Why some Texans are facing catastrophic electric bills after a winter storm

Wholesale power plans left Texans on the hook for thousands of dollars after prices spiked.

In Texas this week, freezing temperatures overwhelmed the state’s power grid, triggering rolling blackouts, multi-day power outages — and, catastrophic electric bills.

According to the Dallas Morning News, some Texans have been hit with power bills totaling as much as $17,000 for only a few days of electricity, many times more than the usual cost of power in Texas.

Specifically, it’s Texas residents who rely on a wholesale power plan, rather than a fixed-rate plan, who have seen their bills climb after the demand for power jumped dramatically across the state this week as Winter Storm Uri struck and temperatures plunged. Texas, which has a deregulated electricity market, has a number of providers, both wholesale and fixed rate.

Fixed-rate customers pay an agreed-upon rate for their power, but wholesale buyers pay a variable rate; whatever the current price per kilowatt-hour of electricity is. Wholesale power plans, such as those offered by Texas energy company Griddy, can be attractive because during good weather, a customer on a variable plan will pay less than one on a fixed-rate plan, according to Public Utility Commission of Texas spokesperson Andrew Barlow.

The problem is, weather isn’t always good — in Dallas on Tuesday, the low temperature was 4 degrees Fahrenheit, colder than in Anchorage, Alaska.

That freezing weather led to rolling blackouts throughout the state amid an increased demand for power; in turn, that demand caused prices to spike, with wholesale rates soaring to about $8,800 per megawatt-hour in the Dallas area on Wednesday.

According to Reuters, the wholesale rate before this week’s storm was only about $50 per megawatt-hour. On Wednesday, Texas’s Public Utility Commission moved to cap wholesale prices at $9,000 per megawatt-hour, or $9 per kilowatt-hour.

Griddy, the wholesale power company that has faced the most rancor from customers online, warned customers on Monday that their rates could climb precipitously with the onset of cold weather — but those warnings didn’t come in time for many Texans to change to a new service provider, the Dallas Morning News reported Friday, and people were still caught off guard by their power bills.

“$5,000 for five days is outrageous,” Dallas resident DeAndré Upshaw told Morning News reporter Maria Halkias Friday. “No one could have anticipated this except the people who manage the service and the power grid.”

The winter storm was not the first time wholesale customers in Texas have been stuck with large bills due to unexpected weather; in 2019, a heat wave caused a spike in power usage — and a sudden increase in wholesale prices — that left many Texans paying hundreds of dollars more than they expected for power. But for some Texans, the current situation is worse by several orders of magnitude, and comes at a difficult time economically, with the US in the midst of a pandemic-related recession.

According to The Verge, “4.8 million Americans were unable to pay at least one energy bill last year and received a disconnection notice from their utility company.” Texas’s supersized wholesale power bills are sure to make that problem more acute in the aftermath of the storm.

As Texas struggles to recover from the winter storm — President Joe Biden approved a major disaster declaration for the state on Saturday — it’s unclear what comes next for Texans who got stuck with astronomic energy bills.

In a Friday statement, however, Griddy said that it was “seeking customer relief” from the Electric Reliability Council of Texas (ERCOT), which manages most of the state’s power grid, and from the state’s Public Utility Commission.

“Griddy is continuing these efforts and is committed to crediting customers for any relief received, dollar-for-dollar,” the company said. Failing that relief, customers could be on the hook for thousands of dollars worth of bills.

Gigantic electric bills are just part of Texas’s power problem this week

Texas has been in unique difficulty this week in part because of the state’s unique power system: Unlike the rest of the lower 48, most of the Lone Star State relies on ERCOT’s independent, internal power grid, which provides about 90 percent of the state’s electricity.

As Vox’s Umair Irfan explained earlier this week, it’s been a hard week for that grid, even though Texas is “the largest oil, natural gas, and wind energy producer” in the country. Demand has far exceeded supply, which is what led to rolling blackouts and dramatically higher prices.

According to Irfan:

The sudden cold snap this weekend put the state’s ample resources to the test, with demand reaching a record high peak for the winter, more than 69,000 megawatts. That’s 3,200 MW higher than the previous record set in 2018.

As demand reached new heights, the supply of electricity fell drastically in the past few days, far below what operators expected. Ordinarily, ERCOT plans for winter to be much warmer and anticipates a lower energy demand. Power providers often schedule downtime and maintenance during the winter months to prepare for the massive annual surge in electricity demand in the hot Texas summer. The state’s ample wind and solar energy resources are also diminished in the winter, so ERCOT doesn’t depend on them to meet much of the demand they anticipate.

Texas’s power grid was also hobbled by lower-than-usual electricity supply after natural gas pipelines froze in the winter weather, and as energy production dropped off across the board. This put the state in an even worse jam, and also contributed to high power prices.

Texas’s decision to remain on an independent grid dates back more than 80 years, according to NBC, and was intended to keep Texas utilities free of federal regulation. It’s succeeded on that count — but at the cost of not being able to borrow power from other states in a crisis.

“The Texas power grid is really an island,” Rice University professor Daniel Cohan told Vox earlier this week. “Whatever happens in Texas stays in Texas.”

As of Friday, things were getting back to normal with the Texas grid, though the state is still facing water and food shortages. ERCOT ended emergency conditions and returned to normal operation; the number of people without power fell to just about 58,000, as of late Saturday afternoon, rather than millions.

For Griddy customers and other Texans on a wholesale plan, however, the effects of the storm will linger in the form of gigantic power bills.

“I don’t have that type of money,” one Texas resident, Akilah Scott-Amos, told the Daily Beast this week. “I now owe Griddy $2,869.11. This is going to put me in debt, this is going to mess up my credit. Are they going to cut me off? In the middle of this ongoing crisis?”