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

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A vehicles drives on snow and sleet covered roads February 15, 2021, in Spring, Texas.

Texas residents who endured days without power during last week’s winter storms are facing a new obstacle: Electricity bills over $5,000 for just a few days of energy.

Some customers of state-owned electric grid 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, residents have been hit with $1,000 per day charges for electricity, The Dallas Morning News reported. Residents have taken to social media to show $5,000 bills – or more – over a period of about five days.

CPS Energy, the electric utility in San Antonio, said some consumers can expect “exorbitant” bills in the coming weeks, KSAT reported. The utility might try to minimize the hit by spreading the charges over a period of up to 10 years, the news station said. 

Texas Governor Greg Abbott met with local lawmakers Saturday to address the 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 in the wholesale market. In good times, a customer’s bill can be lower – but if the price of electricity skyrockets, so too do bills.

Last Monday, as freezing weather rolled through Texas and the southeastern US, the wholesale price of electricity shot up 10,000%. It went from about $50 per megawatt hour to $9,000 – a system cap, according to data provided by the Electric Reliability Council of Texas, the grid’s operator. 

The price increase came as sources of electricity, like natural-gas plants, went offline in the freezing temperatures. Meantime, the unusually cold weather for a mostly temperate state 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 blackout, which affected a few million residents at its peak, is 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. Last week, it urged its nearly 30,000 customers to switch energy providers 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,” Houston Democratic Rep. Gene Wu said, according to The Dallas Morning News.

On Sunday, power had been restored across much of Texas, though many people remain without water after pipes froze and burst. Damages from the storm, which left dozens dead, is expected to approach $50 billion, AccuWeather predicted. 

Abbott has called the blackout event “unacceptable” and said he would add the reform of ERCOT as an emergency item for the 2021 legislative session.

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

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Blame the wind? In Texas, fossil fuels have actually played a larger role in leaving millions without power

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Pedestrians walk on along a snow-covered street on February 15, 2021 in Austin, Texas.

  • Freezing cold temperatures have caused severe power outages in Texas.
  • A majority of lost generation has been from fossil fuels, not wind.
  • But the main factor is not the source of electricity, but the extreme weather.
  • Visit the Business section of Insider for more stories.

It’s a popular claim and a powerful image, attracting the attention of conservatives and headline writers of all political persuasions: frozen wind turbines are to blame for Texans losing power and icicles forming their homes during this week’s shocking cold spell.

There are a number of reasons why, as of Tuesday evening, more than 3 million Texas were without power. The simplest explanation is that the extreme cold has spurred an unprecedented demand for heat, outstripping the state’s ability to provide.

According to the Electric Reliability Council of Texas, which manages 75% of the state’s deregulated electricity market, the previous record for demand, set in 2018, was smashed on Valentine’s Day. And as the weather has gotten worse, the capacity to generate electricity has diminished: By Tuesday, per ERCOT’s CEO, 45,000 megawatts of generating capacity was offline – up from 34,000 megawatts offline the day before, representing more than half of what the state typically uses in a day.

Most of the generation lost has been from coal and gas, according to ERCOT, with only 13% attributable to wind. “By some estimates,” The Texas Tribune reported Tuesday, “nearly half of the state’s natural gas production has screeched to a halt.”

“Gathering lines freeze, and the wells get so cold that they can’t produce,” Parker Fawcett, a natural gas analyst at S&P Global Platts, told the Tribune. “And, pumps use electricity, so they’re not even able to lift that gas and liquid, because there’s no power to produce.”

Texas is unique: It does, by far, generate the most electricity from wind of any state – three times as much as liberal California. It is also energy-independent, its electricity grid almost entirely disconnected from the rest of the country, a move that insulates it from federal regulation and has also left it hanging now, in this moment of need, with so much of its own power generation frozen and offline.

Despite its greater than typical reliance on wind, Texas’ chief source of electricity is not renewable. Indeed, a majority, 52%, comes from natural gas, according to the US Energy Information Administration, while less than a quarter comes from renewables like wind and solar.

And fossil fuels have been affected by the weather too.

As of Tuesday morning, distributor Texas Gas Service warned consumers, “our suppliers of natural gas are experiencing freezing gas wells due to the duration of the extreme cold.”

It is also simply the case that, whatever the fault of regulators and local politicians, Texas is a victim of a cold spell like it hasn’t seen in decades.

A 2016 risk assessment from the US Department of Energy, detailing electricity outages between 1992 and 2009, says 18 were caused by thunderstorms and eight by heatwaves. It doesn’t list freezing temperatures.

Have a news tip? Email this reporter: cdavis@insider.com

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US oil and natural gas prices rise as freezing temperatures leave millions without power in Texas

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Temperatures have plunged in Texas, causing energy prices to spike

US oil and natural gas prices rose on Tuesday, as freezing cold weather battered Texas’s energy infrastructure, leaving millions without power.

WTI crude oil was up 0.52% to $59.77 per barrel as of 6.10am ET. That was just off a more than one-year high of more than $60.80 touched on Monday as plunging temperatures hit Texan oil plants.

Natural gas futures were up 5.8% to $3.079 per million British thermal units on Tuesday, trading at around the highest levels since November.

More than 3 million people have been left without power in Texas and close to 5 million around the US as a whole, according to poweroutage.us, as a rare winter storm sweeps the country.

Temperatures fell to 4F (-16C) overnight in Dallas, Texas, and have plunged across Oklahoma, Kansas, New Mexico, Colorado and elsewhere.

It has been challenging for Texas’s energy grid, which does not pay generators to keep capacity in reserve. The weather has forced many generators to stop production.

Read More: EXCLUSIVE: An asset manager overseeing nearly $100 billion divested from Exxon on concerns it is failing to move fast enough to address climate change

Wholesale energy prices have skyrocketed, at times above the market cap of $9,000 per megawatt hour, compared to prices of around $25 to $50 per MWh before the winter storms.

The frigid temperatures have hit oil production and natural gas supplies and led to a surge in demand for energy, causing prices to spike.

Heating oil futures – a proxy for diesel – were up 2.58% to $1.817 per gallon on Tuesday morning. Gasoline futures were up 4.11% to $1.7621 a gallon.

Texas is also home to some of the country’s biggest oil refineries, as well as the heart of the shale basin. 

Jeffrey Halley, senior market analyst at currency firm Oanda, said he thought the US oil market had been due a correction after a surge in prices in recent weeks. But he said the current weather situation “will likely continue to offset that.”

Read More: GOLDMAN SACHS: These 40 heavily shorted stocks could be the next GameStop if retail traders target them – and the group has already nearly doubled over the past 3 months

“Until the weather moderates in the United States… oil is a ‘buy on dips’ in the short-term.”

Brent crude oil, the international benchmark, was down 0.33% to $63.11 a barrel, still around a one-year high.

JPMorgan last week predicted a commodities “supercycle” would take hold in 2021, as economies reopen and drive up production and demand for energy.

The “roaring 20s” will be accompanied by easy monetary and fiscal policy, a weak US dollar and stronger inflation, all supportive for commodity prices, JPMorgan said.

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