As Texas melts after a winter storm that left customers with sky-high electricity bills, state and federal lawmakers are rushing to find a way to offset costs. With customers owing billions of dollars, it is unclear who will take the bag.
“We are all going to pay for it in some way, that is, 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 be resolved.”
Governor Greg Abbott announced last weekend that the state’s Public Utility Commission has put a moratorium on client disconnections for nonpayment to resolve the exorbitant bills, and he met with lawmakers about how the state can help reduce the electricity load on consumers.
President Joe Biden approved a major disaster declaration for Texas last week, which will provide federal assistance for temporary housing and home repairs. Representative Michael McCaul, R-Texas, told CNN over the weekend that the plan is to use federal assistance for damage to buildings and to cover the cost of electricity bills.
San Antonio Mayor Ron Nirenberg said on Sunday in an interview with CNN that “there will be hell to pay” if residents are forced to pay for the surge in electricity costs.
“It would be unscrupulous that the bills would rise and be placed on the backs of state residents who have been suffering and freezing in their homes for the past week, through no fault of their own,” said Nirenberg.
As temperatures dropped below zero, demand for electricity skyrocketed, raising wholesale energy prices to $ 9,000 per megawatt-hour. Typically, the seasonal average is $ 50 per megawatt-hour. The Texas Electric Reliability Council, or ERCOT, which manages about 90 percent of the state’s electrical charge, and the state’s electricity generators were not prepared for the ice storm. They were unable to produce energy to meet demand – a critical part of what makes Texas’s free market power grid work.
Electricity bills for Texans who chose a tariff plan that changes with wholesale prices rising more than 10 times. Royce Pierce, who owns a three-bedroom house in Willow Park, west of Fort Worth, said his monthly electricity bill was $ 17,300. It usually costs about $ 150 a month. Last week, his wife closed the account, which is automatically charged by Griddy, a wholesale electricity supplier, because it was canceled, Pierce said.
“I emailed them and said, ‘I don’t have the money for it. 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 “conditions of extreme scarcity” to encourage generators to produce more energy, according to the state’s Public Service Commission. Prices are paid by wholesale buyers and generators who have not purchased energy in advance to protect themselves from their risks, which acts as a penalty for generators that fail to produce energy. But in last week’s winter storm, these prices were passed on to consumers.
“Many conservative economists will say, ‘This is a good thing. We want discipline, ease of entry, ease of exit. ‘ If someone is not well protected, they don’t belong in the market, “said Jay Zarnikau, the former director of electricity regulation for the Public Utility Commission.” On the other hand, you have two big competitors, and they will probably survive the measure. that smaller retailers facing problems close the market – so you’ll have more concentration. “
Dramatic increases in electricity prices have already bankrupted about 20 companies 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 the past few days, Canadian energy retailer Just Energy said it could have trouble covering about $ 250 million in storm-related costs. Dallas-based Atmos Energy Corp. said it is considering raising money after spending up to $ 3.5 billion to buy fuel during the storm.
“Certainly, 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 suppliers that cost more – and, believe me, they are just waiting for them.”
While Texans repair broken water pipes and mourn dozens of deaths, people on the ground are unsure when help will come to pay the rising bills. Amanda Powell, a lawyer at Lone Star Legal Aid, said the nonprofit company is focused on providing accurate information to residents who can request assistance from the Federal Emergency Management Agency to cover damage to their homes.
“We will have to see if they will provide any useful assistance,” said Powell. “As for 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 said on Tuesday that they intend to resign. The president and vice president of the council, along with two other members of the council, issued a joint statement saying that their decision was aimed at “allowing state leaders the freedom to direct the future and eliminate distractions”.