Some Texans may face high electric bills after winter storm

As Texans withstand widespread power outages and freezing temperatures this week, many are asking the same question: How much am I going to be charged for the electricity I do receive?

The complex answer, according to experts in the Texas power industry, depends on whether residential customers signed long-term contracts with their providers or decided to take their chances paying wholesale market prices overseen by the Electric Reliability Council of Texas (ERCOT), the nonprofit charged with managing the state’s electrical grid and its “energy-only” market.

“The vast majority of customers are not exposed to the wholesale market for electricity,” said Joshua Rhodes, a research fellow with the Webber Energy Group at the University of Texas. “Now, you do have retail choice in Texas, and you could have opted to be exposed to the wholesale market. If you did, you’ve probably had low prices for forever.”

It’s true that spot, or current, prices for wholesale electricity have spiked by more than 10,000% since Feb. 10, according to Reuters. Based on scarcity of electricity and statewide demand for heat, the governor-appointed Public Utility Commission of Texas originally ordered ERCOT to raise the wholesale price to the state cap of $9,000 per megawatt hour. On Tuesday, the commission reversed that decision, allowing prices to remain beneath that cap.

Those skyrocketing prices will have little impact on most Texans, at least for now. That’s because the three main buyers of wholesale power — retail electric providers, electric cooperatives and municipal utilities — have long-term contracts laying out how much estimated power they will need and fixed rates for how much they will pay for it.

In a Facebook video update, Darryl Schriver, the president and chief executive officer of Tri-County Electric Cooperative, told customers that the co-op’s rates are already set and won’t change due to the storm. Tri-County serves more than 94,500 members in 16 counties, including Tarrant, Wise, Parker and Denton.

“Our board does not see a rate change anytime soon tied to this,” Schriver said. “We’ve maintained, over 15 years, no changes in our rates.”

However, Schriver said many people will see higher usage, and therefore higher charges, on their bills from having to turn on their heaters at full blast for extended periods in order to raise the temperatures inside their homes. Residents may see similar increases on their utility bills due to natural gas usage, which many Texans use to heat their homes. (Those prices have also shot up during the winter freeze, but are part of a separate marketplace than electricity).

There is also the possibility of Tri-County increasing its “power cost recovery factor,” a fee based on the amount the utility spent on wholesale power and fuel.

“Those power cost recovery adjustments have always tried to be fair and spread over a long period of time where everybody does not have a big surprise bill hit them,” Schriver said. “I don’t see Tri-County deviating from this mission.”

That doesn’t mean everyone will be spared from the volatility of the wholesale electricity market. While many Texans signed contracts to pay fixed rates, others should check to see if they signed up for variable or indexed plans, which rise and fall with market prices. And the most vulnerable residents are those who get their electricity from wholesale providers like Griddy.

The company charges customers a $9.99 monthly fee and the cost of spot power traded on Texas’ electric grid based on the time of day they use electricity, an arrangement that is fairly unique to Texas, according to Bloomberg News.

“Most customers don’t buy wholesale, and you would hope that the customers who do understand that that exposes them to potential higher prices than customers traditionally pay,” said Caitlin Smith, an expert on ERCOT and wholesale market policy in Austin. “But oftentimes they pay much less. That’s a newer business model in the Texas energy only market.”

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On its website, Griddy notes that “wholesale beats the Texas [price] average 96% of the time,” with customers saving money and sometimes getting paid to use electricity at night. But, as prices began to rise during President’s Day weekend, Griddy told its 29,000 customers that they should switch to another provider to avoid unthinkably high electricity bills.

“We made the unprecedented decision to tell our customers — whom we worked really hard to get — that they are better off in the near term with another provider,” Michael Fallquist, Griddy’s chief executive officer, told Bloomberg.

Texans who rely on wholesale energy have hit other snags in trying to find affordable electricity during the snow storm. Several providers in Texas, like Cirro Energy and Reliant, are not allowing new customers to enroll until after the storm is expected to pass through the state, according to NPR.

“The sad thing is that most people probably didn’t fully appreciate or understand the risk,” Rhodes said. “We’re not very good at assessing the risk of such unprecedented events.”

As the crisis ignites renewed debate over Texas’ energy markets, Bill Magness, the president and chief executive officer of ERCOT, told reporters Wednesday that the agency’s focus is getting people’s power back on and that energy policy debates will “come very soon.” The Texas House is expected to hold a joint committee hearing later this month to review the outages.

In the meantime, Rhodes advised Texans that the extremely high wholesale prices will be averaged across the entire year, which will lighten the blow of a higher bill.

“They’ve been high since the weekend, but there are 8,760 hours in a year,” Rhodes said. “Maybe the next time you renew your contract, there might be a slight bump, but it’s not going to be double or triple or quadruple.”

Haley Samsel is a Report for America corps member reporting on environmental issues caused by economic growth for the Fort Worth Star-Telegram. Her position is partly supported by a grant from the Anita Berry Martin Memorial Fund at North Texas Community Foundation. Samsel, a Plano native, graduated from American University in Washington, D.C., where she served as the editor-in-chief of the student newspaper, The Eagle, and interned for news organizations like The Texas Tribune and NPR.

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