This is going to be interesting.
A Chambers County resident filed a class-action lawsuit against electricity retailer Griddy on Monday, accusing the provider of price gouging customers during last week’s freeze. She is seeking $1 billion in relief for affected customers.
Attorneys for Lisa Khoury said in the lawsuit that her bill spiked to $9,340 the week of the storm, compared to her average monthly bills that range from $200 to $250. Griddy drafted payments from Khoury’s bank account several times, according to the lawsuit, pulling $1,200 before she blocked further charges from her bank. She still owes thousands.
Griddy passes wholesale electricity rates directly to customers, who in turn pay the company $10 a month. This differs from fixed-rate electricity plans which offer a consistent rate regardless of market conditions.
But because of a price hike fueled by a shortage of supply and skyrocketing demand, some customers were faced with bills charging tens of thousands of dollars. While electricity bills are likely to rise across the board, Texans on variable rate plans faced immediate and alarmingly high prices.
Texas’ Public Utility Commission, appointed by Abbott, raised the wholesale market price of electricity to $9 per kilo-watt hour — a 7,400% increase over the average 12 cents per kilo-watt hour — in response to rising demand. The hope was power generators would be enticed to produce more electricity.
“Energy prices should reflect scarcity of the supply,” the order stated.
Representatives for Griddy could not immediately be reached for comment. The electricity retailer addressed concerns of price gouging on its website and firmly placed the blame on the Public Utility Commission. The company states that it did not profit from raised prices.
A quick perusal of Griddy’s Twitter shows that they are blaming the PUC, and that they did suggest alternate electricity providers for their customers to switch to during freeze days; there are several news stories, including this one that ran in the Chron, about that as well.
This is one of those situations where the system is working exactly as designed – here are a couple of stories that explain the mechanics of this. I guess the courts could rule that what the PUC did violated the state’s laws on price gouging, but that seems like a stretch to me. I Am Not A Lawyer, so if you know better than me, please speak up.
More likely, there will be some kind of legislative solution to this. This Trib story goes into that option.
Gov. Greg Abbott and Texas lawmakers are promising relief for Texans hit with massive electric bills after a winter storm bludgeoned the state’s power grid, leaving millions of residents freezing without electricity.
But how they’ll accomplish that remains unclear. The state’s deregulated electricity market not only allows for staggering price spikes, but effectively compels them for some customers.
While many Texans are on “fixed rate” electricity plans that insulate them from market swings, others pay rates tied to the spot price of wholesale electricity, which skyrocketed during the storm.
As the bad weather bore down, it froze natural gas production and wind turbines, choking off the supply of electricity as demand skyrocketed. In response, the Public Utility Commission, appointed by Abbott, let the wholesale market price of electricity rise to $9 per kilo-watt hour, a 7,400% increase over the average 12 cents per kilo-watt hour.
The rate hike was supposed to entice power generators to get more juice into the grid, but the astounding costs were also passed directly on to some customers, who were suddenly being billed more for electricity each day than they normally pay in a month.
Kaiba White, an energy policy specialist with consumer advocacy group Public Citizen, said the costs would be passed on to customers one way or another.
“If they [the electric provider] don’t have a mechanism that allows them to do that in the immediate — like on the next bill or the next several bills — it’ll end up getting rolled into the overall cost of service,” she said. “It’s just a matter of whether it’s going to get passed on in an immediate way, in a shocking way … or spread out over time.”
Tim Morstad, associate state director with the Texas AARP, said “prices are going to rise” but with a delay for those not on variable rate plans.
“Forgive me for stepping back to say — this system is truly designed to have high prices and huge fluctuations. And putting consumers through that by design is a bad process. It’s setting people up for pain,” he said.
Texas has an unusually deregulated electricity market that’s touted for offering customers the ability to pick from hundreds of plans offered by dozens of electric providers. Parts of the state are carved out, including cities like Austin, that get energy from a municipally owned utility, or people served by cooperatives. Those too could see cost increases down the line.
Lawmakers and Abbott have pledged to protect consumers from the big bills, and excoriated the Electric Reliability Council of Texas for the outages last week. The reliability council, which operates the power grid that covers most of the state, is overseen by a Public Utility Commission.
Abbott’s office did not respond to a question about what options were on the table.
Lawmakers have demanded that the utility commission roll back its decision to allow the huge rate increases, or suggested cobbling together some package of emergency waivers or relief money to buffer Texans’ from the high bills.
“We cannot allow someone to exploit a market when they were the ones responsible for the dire consequences in the first place,” said state Rep. Brooks Landgraf, R-Odessa.
I have no idea what Abbott will suggest. He’s nobody’s picture of a creative thinker, and “solving problems” is not in his skill set. I’m hardly an expert either, but it seems to me that the first order of business is to prevent people from getting multi-thousand-dollar electric bills, and the simplest way to do that is probably just to order everyone’s bill capped at some value that relates to their usual experience, and have the state pick up the difference since the providers do in fact have the legal right to charge these amounts. That’s the easy part. The much harder question, at least for the leadership we are stuck with, is what to do about it for the future. That either involves some form of re-regulation that puts limits on how “free” the electricity market is, or ignoring it and hoping you survive electorally. I know what I’d do, but I’m not a Republican. Good luck with that.
One more thing, as long as we are talking about freeze/blackout-related lawsuits:
The family of an 11-year-old boy who died last week in Conroe during power outages while Texas endured a freezing winter storm is suing Entergy Texas and operator of the state’s power grid for a total of $100 million.
In the lawsuit filed Saturday, the family said Cristian Pineda died of hypothermia after the temperature in his house plunged due to the forced blackouts. Pineda’s family of five shared a single room for warmth, and Cristian shared a bed with his younger brother, the lawsuit states.
His family found Cristian unresponsive in the morning. The Houston Chronicle first reported news of the lawsuit.
The family is suing the Electric Reliability Council of Texas, which operates the decentralized electrical grid system. The Texas grid is not governed by federal regulations.
As the story notes, our old buddy Tony Buzbee is filing this lawsuit, along with at least seven others, against ERCOT. Whether or not he can do that is an open question.
ERCOT has sovereign immunity, a well-established legal principle that protects governmental agencies from lawsuits. ERCOT, a private nonprofit corporation overseen by the Texas Legislature and the Public Utility Commission, is the only grid manager in the country with such protections.
A pending decision by the Texas Supreme Court, however, could change that. Justices on the state’s highest court are expected to rule this year on a case between Dallas utility Panda Power and ERCOT that could strip the Texas grid operator of its sovereign immunity, leaving it open to lawsuits that ERCOT has said could cripple the agency.
The ruling by the high court will have widespread implications in the wake of last week’s blackouts. It would not only determine whether Texans can use the legal system to hold ERCOT accountable for power outages that led to more than 48 deaths and billions of dollars of property damage, but also the future of ERCOT and the state’s power markets if the court opens the door to the likely flood of lawsuits.
“The political rhetoric around ERCOT and the weather emergency has embraced transparency and accountability,” Rottinghaus said. “A ruling that holds ERCOT immune from such lawsuits may run against that. It could be a political liability.”
Panda Power filed suit in 2016 against ERCOT, alleging the grid operator issued “seriously flawed or rigged” energy demand projections that prompted the Dallas power company to invest $2.2 billion to build three power plants early last decade. The plants ended up losing billions of dollars, with one forced into bankruptcy.
ERCOT’s reports calling for more power generators came in the aftermath of a major ice storm in February 2011, which crippled Texas power plants and forced rolling blackouts across the state.
Panda Power’s case was halted in 2018 when an appeals court in Dallas asserted ERCOT was protected from lawsuits by sovereign immunity. The Texas Supreme Court in June 2020 said it would review the appellate court decision, heard the case in September 2020 and is expected to render a decision before it recesses in June.
We’ll see about that. There’s definitely some pressure, on the courts and on the Lege and on Greg Abbott, to Do Something about all this – and again, I remind you, that the “all this” in question is what was supposed to happen based on existing laws. How long that pressure lasts, and what happens if there are no legal or legislative outlets for it, that’s the big political question.
UPDATE: Multiple ERCOT board members have resigned. All are folks who did not live in Texas, which yes is one of the weirder things about ERCOT. Not directly related to this story, but this is as good a place as any to note it.