s Public Utilities Commission had put a moratorium on customer disconnections for non-payment to address exorbitant bills, and he met with lawmakers about how the state can help reduce the burden of electricity cost for consumers.

President Joe Biden approved a major disaster declaration for Texas last week that will provide federal assistance for temporary housing and home repairs. Rep. Michael McCaul, R-Texas, told CNN over the weekend that the plan is to use federal assistance for construction damage and cover the cost of electric bills.

San Antonio Mayor Ron Nirenberg said Sunday in an interview on CNN that there will be “hell to pay” if residents are expected to pay the bill for high electricity costs.

“It would be inconceivable for the bills to go up and for the bills to be put on the backs of state residents who have been suffering and freezing their homes for the past week, through no fault of their own,” said Nirenberg.

As temperatures fell below freezing, demand for electricity soared, pushing wholesale energy prices to $ 9,000 per megawatt-hour. Typically, the seasonal average is $ 50 per megawatt-hour. The Electric Reliability Council of Texas, or ERCOT, which manages power for about 90 percent of the state’s electrical load, and the state’s electricity generators were unprepared for the freezing storm. They were unable to produce power to meet demand, a critical part of what makes Texas’ free market power grid work.

Electricity bills for Texans who chose a rate plan that changes with wholesale prices increased more than 10 times. Royce Pierce, who owns a three-bedroom home in Willow Park, west of Fort Worth, said his monthly electric bill came to $ 17,300. It usually costs around $ 150 a month. Last week, his wife closed the account, which is automatically billed by Griddy, a wholesale electricity provider, because it had been eliminated, Pierce said.

“I emailed them and said, ‘I can’t afford this. What do I need to do? What can we do?'” He said. “We have teenage children and we still have other expenses.”

In Texas, maximum wholesale electricity prices are used in “extreme scarcity conditions” to encourage generators to produce more power, according to the state’s Public Utilities Commission. Prices are paid by wholesale buyers and generators who did not purchase power in advance to cover their risks, which acts as a penalty for generators that do not produce power. But in last week’s winter storm, those prices were passed on to consumers.

“Many conservative economists will say, ‘That’s good. We want discipline, ease of entry, ease of exit. ‘ If someone isn’t well protected, they don’t belong in the market, “said Jay Zarnikau, former director of electricity regulation for the Public Utilities Commission.” On the other hand, you have two big competitors, and they will likely survive when smaller retailers that they have problems closing, so it will have more concentration “.

Dramatic spikes in electricity prices have already driven some 20 companies out of business in the past two decades, leaving a handful of dominant players, including NRG Energy and Vistra, said Zarnikau, who is now an economist at the University of Texas at Austin Lyndon B. Johnson School of Public Affairs.

In recent days, Canadian energy retailer Just Energy said it could have trouble covering about $ 250 million in weather-related costs from the storm. Dallas-based Atmos Energy Corp. said it is considering raising cash after spending up to $ 3.5 billion to buy fuel during the storm.

“Absolutely, some companies will go bankrupt,” said Edward Hirs, an energy fellow at the University of Houston. “Some consumers will be at a disadvantage, because they will have to switch to providers that cost more, and trust me, they are waiting for them.”

As Texans mend burst water pipes and mourn scores of deaths, people on the ground aren’t sure when help will arrive to pay their bills. Amanda Powell, an attorney for Lone Star Legal Aid, said the nonprofit firm focuses on providing accurate information to residents who may request assistance from the Federal Emergency Management Agency to cover damage to their homes.

“We will have to see if they are going to provide any public service assistance,” Powell said. “As for the answer to what’s going to happen, we just don’t know. I’ve never seen anything like this.”

Four ERCOT board members said Tuesday they intend to resign. The board president and vice president, along with two other board members, issued a joint statement saying their decision was intended to “allow state leaders to have a free hand with future direction and eliminate distractions.”

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