'How in the world can anyone pay that?': Some seeing electric bills as high as $17K in wake of Texas

[mystery-ak]

'How in the world can anyone pay that?': Some seeing electric bills as high as $17K in wake of Texas winter storm
If you were on a variable or indexed plan, your rate — and therefore, your electric bill — may have skyrocketed.


Author: Jason Wheeler
Published: 9:36 PM CST February 18, 2021
Updated: 10:33 PM CST February 18, 2021


DALLAS — The Texas power outage has become the Texas power outrage. Electricity supply and demand in Texas has really stabilized now. But when it was grossly out of whack over the past several days, the cost of power in the wholesale market went crazy. It went from about $50 per Megawatt to $9,000. That didn’t affect retail many customers because they were on a fixed-rate plan. See explanation of plan types here.

But if you were on a variable or indexed plan, your rate — and therefore, your electric bill — may have skyrocketed. One customer messaged us:

“Mine is over $1,000…not sure how…700 square foot apt I have been keeping at 60 degrees."

Another couple tweeted at us:

“Using as little as possible 1300 sq. ft. house and this is my bill. How is this fair. I only paid $1200 for the whole 2020.”

more w/video
https://www.wfaa.com/article/money/business/right-on-the-money/how-in-the-world-can-anyone-pay-that-some-seeing-electric-bills-as-high-as-17k-in-wake-of-texas-winter-storm/287-14a54a65-39cb-4d1c-931c-0d003002f529

[SZonian]

Similar to all those who took out "interest only" homes and then whined when the real payment with principal hit.

No sympathy here, they should have read and understood their contract better.

Very interesting and enlightening information about their electric grid.

[thackney]

I have an indexed plan, tied to Nat Gas price.

I was concerned about this during the week, Nat Gas spot market priced sky-rocketed when gas could not keep up with demand.

But I checked, my price is tied to the monthly average.  It will be up, but not that bad.

[thackney]

https://www.griddy.com/post/griddy-update-why-energy-prices-were-sky-high-this-week

...As of today (Thursday), 99% of homes have their power restored and available generation was well above the 1,000 MW cushion. Yet, the PUCT left the directive in place and continued to force prices to $9/kWh, approximately 300x higher than the normal wholesale price. For a home that uses 2,000 kWh per month, prices at $9/kWh work out to over $640 per day in energy charges. By comparison, that same household would typically pay $2 per day. 

See (below) the difference between the price set by the market's supply-and-demand conditions and the price set by the PUCT's “complete authority over ERCOT.” The PUCT used their authority to ensure a $9/kWh price for generation when the market's true supply and demand conditions called for far less. Why? 

[HoustonSam]

Yet, the PUCT left the directive in place and continued to force prices to $9/kWh, approximately 300x higher than the normal wholesale price.

......the difference between the price set by the market's supply-and-demand conditions and the price set by the PUCT's “complete authority over ERCOT.” The PUCT used their authority to ensure a $9/kWh price for generation when the market's true supply and demand conditions called for far less. Why? 

I'm seeing it argued in some quarters that de-regulation is a root cause of the power issues throughout TX last week, including market price for power passed through to household consumers.  Doesn't the quote here argue the exact opposite, that *regulation* maintained an extreme high price for power, far beyond the actual free-exchange value which would be determined by a free market?

[Elderberry]

Electricity Rates and Consumption in Texas Versus the Rest of the United States

https://www.electricchoice.com/blog/electricity-rates-in-texas-versus-us/

As of 2013, the average Texas energy customer was also paying around 11.35 cents per kWh (for today’s rates, go here).

How does this compare to other states?

In terms of per kWh rates, California, Delaware, Arizona, Colorado, Nevada and New Mexico are just a few of the many states that have higher per kWh rates than Texas. The state even fares better when it comes to per kWh rates than other deregulated states such as Maryland, Pennsylvania, Ohio and New Jersey.

Upon further investigation, it seems as though using the least amount of energy doesn?t always mean that consumers pay the least amount.

Even though Hawaii as a state uses the second least amount of energy in the entire country, the average resident of the Aloha state pays far more than Texas residents on their monthly bill, with the average cost per residents coming in around $203 per month. High energy rates in this state, along with Alaska and the District of Columbia have residents in these areas paying a remarkably high amount in energy bills every month.

This is one of the many examples used to suggest that deregulation has in fact had a positive impact on the state of Texas. Overall, no matter what consumption may be, manageable electricity rates are always instrumental when it comes to keeping electricity bills low.

[thackney]

I'm seeing it argued in some quarters that de-regulation is a root cause of the power issues throughout TX last week, including market price for power passed through to household consumers.  Doesn't the quote here argue the exact opposite, that *regulation* maintained an extreme high price for power, far beyond the actual free-exchange value which would be determined by a free market?

And yet we had the problem before deregulation as well.

 In 1989 the state experienced simultaneous shutdowns of power plants and parts of its natural gas–producing infrastructure, as significant swaths of both of those critical systems were incapacitated by arctic temperatures, triggering blackouts.

https://www.statesman.com/article/20110411/NEWS/304119704

[Idiot]

Geez.....I had to pull out my electric bill to make sure I was ok.  As this has NEVER happened in Texas, people never had any idea that they'd be hit with MASSIVE bills.

I get my electricity through Reliant and am on the Secure 18 plan...whatever the heck that is.  Seriously... does anyone really read the details to these plans?  The bottom price seems to be all they care about....I'm the same.  What sane person thinks they'll be hit with a $9,000 a day electric bill?

[thackney]

Geez.....I had to pull out my electric bill to make sure I was ok.  As this has NEVER happened in Texas, people never had any idea that they'd be hit with MASSIVE bills.

I get my electricity through Reliant and am on the Secure 18 plan...whatever the heck that is.  Seriously... does anyone really read the details to these plans?  The bottom price seems to be all they care about....I'm the same.  What sane person thinks they'll be hit with a $9,000 a day electric bill?

This was quite the news a year and a half or so ago.

Griddy customers feel bite of soaring wholesale power prices
https://www.houstonchronicle.com/business/energy/article/Griddy-customers-feel-bite-of-soaring-wholesale-14352985.php
Aug. 19, 2019

...Griddy customers in Texas, both households and businesses, are reeling from a week of high temperatures that strained electricity supplies and sent wholesale prices and their bills surging to levels they never imagined, forcing them to take extreme measures to try to hold down the soaring costs.

Texas Custom Granite, a Houston company that designs and fabricates counter tops, shut down Thursday afternoon and sent its 25 employees home when Griddy said power would spike again to $9,000 per megawatt hour or $9 a kilowatt hour, compared to 3 to 8 cents per kilowatt hour for energy that those with fixed rate power contracts from other providers pay.

Texas Custom Granite had already paid $2,500 over a three-day period for electricity and the credit card charges from Griddy to cover the higher wholesale power costs were coming more rapidly. The company decided to end the Griddy experiment that began in March and switch back to a fixed rate plan with Reliant Energy....

[Elderberry]

Geez.....I had to pull out my electric bill to make sure I was ok.  As this has NEVER happened in Texas, people never had any idea that they'd be hit with MASSIVE bills.

I get my electricity through Reliant and am on the Secure 18 plan...whatever the heck that is.  Seriously... does anyone really read the details to these plans?  The bottom price seems to be all they care about....I'm the same.  What sane person thinks they'll be hit with a $9,000 a day electric bill?

I do. Every time I'm up for renewal and need to find a new plan, I pre-select around a half dozen plans and take their charging math from their facts label and run it against every month of my usage from the previous year. Only then do I select a plan.

[thackney]

Texas Governor Addresses Skyrocketing Energy Bills
https://www.rigzone.com/news/texas_governor_addresses_skyrocketing_energy_bills-22-feb-2021-164689-article/
February 22, 2021

Texas Governor Greg Abbott announced Sunday that he is working with members of the legislature to address “skyrocketing” energy bills that resulted from a temporary spike in the energy market.

The governor said they are working quickly to calculate the total cost of these bills and find ways that the state can help “reduce this burden”. The governor noted that the Public Utility Commission has issued a moratorium on customer disconnections for non-payment and will temporarily restrict providers from issuing invoices.

“This pause will ensure that the state has time to address these bills and develop a solution for Texans,” Abbott’s office said in a statement posted on the governor’s website....

[HoustonSam]

The governor said they are working quickly to calculate the total cost of these bills and find ways that the state can help “reduce this burden”. The governor noted that the Public Utility Commission has issued a moratorium on customer disconnections for non-payment and will temporarily restrict providers from issuing invoices.

I don't wish financial hardship on anyone who had entered into a variable-price contract for power, but I don't understand how the price incentive mechanism is supposed to bring generators on line if the ultimate consumers of power aren't paying that higher price.

What is it supposed to mean for the PUC to set the price of power at $9k/MW if that price is not what actually gets paid?  Should the price be paid by the transmission companies but not passed through to consumers?  Should it be paid by the state and then passed through to all tax payers?

And how did the PUC calculate $9k/MW in the first place?

[thackney]

I don't wish financial hardship on anyone who had entered into a variable-price contract for power, but I don't understand how the price incentive mechanism is supposed to bring generators on line if the ultimate consumers of power aren't paying that higher price.

What is it supposed to mean for the PUC to set the price of power at $9k/MW if that price is not what actually gets paid?  Should the price be paid by the transmission companies but not passed through to consumers?  Should it be paid by the state and then passed through to all tax payers?

And how did the PUC calculate $9k/MW in the first place?

This should be paid by the consumers.  This is not the first time price spikes impacted those residential customers.  They got savings for years and now they don't.

I think the only solution of this specific problem is for government to not allow this type of contract, or make very clear requirements of the risk to be known.

[catfish1957]

This should be paid by the consumers.  This is not the first time price spikes impacted those residential customers.  They got savings for years and now they don't.

I think the only solution of this specific problem is for government to not allow this type of contract, or make very clear requirements of the risk to be known.

Don't worry, once things come to a head, the taxpayer will be footing the bill via bailout or subsidy.

[HoustonSam]

This should be paid by the consumers.  This is not the first time price spikes impacted those residential customers.  They got savings for years and now they don't.

I think the only solution of this specific problem is for government to not allow this type of contract, or make very clear requirements of the risk to be known.

I tend to agree.  However I would still like to know more about how the PUC decided the "right" number was $9k/MW.  If a quasi-government regulatory body is going to make numbers up, I'm not as certain about simply passing that price through to consumers, because it's not really an economically-determined price.

[thackney]

And how did the PUC calculate $9k/MW in the first place?

Some now say this is too low or more would have spent the money for freeze protection.  Those that did run last week made a fortune because of spending the money.  However, if most of those that did not, had installed more freeze protection, and if they could get Natural Gas, the price would not have stayed so high, so long, making less money.

A basic (96 page) slide presentation of how Ercot generation wholesale pricing works:

http://www.ercot.com/content/wcm/training_courses/174927/2019_06_Wholesale_101.pdf

[thackney]

Texas to raise energy prices and suspend price cap amid winter storm
https://www.power-technology.com/news/texas-to-raise-energy-prices-and-suspend-price-cap-amid-winter-storm/

The Electric Reliability Council of Texas (ERCOT) has announced sweeping changes to the state’s energy pricing structure amid the ongoing winter storm, including higher energy prices and the suspension of a spiralling energy price cap.

The storm, which has killed at least ten people and trapped millions more without power as energy infrastructure has frozen solid across the state, has led to Governor Greg Abbott declaring a state of disaster across Texas. ERCOT has also come under fire for failing to provide reliable power to the citizens of Texas and this week, the Public Utility Commission of Texas (PUC) ordered the council to take action to cut state-wide power demand by 10,000MW, in order to alleviate the crisis.

The commission’s first order will see energy prices raised to better balance supply and demand, with the former dramatically outpacing the latter amid the crisis. The current Texas offer cap, the highest price available for power, is set at $9,000 per MWh. However, the storm has caused energy prices to plummet as low as $1,200 per MWh, a discrepancy that PUC described as “inconsistent with the fundamental design of the ERCOT market, [where] energy prices should reflect the scarcity of supply”.

The news has been greeted with dismay by many in Texas, with Austin-based radio station KVUE reporting that this would translate to higher bills for Texans, both during and after the current crisis.

However, the PUC’s second order could help protect customers from potential exploitation of these raised prices. ERCOT’s energy prices are capped by two thresholds, known as the low and high system-wide offer caps. The lower figure is set at $2,000 per MWh or 50 times the price of natural gas, whichever is higher, while the higher cap is the figure of $9,000 per MWh....

[Bigun]

Don't worry, once things come to a head, the taxpayer will be footing the bill via bailout or subsidy.

Yep!

Watch this from our Lt. Governor:

 https://www.danpatrick.org/second-baptist-church-online/

[HoustonSam]

Some now say this is too low or more would have spent the money for freeze protection.  Those that did run last week made a fortune because of spending the money.  However, if most of those that did not, had installed more freeze protection, and if they could get Natural Gas, the price would not have stayed so high, so long, making less money.

A basic (96 page) slide presentation of how Ercot generation wholesale pricing works:

http://www.ercot.com/content/wcm/training_courses/174927/2019_06_Wholesale_101.pdf

Thanks @thackney.  I understand now that the $9k/MWh figure is an upper limit, not an estimate of an actual fair price; the fair price estimate emerges from the wholesale pricing model summarized in the presentation you linked.  But given that the buyers in that model are *not* the final consumers, rather they are distributors, can it be said that the settlement actually is a fair price?

I suppose the current body of regulation provides an incentive for only a few generators to winterize, so they are able to take advantage of transient extremely high prices in a crisis; as you point out, if all generators winterized then those extremely high prices would likely not ever be achieved and the cost of winterization would not be recovered, at least not in such a spectacular fashion.  As each generator winterizes the potential reward for that added cost marginally decreases.

More interesting to me is how the lower limit on wholesale power, 50xNG, is actually now higher than the higher limit.  I don't know the conversion factor from $/MMBTU to $/MWh; I suppose buried in that conversion factor is some fundamental insight into how the overall system will operate, and the implicit statement that the TX grid primarily runs on NG.

[thackney]

But given that the buyers in that model are *not* the final consumers, rather they are distributors, can it be said that the settlement actually is a fair price?

It is the wholesale price.  It is competitive market.  Is the price Kroger pays to buy lettuce to sell to us the "fair" price?

[HoustonSam]

It is the wholesale price.  It is competitive market.  Is the price Kroger pays to buy lettuce to sell to us the "fair" price?

That's a fair point.  While the final consumer is removed from the actual puts and takes that determine the retail price, on further reflection I suppose that is true for most items we purchase.

[thackney]

I learned somethings new.

...There is an offer cap placed on the wholesale market price. The maximum wholesale market
price for electricity is reserved for extreme scarcity conditions to encourage any and all
generation able to come online. These peak prices are paid by wholesale buyers that
have failed to purchase power in advance to hedge risk exposure for their customers.
They are also paid by generators who do not generate power that they have committed
to provide. This acts as a penalty for generators who fail to show up when needed....

...ERCOT informed the Commission that a computer glitch was preventing that maximum price
from being applied. Because this penalty was not being applied, the power dispatch
system was actually taking megawatts off of the grid. The Commission ordered ERCOT
to correct that problem manually....

https://www.puc.texas.gov/consumer/facts/factsheets/elecfacts/WinterStormPriceExplainer-FIN.pdf

[thackney]

Griddy customers moved to other electricity providers after ERCOT boots it from Texas market
https://www.texastribune.org/2021/02/26/griddy-texas-ercot-electricity-costs/
FEB. 26, 2021

Texans who receive their electricity from Griddy Energy are being shifted to other providers after the Electric Reliability Council of Texas, which operates the power grid for most of Texas, revoked the company’s rights to operate because it missed required payments to ERCOT, according to a market notice.

In all, Texas electricity providers failed to make more than $2.1 billion in payments that were due to ERCOT, according to another market notice Friday. The state entity depends on transaction fees from providers to help operate the state’s electric grid. Those missed payments came after the costs for a megawatt hour of electricity jumped from an average of $35 to $9,000 during the height of last week’s devastating winter storm that contributed to the near-collapse of the state’s power grid.

Griddy made headlines for sending massive bills to customers. One woman in Chambers County filed a class-action lawsuit accusing Griddy of price gouging. In the lawsuit, her attorney claimed the company charged her more than $9,000 for the week of the storm in stark contrast to her normal $200 to $500 monthly bill....