The bitter cold that hit Texas and caused massive power outages has brought more trouble for Texans as many are about to get hit with major energy bills due to increased electricity use.
The surge in electricity bill prices will hit Texans who chose to pay wholesale prices for their power. Paying wholesale energy prices is typically cheaper than paying fixed rates during good weather, but when demand for energy increases with bad weather, prices can spike.
Because Texas’s natural gas pipelines and wind turbines froze, there was less power available for residents but high demand for electricity to heat their homes. This demand caused prices to spike to $9 per kilowatt-hour after the storm for wholesale users. Meanwhile, fixed-rate customers pay around 12 cents per kilowatt-hour.
For customers like Susan Hosford of Denison, Texas, the dramatic jump in price had severe consequences for her finances. Hosford claimed that for a typical February day, she pays about $2.50 for power. Because of the spike in prices, she was automatically charged $1,346.17 for February’s first two weeks. The charge was more money than she had in her checking account, and it caused her bank to charge her overdraft fees, which affected other bills.
Officials for Denton, Texas, said the municipal utility racked up a $75 million power bill. That bill is more than the city spent on electricity for all of its previous fiscal year.
The skyrocketing prices have now drawn the attention of federal regulators, who are set to look into Texas’s energy market.
Texas deregulated its power market in 1999. While residents of Austin and some other cities still have traditional utilities, most Texans in Houston, Dallas, and other cities are part of this deregulated scheme.
“These drastic price increases are forcing utilities and other natural gas users to incur exorbitant costs, much of which could be passed along to consumers in the form of higher electric or natural gas bills over the next year,” wrote Democratic Senator Tina Smith of Minnesota in a letter to regulators urging them to investigate possible price gouging for natural gas.
The Federal Energy Regulatory Commission (FERC) also announced that its Office of Enforcement would look into wholesale natural gas and electricity market activity in Texas during the extreme cold to see if there is any evidence of market participants engaging in manipulation or other violations.
“This examination will take place as part of the Division of Analytics and Surveillance’s (DAS) ongoing surveillance of market participant behavior in the wholesale natural gas and electricity markets. The Division uses market participant-level trading data and data from the financial markets to screen daily and monthly trading at the majority of physical and financial natural gas trading hubs in the United States and the organized and bilateral wholesale electricity markets,” said FERC in a news release.
Other organizations, like the Commodity Futures Trading Commission, are also looking into the situation. According to CNN, the agency is looking specifically at areas where there is a federal nexus with CFTC regulated markets and futures contracts traded on exchanges to see where they can make improvements to protect the integrity of the market.
