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

texas weather
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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Damages tied to the ‘life-threatening crisis’ caused by the winter storm in Texas could approach $50 billion

texas freeze
Icicles hang off the State Highway 195 sign in Killeen, Texas.

The damages from the devastating winter storm in and around Texas could near $50 billion, according to AccuWeather

The estimate, provided earlier this week by AccuWeather CEO Joel Myers, accounts for lost wages, damages to businesses and homes, and cleanup costs across the region. 

AccuWeather’s Chief Meteorologist Jonathan Porter said that the estimate “denotes the historic magnitude and just how much of a life-threatening crisis this has been for people in the Southern Plains, the Southeast and especially Texas.”

“It’s it’s yet another setback for businesses that don’t need it in a very challenging year,” Porter continued.

The forecasting-technology company reported serious damage to homes and businesses after freezing cold temperatures caused water pipes to burst and other issues in the state, which was resoundingly unprepared for such a major cold snap.

According to reporting by Insider, as of Friday, the majority of Texans affected by the blackout had their power restored. At its peak, the blackout affected over 3 million people. Winter storms pummeled the state’s energy grid and forced shutoffs to power and heat. Porter said that he week’s weather pattern was the worst cold front in Texas since December of 1989. 

Since Texas effectively operates on its own power grid, it is difficult for the state to draw power from other areas that are not experiencing blackouts, Insider reported

The Verge reported that individual consumers heating their homes after the blackouts will face staggering energy costs. And wholesale electricity customers are similarly in the hole: The Electric Reliability Council of Texas said that on February 15, wholesale electricity prices surged to over $9,000 per megawatt-hour, up from $50.

Politicians have had mixed responses to the blackouts. Amid the economic devastation, Texas Senator Ted Cruz faced criticism over his decision to travel to Cancún. He said on Thursday that the decision to leave the state was a “mistake.” 

Beto O’Rourke, who ran against Cruz for the Texas Senate seat, organized a phone bank to help older Texans, and Rep. Alexandria Ocasio-Cortez ran a donation drive that raised over $1 million, Insider reported Friday

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Ted Cruz traveled to Jamaica for July 4th last year, defying public health guidelines during the pandemic, report says

Ted Cruz
Cruz is facing criticism for flying to Cancun as his home state of Texas grapples with severe winter storms.

  • The Washington Post reported GOP Sen. Ted Cruz traveled to Jamaica for the Fourth of July last year.
  • CDC guidelines at the time recommended Americans avoid nonessential travel.
  • The Post report came as Cruz faces criticism for traveling to Cancun as Texas battles winter storms.
  • Visit the Business section of Insider for more stories.

Sen. Ted Cruz traveled to Jamaica last year for the Fourth of July, despite public health recommendations to avoid unnecessary travel during the pandemic, The Washington Post reported.

Centers for Disease Control and Prevention guidelines at the time recommended Americans avoid nonessential international travel due to the risk of coronavirus transmission.

Sources told The Post the Republican senator was visiting a friend from college.

Cruz’s office did not immediately respond to Insider’s request for comment.

The news came as Cruz is facing criticism for flying to Cancun for a luxury vacation as his home state of Texas grapples with severe winter storms.

The senator was spotted Wednesday flying from Houston to Cancun, before returning home the following day amid outrage. While speaking to reporters outside his home, Cruz expressed regret for the decision to go.

“It was obviously a mistake and in hindsight I wouldn’t have done it,” Cruz told reporters, saying that it wasn’t his intention to diminish “the suffering and hardship other Texans had experienced.”

The storms in Texas left millions without power or clean drinking water for days, though as of Thursday many households had had their power restored.

Cruz has previously criticised Democratic politicians for flouting COVID-19 guidelines that they themselves had promoted.

“Hypocrites. Complete and utter hypocrites,” Cruz tweeted in December, after Democratic officials were found to be breaking their own coronavirus restrictions.

He also chided Austin Mayor Steve Adler, referring to the Democrat taking a “private jet” to Cabo San Lucas, Mexico.

“And don’t forget @MayorAdler who took a private jet with eight people to Cabo and WHILE IN CABO recorded a video telling Austinites to ‘stay home if you can…this is not the time to relax,'” Cruz tweeted.

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Returning home to protesters at his door, Ted Cruz says he regrets taking luxury vacation to Cancun amid devastating Texas winter storms

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U.S. Senator Ted Cruz (R-TX) speaks to the media at the Cancun International Airport before boarding his plane back to the U.S., in Cancun, Mexico February 18, 2021.

  • Sen. Ted Cruz of Texas flew to Cancun Wednesday and returned Thursday after criticism over the trip.
  • Texas is coping with severe winter weather, as millions lost power, heat, or clean drinking water.
  • The senator expressed regret over the trip while protesters gathered in front of his home.
  • Visit the Business section of Insider for more stories.

Republican Sen. Ted Cruz of Texas returned from Cancun Thursday evening to find protesters outside his home demanding his resignation after taking the trip while millions in the state deal with severe winter weather.

Speaking to reporters outside his home, Cruz expressed regret for the trip while the protesters could be heard chanting in the background.

“It was obviously a mistake and in hindsight I wouldn’t have done it,” Cruz said, saying that it wasn’t his intention to diminish “the suffering and hardship other Texans had experienced.”

 

Cruz’s decision to fly to Cancun while millions of people in Texas battled unusual winter storms, power outages, and drinking water shortages was met with swift criticism. He flew out of the country Wednesday evening, returning the following day amid growing outrage.

The senator also reiterated he was trying to be a good dad by getting his two girls out of the cold, and said he had planned to be working remotely while on the trip.

“From the moment I sat on the plane, I began really second-guessing that decision,” Cruz told reporters. He said the outrage over the trip made the decision to come home more compelling.

He also called for a “longer term examination” of what went wrong in Texas.

“Our priority should be fixing this problem, and making sure it doesn’t happen again, and I didn’t want all the screaming and yelling about this trip to distract even one moment from the real issues that I think Texans care about,” Cruz said, as protesters outside his home carried signs that read “RESIGN” and chanted “Ted Cruz has got to go.”

Have a news tip? Contact this reporter at kvlamis@insider.com.

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Texas blackouts explained: Arctic weather shut down power plants as demand for heat surged, and the state’s grid is on its own

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Pike Electric service trucks line up after a snow storm on February 16, 2021 in Fort Worth, Texas. Winter storm Uri has brought historic cold weather and power outages to Texas as storms have swept across 26 states with a mix of freezing temperatures and precipitation.

  • Millions of Texans are without heat and power Wednesday as Arctic weather pummels the state. 
  • The cold weather caused energy sources including natural gas plants to go offline, just as demand for electricity went up. 
  • Climate change could make events like these more frequent, experts say. 
  • Visit the Business section of Insider for more stories.

Millions of Texans are without heat and power as Arctic weather continues to barrel through the state.

The blackout, which affected 2.8 million people across Texas as of Wednesday morning, is among the largest in US history.

“We know millions of people are suffering,” said Bill Magness, the president of Texas’ electric-grid manager ERCOT, in a statement Wednesday morning. “We have no other priority than getting them electricity.”

While some power was restored Tuesday night, outages are expected to continue through the week. At least 30 people across eight states have died from the winter weather sweeping the country.

Misinformation spread online Tuesday, with some conservative groups and lawmakers falsely blaming the blackouts on frozen wind turbines that quit generating power. In reality, thermal energy sources that went offline, such as coal and natural gas plants, contributed more to the problem.

But the drop in energy supply is just part of the reason why so many people in Texas lost power this week. Here’s what you need to know. 

winter storm snow texas
A man walks to his friend’s home in a neighbourhood without electricity as snow covers the BlackHawk neighborhood in Pflugerville, Texas, U.S. February 15, 2021. Picture taken February 15, 2021.

The simple reason why millions lost power: A gap between supply and demand

A major winter storm that hit Texas over the long weekend caused two important things to happen: Sources of electricity, like natural gas plants, went offline, while at the same time demand for the energy they produce went up, as people across the state turned on heaters to stay warm. 

That caused a massive shortfall in energy.

The organization that manages most of Texas’ grid, known as ERCOT, responded by cutting power to millions of homes, in rotating chunks (to limit the time any one household was dark). These so-called rolling blackouts are similar to what happened in California last year, which was also due to extreme weather. 

On Wednesday morning, 46 gigawatts of electricity were offline in ERCOT’s territory and 2.8 million customers were without power, ERCOT said. This is one of the largest shortfalls in energy supply in modern US history, Patrick Milligan, a manager and power expert at the consulting firm ICF, told Insider. 

Most of the supply that went offline was coal and natural gas, not wind

About 61% of the energy sources offline in Texas on Wednesday were thermal – that is, power plants that run on coal, natural gas, or nuclear energy. The rest was from solar and wind farms, ERCOT said.

Cold weather is the obvious culprit: All different kinds of power plants in Texas have trouble operating in Arctic weather as their instruments freeze, not just wind turbines. In fact, earlier this week, wind farms were overperforming compared to forecasts, said Rebecca Miller, a research manager at Wood Mackenzie who tracks output across the state. 

It can be more difficult to pump natural gas out of the ground or transport it to power plants in freezing conditions. What’s more, utilities have prioritized sending natural gas to homes for heating, instead of to power plants, Miller said.

A wind farm in TExas
Wind turbines in Loraine, Texas

There are other, less obvious drivers behind the Texas blackouts

The US is made up of three major electric grids, and one of them overlaps, almost entirely, with the state of Texas alone. In other words, Texas essentially has its own grid.

That can exacerbate a situation like this, by making it harder for Texas to draw power from other regions that aren’t under the same weather-related stress, said Emily Grubert, an assistant professor of environmental engineering at Georgia Tech, who studies large infrastructure.

“The entire grid of Texas is subjected to this emergency condition at once,” Grubert said. “That’s a lot of pressure to be putting on a grid that doesn’t have access to other areas that aren’t under those conditions.”

But there were other issues at play, as well, such as a lack of preparedness – both on the side of supply and demand.

Homeowners weren’t told to do much to conserve energy, Miller said. Meanwhile, power plants weren’t properly weatherized. 

Take the examples of wind turbines. While obvious, it bears mention that wind turbines have no problem operating in much colder states than Texas. Minnesota and Iowa, for example, have large wind farms yet don’t suffer from blackouts when temperatures plunge to single digits. 

“Wind can operate perfectly in cold weather,” Milligan said. 

Like natural-gas and coal-fired power plants, wind turbines can be weatherized to withstand tough winter conditions. But weatherization costs money turbines in Texas generally aren’t equipped for cold weather.

“Why would you have a snowplow in Austin? That kind of same thinking applies to the power plants,” Grubert said. 

It didn’t have to get this bad

This isn’t the first time that Texas has been hit by an Arctic burst. In 2011, around the time of the Superbowl, cold weather swept through the state, causing a familiar result: 3 million people were plunged into darkness.  

That’s left many wondering: Why didn’t energy producers and regulators do more to prepare for this cold spell? 

They did do something: That summer, a federal report recommended things like weatherization to prevent supply from going offline in the future, the Houston Chronicle reports. 

But a lot of that advice wasn’t followed, Milligan said, partly because it wasn’t enforceable and there was no mechanism put in place to pay for it. Weatherization is expensive, he said. 

Plus, Texas’ energy market is deregulated, and suppliers there try to produce energy as cheaply as possible, Milligan added. 

“The generators are not really incentivized to undertake these kinds of [weatherization] investments,” Milligan said. 

It would have been hard to have completely prevented these blackouts, experts told Insider; this kind of weather really is unusual for Texas. But the impacts would not have been so devastating if companies had done more to prepare, they said. 

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

More blackouts are coming if we don’t do more to prepare 

The irony of blaming wind turbines for the power outages in Texas is that extreme weather events are known to be made worse by climate change – which is, in turn, fueled by burning coal and natural gas. In theory, wind and solar farms offset emissions spewed into the atmosphere, lessening the impact of climate change. 

“Can you expect more extremes? Yes,” Grubert said. “In terms of what that means for the grid, that’s a question that we as a society will have to grapple with.” 

It’s not only important to prevent outages outright but to ensure that we have ways to keep people safe when the grid goes down, she said. 

“Even if the energy system had stayed up, there would have been a lot of people in trouble during this event,” she said, such as those who may not have access to heat. 

The importance of managing demand, such as through measures that make buildings more energy-efficient, also can’t be understated, she said. 

Winter storm texas
Power lines in Fort Worth, Texas

When power will be restored, and what happens next

The outages are likely to continue through the week as a second winter storm brings freezing rain and sleet to the state.

“We are anticipating another cold front this evening which could increase the demand,” Dan Woodfin, ERCOT senior director of system operations, said in a statement Wednesday morning. “The ability to restore more power is contingent on more generation coming back online.”

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

“The Electric Reliability Council of Texas has been anything but reliable over the past 48 hours,” Abbott said.

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

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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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