Texas racked up a $50 billion energy bill last week. It's not clear who's going to pay it.
When demand for energy rose sharply last week in unseasonably frigid Texas, and power plants started going offline, the state Public Utility Commission (PUC) allowed wholesale electricity prices to jump to the maximum rate of $9 per kilowatt-hour, a 7,400 percent increase over the normal rate of 12 cents per kilowatt-hour, The Texas Tribune reports. "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."
Texas became national news because its power grid, overseen by the Electric Reliability Council of Texas (ERCOT), nearly collapsed and 4.5 million customers lost power. But "now that the lights are back on in Texas, the state has to figure out who's going to pay for the energy crisis," Bloomberg News reports. "It will likely be ordinary Texans."
"The price tag so far: $50.6 billion, the cost of electricity sold from early Monday, when the blackouts began, to Friday morning," Bloomberg estimates. "That compares with $4.2 billion for the prior week." Texas allows energy retailers to compete for customers, and those who opted for variable-rate plans face huge bills — up to $17,000 in one case. But even utilities with fixed-rate plans "that ran up huge losses as the cost of electricity skyrocketed last week will inevitably try to recoup those through their customers, taxpayers, or bonds," Bloomberg reports.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Texas Gov. Greg Abbott (R), who appointed the PUC, said Sunday he will work with the legislature to address the huge energy bills. But the customers' pain is the energy industry's gain, ProPublica and The Texas Tribune report. After a 2014 freeze, Houston's CenterPoint Energy bragged to investors that it "benefited significantly" from high energy prices during the resulting power squeeze, adding, "To the extent that we get another polar vortex or whatever, absolutely, we'll be opportunistic and take advantage of those conditions."
Under the Texas system, power companies not only aren't required to produce enough energy to avoid blackouts, "they are incentivized to ramp up generation only when dwindling power supplies have driven up prices," ProPublica and the Tribune report. That's incentive structure is a recipe for near-misses — and blackouts, said University of Houston energy expert Ed Hirs.
It is also bad politics right now. "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 Landgra (R).
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.
-
5 carefully selected cartoons about the Trump-Daniels jury selection process
Cartoons Artists take on a stress-free life, rare peers, and more
By The Week US Published
-
Loire Valley Lodges review: sleep, feast and revive in treetop luxury
The Week Recommends Forest hideaway offers chance to relax and reset in Michelin key-winning comfort
By Julia O'Driscoll, The Week UK Published
-
Myanmar: the Spring Revolution and the downfall of the generals
Talking Point An armed protest movement has swept across the country since the elected government of Aung San Suu Kyi was overthrown in 2021
By The Week Staff Published
-
Empty-nest boomers aren't selling their big homes
Speed Read Most Americans 60 and older do not intend to move, according to a recent survey
By Peter Weber, The Week US Published
-
Brazil accuses Musk of 'disinformation campaign'
Speed Read A Brazilian Supreme Court judge has opened an inquiry into Elon Musk and X
By Rafi Schwartz, The Week US Published
-
Disney board fends off Peltz infiltration bid
Speed Read Disney CEO Bob Iger has defeated activist investor Nelson Peltz in a contentious proxy battle
By Rafi Schwartz, The Week US Published
-
Disney and DeSantis reach detente
Speed Read The Florida governor and Disney settle a yearslong litigation over control of the tourism district
By Peter Weber, The Week US Published
-
Visa and Mastercard agree to lower swipe fees
Speed Read The companies will cap the fees they charge businesses when customers use their credit cards
By Peter Weber, The Week US Published
-
Reddit IPO values social media site at $6.4 billion
Speed Read The company makes its public debut on the New York Stock Exchange
By Peter Weber, The Week US Published
-
Housing costs: the root of US economic malaise?
speed read Many voters are troubled by the housing affordability crisis
By Peter Weber, The Week US Published
-
Feds cap credit card late fees at $8
speed read The Consumer Financial Protection Bureau finalized a rule to save households an estimated $10 billion a year
By Peter Weber, The Week US Published