Gov. Greg Abbott and Texas lawmakers are promising relief for Texans hit with massive electric bills after a winter storm bludgeoned the state’s power grid, leaving millions of residents freezing without electricity.
But how they’ll accomplish that remains unclear. The state’s deregulated electricity market not only allows for staggering price spikes, but effectively compels them for some customers.
While many Texans are on “fixed rate” electricity plans that insulate them from market swings, others pay rates tied to the spot price of wholesale electricity, which skyrocketed during the storm.
As the bad weather bore down, it froze natural gas production and wind turbines, choking off the supply of electricity as demand skyrocketed. In response, the Public Utility Commission, appointed by Abbott, let the wholesale market price of electricity rise to $9 per kilowatt hour, a 7,400 percent increase over the average 12 cents per kilowatt hour.
The rate hike was supposed to entice power generators to get more juice into the grid, but the astounding costs were also passed directly on to some customers, who were suddenly being billed more for electricity each day than they normally pay in a month.
Karen Knox, a special education teacher in Bedford, was among them. She lost power during the crisis but still owes some $7,000 to Griddy, an electricity provider located in Houston.
As the cold snap hit early last week, she was horrified to notice $400 had been withdrawn from her bank account — well above the price her family of three normally pays for electricity for their four-bedroom home. She removed her debit card information from Griddy’s system, and told her bank the charges were fraudulent. She’s not going to pay.
“There’s no way I can and I’m not going to,” Knox said. During sweltering summer months, the maximum the family has paid for electricity is $150, she said.
Griddy, the company Knox used, is one example of how the state’s deregulated system can funnel the cost of a power emergency down to its 29,000 customers.
The company buys electricity at wholesale prices, and passes the real-time rates along to its customers, who pay a $10 monthly fee for the service.
That lets customers save money when the price of electricity is low, but leaves them vulnerable to price hikes when the cost of electricity spikes.
“Griddy customers might (normally) be paying three cents per kilo-watt hour because that’s the average price of the market,” said Joshua Rhodes, research associate at the Webber Energy Group at the University of Texas at Austin. “But if they’re exposed to these prices and it goes to $9 (per kilo-watt hour), that’s $290 a day — they’re using the same amount of electricity.”
An average home uses a little more than 1,000 kilowatt hours a month, he said.
Griddy did not respond to a request for comment Monday, but has allied itself with its customers in online posts. Before the storm, the company had urged its customers to switch to other providers, fearing high prices.
“We intend to fight this for, and alongside, our customers for equity and accountability — to reveal why such price increases were allowed to happen as millions of Texans went without power,” one post said.
It’s not clear how many Texans are on variable rate plans like Griddy’s. But the arrangement produced eye-popping costs for some during the storm — topping $17,000 for a man Dallas television station WFAA spoke to — which triggered outrage from Texans just beginning to pick up the pieces after a bruising week endured, at times, without electricity, heat or water. Over the weekend, Abbott vowed scaling back the bills will be a top priority, and the state’s utility commission temporarily stopped electric companies from turning out the lights on customers who don’t pay.
Even the majority of Texans not on variable rate plans can expect to see their electric bills go up, simply because they needed more power to keep their homes warm or reheat them after losing power. They could also face ripple effects later — “next time you go to choose a retail electric provider, prices might be a bit higher,” Rhodes said.
Tim Morstad, associate state director with the Texas AARP, said “prices are going to rise” but with a delay for those not on variable rate plans.
“Forgive me for stepping back to say — this system is truly designed to have high prices and huge fluctuations. And putting consumers through that by design is a bad process. It’s setting people up for pain,” he said.
Texas has an unusually deregulated electricity market that’s touted for offering customers the ability to pick from hundreds of plans offered by dozens of electric providers.
Parts of the state are carved out, including cities like Austin, that get energy from a municipally owned utility or people served by cooperatives. Those too could see cost increases down the line.
Lawmakers and Abbott have pledged to protect consumers from the big bills, and excoriated the Electric Reliability Council of Texas for the outages last week. The reliability council, which operates the power grid that covers most of the state, is overseen by a Public Utility Commission.
Abbott’s office did not respond to a question about what options were on the table.
Lawmakers have demanded the utility commission roll back its decision to allow the huge rate increases, or suggested cobbling together some package of emergency waivers or relief money to buffer Texans’ from the high bills.
“We cannot allow someone to exploit a market when they were the ones responsible for the dire consequences in the first place,” said state Rep. Brooks Landgraf, R-Odessa.
Experts said people who signed up with providers like Griddy might not have understood the risks associated with the plan, or might have been drawn to the game-like quality of using an app to track swings in electricity prices and change their behavior — similar to playing the stock market.
Other Texans said they just never expected the prices to get so high.
Aubrey Jakob, a Starbucks barista and former Griddy customer living in Houston, prepped for the outage by stocking up on water and getting out extra blankets and flashlights. She expected her electricity prices would go up but was “mortified” when she saw them skyrocket. On Monday, it cost her and her husband — who live with a third roommate — more than $560. The next day, their power went out. Reheating the apartment and taking a shower left them with a $449 bill.
“This is my entire paycheck,” said Jakob, who said she makes about $1,200 a month. “My husband and I are — we’re pretty frugal. So we have a decent amount of savings, but this is enormous.”
She knew spiking prices were a “risk” of using a variable-rate service like Griddy, but normally she and her husband benefit from the model because they closely track their electricity usage, she said. The couple tried to transfer to TXU Energy as soon as possible, but the earliest date they could was this week, after the storm had blown over. While she was grateful to have power, she said “at this point, it almost feels like it would be better to not have any power at all because at least we wouldn’t be paying that much.”
“I feel torn because I realize that we have to accept responsibility for doing a service like this that is wholesale,” she said. “It still is really hard to cope with the fact that we have an infrastructure and a system overall that allows for something like that to happen. It feels like it’s evil.”