The Texas Power Crisis is Far From Over, a Wave of Bankruptcies is Next
Texas Power Outages
On February 17 I noted Texas Power Outages Stretch Into Third Day, Millions are Still Without Electricity.
An unusual and prolonged arctic blast left millions without power. Prices surged from 12 cents per kilowatt-hour to $9 per kilowatt-hour.
Those most affected by the price hikes were on "variable-rate power plans." Those plans give energy companies the discretion to change the price depending on consumer demand.
The outages are over but the damage isn't.
Huge Bills and a Class Action Lawsuit
Lisa Khoury, a Texas woman who received a $9,300 Electricity Bill filed a class action lawsuit against Griddy, an electricity company.
Griddy charges its customers $10 a month and provides electricity at whatever the wholesale rate is, according to the Texas Tribune.
The proposed class action suit would cover all Texas Griddy customers who received “excessive charges” after the storm.
The lawsuit, which was filed in a Harris County state district court, seeks more than $1 billion from Griddy for allegedly violating the Texas Deceptive Trade Practices Act.
Griddy did not immediately reply to a request for comment, but said in a statement on the company’s website that the Public Utility Commission of Texas (PUCT) directed ERCOT, the council that manages the flow of power to Texans, to set wholesale pricing at $9/kWh – roughly 300 times higher than the normal wholesale price.
As explained above, ERCOT, not Griddy, set the wholesale price.
Arguably, this is what happens when you try to save pennies by opting for plans that charge wholesale rates.
A Houston startup offered customers an allegedly great deal. Customers would pay the same wholesale price for electric power as the big companies that buy it bulk.
Griddy vowed to be a Market 'Disrupter'. Giddy kept its promise.
"I got hit with $2,500 a day, and so now my bill is a little over $11,000," said Houston resident and Griddy customer Akilah Scott-Amos said in a video that went viral.
Texas Attorney General Ken Paxton filed a lawsuit against Griddy, accusing the company of "misleading and deceptive advertising and marketing practices."
Brazos Electric Power Cooperative Files Bankruptcy
Bloomberg notes the Texas Power Market Shortfall Jumps to $2.5 Billion.
High prices put a financial strain on some utilities, power retailers and generators. On Sunday, Brazos Electric Power Cooperative, the largest power generation and transmission cooperative in Texas, filed for bankruptcy after racking up an estimated $2.1 billion in charges over seven days of the winter storm. The company owes Ercot a disputed $1.8 billion in collateral.
If Ercot cannot come up with financing to cover the underpayments, the debt could end up being shared by everyone in the Texas market, including consumers. Amid the fallout, seven of Ercot’s board members have resigned. The head of the Public Utility Commission of Texas resigned Monday.
More Companies Skip Payments
The Texas power crisis deepened today as More Companies Skip Payments.
Texas energy companies failed to pay another $345 million for electricity and other services incurred during last month’s cold snap, the operator of the state’s grid said on Monday.
Electricity prices on the state’s wholesale market soared by $47 billion for the about five-day period when cold weather drove up demand and generating plants failed, estimated Carrie Bivens, a vice president at Potomac Economics, which monitors the Texas power market.
In all, electricity providers skipped out on $2.46 billion in power and service charges, grid operator Electric Reliability Council of Texas (ERCOT) said. It applied $800 million from collateral and other accounts to reduce the cumulative shortfall to $1.66 billion.
ERCOT did not disclose which companies failed to pay the bills, but said it will begin naming firms and the amounts they have failed to pay in the future.
A spokeswoman for Governor Greg Abbott declined to comment on Monday’s bankruptcy filing or on proposals that the state’s Public Utility Commission roll back fees that skyrocketed during the blackout.
Expect More Bankruptcies
More bankruptcies, perhaps even some on the personal level, are on the way.
Consumers were happy to pay "wholesale" prices, until they weren't.
I recall a plethora of phone calls back in 2005 and again in 2008 when Natural Gas futures spiked to $15.70 and $13.70 respectively.
The conventional "wisdom" at the time, which I vigorously fought, was that inflation was going to the moon and NG would soon be at $40.
The reverse happened in Texas.
Big Winners and Losers
I smell some big winners in this mess.
Who? The lawyers, of course.
They will have a field day with all the coming lawsuits.
The losers will be those who did not get sucked into wholesale price schemes because bureaucrats will undoubtedly decide to bail out some at the expense of others.