A Texas woman who received an energy bill of more than $ 9,000 this month is suing her electricity supplier for a price increase. It is the first process after a terrible week of snow and sub-zero temperatures that have triggered soaring energy prices for thousands of consumers in the state and blackouts for millions of others.
Consumer law experts say more such lawsuits are likely to occur. But Texas’s deregulated electricity market, complete with what is called a variable rate price, means that many of these claimants will have an uphill battle to pay their bills.
Lisa Khoury, a resident of Chambers County in Houston, filed a class action on Monday against her electricity supplier, Griddy Energy. According to the lawsuit, Khoury was charged $ 9,546 between February 1 and February 19, an amount hundreds of times greater than his typical $ 200 to $ 250 account range.
Khoury said Griddy withdrew $ 1,200 from his bank account via an automatic payment system before stopping payment through his bank, but she still owes more than $ 8,000 for the energy that was intermittent, according to the complaint. Khoury and other members of the class in the process are seeking $ 1 billion in monetary relief.
“Griddy attacked Khoury in the middle of a disaster. She and her husband ran out of power in the house on Wednesday, February 17, 2021, Thursday, February 18, 2021. At the same time, Khoury hosted her parents and during the storm, who are in their 80s. Even so, she continued to minimize energy use because of high prices, “says the complaint.
Khoury’s lawyer, Derek Potts, national managing partner of the Potts law firm, said Griddy’s billing violates Texas consumer protection laws – and that probably thousands of electricity users will be affected.
Unpredictable prices
Griddy said the lawsuit “had no merit” in a statement given to Dallas Morning News. The electricity supplier did not immediately respond to a request for comment from CBS News. On its website, the company says it does not profit from high energy prices and blamed the Texas Public Utility Commission for last weekend’s astronomical increases.
“You actually pay the same price as an energy provider or retail energy utility,” says Griddy on its website, noting that these prices change every five minutes.
“PUCT changed the rules on Monday” when it instructed the Texas network provider to allow astronomically high energy prices, Griddy said, adding that he was “seeking relief” from the ERCOT for affected customers.
Plans like Griddy’s are a relatively new resource in the largely deregulated energy market in Texas. Most Texans, according to public service commission spokesman Andrew Barlow, are on flat-rate plans where users pay a predetermined amount for each bit of electricity they use. On variable plans like the one Griddy offers, consumers pay wholesale prices, which means that their bills are low in times of low demand, but they can increase rapidly in times of crisis. Some energy industry experts consider these plans to be predatory.
Variable rate utility contracts were compared by some energy experts to adjustable rate mortgages that were popular during the housing boom of the early 2000s. Under such mortgages, the homeowner could get a slightly lower interest rate, but it was about to raise interest rates in the future.
“It looks like consumers have been drawn to the promise of a little cheaper electricity, with the fine print being, ‘Oh, if there’s an emergency on the network, you could get a $ 5,000 bill,'” said Costa Samaras, professor Carnegie Mellon associate and associate analyst at RAND. “It may be cool, but is it right?”
Fooled “to a grossly unfair degree”
“There is a decent claim that these contracts are abusive,” said Richard Alderman, director of the Consumer Law Center at the University of Houston and professor emeritus at the university.
Texas law protects consumers who are exploited “to a grossly unfair degree,” said Alderman, adding that spikes in the price of energy in the thousands of dollars should be considered grossly unfair by the law.
“Would anyone in their right mind sign a contract knowing that it would happen? In my mind, no,” he said.
Still, these processes face several obstacles. Many contracts oblige consumers to arbitrate privately, a non-sworn system that tends to favor companies. Even when a consumer comes to court, the judge is often not on your side.
“Texas courts are generally very conservative and often say to consumers, ‘You signed that contract, you should have read and understood what it said,'” noted Alderman.
For now, Texas Governor Greg Abbott has asked for energy bills a “top priority” for lawmakers. Concessionaires were prohibited from disconnecting customers for non-payment and were instructed to pause billing.
Power providers caught by surprise
Residents were not the only ones who faced $ 1,000 energy bills. Some municipalities and alternative energy suppliers have also been taken by surprise. The city of Denton spent $ 207 million on energy during the outages, close to its annual electricity budget. Power supplier Just Energy said it lost $ 250 million during the episode and will close its doors.
When several power sources failed over the weekend, the commission and the Texas network operator, ERCOT, allowed wholesale energy prices to rise to 300 times their normal level in order to encourage more energy for the grid. At the time, Griddy took an unprecedented step in asking its customers to switch to other suppliers. However, many providers were unable to register new customers during the deep freeze. People like Lisa Khoury said they were forced to wait.
According to Bloomberg, nearly a dozen domain names have been registered in search of potential clients for class actions, including the addresses TexasPowerLawsuit.com, TexasPowerFailureLawsuit.org and ClassActionTexasPower.org.
Consumer advocates hope that federal funds or the Texas legislature can help customers pay astronomical bills – and avoid spikes like these in the future.
“The money has to come from somewhere,” said Samaras. “The question is, does Texas rescue these customers or are there regulations?”