Austin News

Texas residents face nearly $38 billion in energy costs related to power outages caused by last winter's extreme arctic storm.

As Winter Storm Uri battered Texas in February, causing massive blackouts across the state, the Texas Public Utility Commission (PUC) issued an order increasing the price of electricity to $9,000 per megawatt hour, compared to the average price of roughly $20 per megawatt hour.

The PUC rationalized its decision by stating that the high price would encourage energy companies to produce electricity during the power outages and that the prices should be a reflection of scarcity, energy expert Robert Bryce wrote in a Forbes article.

"Energy prices should reflect scarcity of the supply," stated the PUC order. "If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest."

That rationale seems contradictory to some critics, however. Market price is set by the market and, despite PUC's claim of desiring a "market price," the commissioners overrode the actual market price and arbitrarily imposed a much higher price onto much-needed electricity.

Instead of reversing the PUC's arbitrary and potentially illegal action, the Texas Legislature passed several measures designed to deal with the blackout, according to Texas Tribune. 

"Texas ratepayers will ultimately be saddled with about $37.7 billion in excess energy costs," Bryce wrote. 

Bryce explains that Potomac Economics, hired by the PUC as the "market monitor" for the Texas grid, estimated the cost of the PUC order to be about $16 billion, but that the actual cost could be as high as $37.7 billion. 

"It includes the $26.3 billion in excess electricity prices incurred during the week of February 15 and the total amount ratepayers will be required to pay for some $8.6 billion in bonds that will be issued to rescue the natural gas utilities and electricity suppliers who got walloped during the energy crisis," he wrote.

If the state issues $8.6 billion in bonds at 3% interest, which are paid off over a 20-year period, the final cost to Texas ratepayers will be approximately $11.4 billion. That sum will be collected by adding a fee of several dollars to the monthly bills of ERCOT ratepayers.

According to Excellent Thought, the legislature also failed to deal with renewable energy and government subsidies paid to green-energy companies, which may have partially contributed to the power outages. Some lawmakers tried to address the issue, but efforts were watered down or killed by the time the legislature adjourned. 

The legislature did not rescind any state or local renewable subsidies, nor did it require wind and solar generators to pay for the costs they impose on the system when they fail to generate electricity.