The costs of the Texas blackouts is still mounting, but it’s becoming increasingly clear that Texans could be saddled with energy bills they’ll be paying for decades absent government intervention.
A new Bloomberg NEF analysis found that the cost of energy sold across the state from Monday to Friday last week totaled $US50 ($63).6 ($64) billion as the state’s lightly regulated grid attempted (and in many cases, failed) to meet demand. That’s led to a spate of shocking five-figure energy bills showing up all over social media, and an order earlier this week by Texas officials to put a temporary halt on companies seeking payment until they can figure out what the hell is going on. But pausing payments is just a smidgeon of the relief needed.
The broad contours of the story in Texas are familiar now, but it’s worth revisiting to understand how the tail of last week’s disaster could stretch not just into next season but for years to come. The state experienced a shocking cold snap at a time when a number of power plants are offline for repairs and maintenance since winter electricity demand is usually lower in the mild Texas winter as opposed to the scorching summer. That meant when temperatures plunged to levels that made Alaska look like a beach vacation, demand surged and capacity wasn’t there to meet it. Those companies with natural gas to sell were able to command outrageous prices from utilities trying to power the state.
To take one example, Comstock Resources, a natural gas firm owned by Cowboys owner Jerry Jones, raked in millions. Its CFO, Roland Burns, said it was “like hitting the jackpot with some of these incredible prices.”
Yet another reason companies could gouge utilities is because Texas’ grid isn’t hooked up to the rest of the country because the state didn’t want to deal with federal regulation. That also means it couldn’t just, say, buy relatively cheaper electricity generated elsewhere when demand exploded. ERCOT, the entity that oversees the Texas grid, also takes a light hand in regulating winterization at power plants, and power plant operators have little incentive to do it given the state doesn’t usually get this cold and the priority is cheap electricity, not reliable electricity.
And that, my friends, is how you end up with the cost of all electricity sold last week ending up north of $US50 ($63) billion while the week prior topped out at just $US4.2 ($5) billion. I go through all this to say that the failures took place at every level of the power system, none of which have any accountability to the people of Texas outside of elected officials (and even then, those officials are beholden to fossil fuel interests). And yet ratepayers are being asked to shoulder the burden. Companies like Griddy, which offer variable rate plans, are the source of many of this week’s extreme bills circulating online. But the costs from more traditional power suppliers could be equally problematic.
“If prior U.S. power market failures are any guide, Texans could be on the hook for decades,” Bloomberg wrote. “Californians, for example, have spent about 20 years paying for the 2000-2001 Enron-era power crisis, via surcharges on utility bills.”
San Antonio’s utility, run by the city, is already considering something like that based on a tweet last week. The utility could also reportedly issue bonds to help defray the costs of buying gas at inflated costs. Other utilities could tack a surcharge on at the end of this month or take out loans to blunt the cost of last week’s gas purchases, though the costs would still inevitably find their way back to households.
All these are approaches are bandaids on a gangrenous wound, though. The Texas grid failed because of a lack of oversight and decades of measures to cut costs rather than focus on needed upgrades. The federal government certainly has the funds to help fix the grid and ease the burden utilities are sure to foist on customers. But those funds should come with stipulations to improve oversight in a way that can ensure this type of disaster doesn’t happen again. Because as a famous Texan once said, “fool me once, shame on you. Fool me, you can’t get fooled again.”