Why some Texas residents are ending up with $5,000 electric bills after the winter storms

Texas weather
Snow-covered roads February 15 in Spring, Texas. David J. Phillip/AP

Some Texas residents are facing a new obstacle after last week’s winter storms: electricity bills over $US5,000 ($6,362) for less than a week’s worth of energy.

While millions of people in the state endured lengthy stretches without power last week, other customers are seeing the eye-popping, five-figure power bills because their plans are tied to the wholesale market rate. In the Dallas-Fort Worth area, some residents described being hit with $US1,000 ($1,272)-a-day charges for electricity, The Dallas Morning News reported. Residents have used social media or other means to show $US5,000 ($6,362) bills – or more – over a period of about five days.

CPS Energy, the electric utility in San Antonio, said it was working to avoid giving customers “exorbitant” bills in the coming weeks, KSAT reported, perhaps by spreading the charges over more than a decade.

Gov. Greg Abbott met with local lawmakers Saturday to address this latest crisis. “We are moving quickly to alleviate this problem and will continue to work collaboratively throughout this week on solutions to help Texas families and ensure they do not get stuck with skyrocketing energy bills,” Abbott said in a statement.

Spiking bills won’t hit state residents who had fixed-rate electric plans. The problem for many comes from index or variable-rate plans, in which rates to power their home or business change with the price of the wholesale market. In good times, a customer’s bill can be lower than it might be otherwise – but if the cost to produce electricity skyrockets, so too do bills.

Last Monday, as freezing weather rolled through Texas and much of the US, the wholesale price of electricity shot up 10,000%. It went from about $US50 ($64) per megawatt hour to $US9,000 ($11,451) – a system cap, according to data provided by the Electric Reliability Council of Texas, the operator of Texas’ electric grid.

The price increase came as Texas’ main sources of electricity, chiefly natural-gas plants, went offline in the freezing temperatures. At the same time, the unusually cold weather meant demand for energy went up, as people turned up their heaters to stay warm.

ERCOT responded with rolling blackouts, it said, so as not to further damage the grid. The blackouts, which affected a few million residents at their peak, were among the largest in US history.

President Joe Biden on Saturday declared a major disaster in Texas.

ERCOT did not immediately respond to Insider’s request for comment about the wholesale electricity price and reports of spiking consumer bills.

It’s unclear how many Texas residents have variable or index-rate electric plans. Texans are allowed to shop for their power plans in its deregulated retail electricity market.

Griddy, one of the state’s electric companies, provides access to wholesale electricity for a monthly membership fee. Last week, it urged its nearly 30,000 customers to find a different provider if they couldn’t afford the soaring rates, The Dallas Morning News reported.

Some state lawmakers think some residents might not understand how their electricity is billed.

“The state needs to look into whether or not people are signing up for things that they don’t really understand and signing up for things that could ultimately really hurt them,” Gene Wu, a Texas state representative whose district covers part of Houston, said, according to The Dallas Morning News.

By Sunday, power had been restored across much of Texas, though many people remained without water after pipes froze and burst. Damage from the storm, which left dozens dead, is expected to approach $US50 ($64) billion, AccuWeather predicted.

Abbott has called the blackout event “unacceptable” and said he would call for changes at ERCOT as an emergency item for the 2021 legislative session.

The Federal Energy Regulatory Commission has also launched a task force to investigate the loss of power in Texas and elsewhere in the US.

Correction: An earlier version of this article misstated KSAT’s reporting. It quoted CPS Energy as saying it was working to avoid “exorbitant” bills, not that some customers should expect them.