First published February 20, 2021.
After the winter storms of February 2021 knocked out power across Texas, some households received electricity bills of thousands of dollars for a few days of use. The worst cases, including one reported bill of $16,752, hit customers on plans that passed wholesale prices straight through to them, most notably those of the retailer Griddy. When regulators held the wholesale price at the market cap of $9,000 per megawatt-hour, roughly 180 times its usual winter level, those customers paid the full cost. Most Texans on fixed-rate plans did not see such spikes, and Griddy's customers were later released from unpaid balances.
What happened during the freeze
Between February 10 and 27, 2021, three winter storms brought snow, ice and record-breaking cold across the state. Demand for heating soared just as power plants failed. Frozen wellheads, pipelines and equipment cut natural gas supplies, which fuel much of Texas's electricity, and wind turbines, coal units and one nuclear unit also went offline. At one point more than a third of the state's generating capacity was unavailable.
To prevent a total grid collapse, the Electric Reliability Council of Texas (ERCOT) ordered rolling outages that lasted days in many areas. More than 4.5 million homes and businesses lost power. Water systems failed too: over 12 million people had their service disrupted and about 12 million were told to boil their tap water.
The human cost was severe. Texas's official count is 246 deaths, most from hypothermia, with others from carbon monoxide poisoning as people tried to keep warm. Some independent estimates put the toll far higher, at around 700. Damages were estimated at no less than $26.5 billion.
Why some bills were so high
Texas has a deregulated electricity market with about 220 retail providers. Most customers sign fixed-rate contracts, so the retailer absorbs swings in wholesale prices. A small number chose plans indexed to the wholesale market, which are cheap most of the year but expose customers directly to price spikes.
Griddy, a Houston company, sold exactly that: members paid a $9.99 monthly fee plus the real-time wholesale price. Normally that price averages around $50 per megawatt-hour in winter. On February 16, the Public Utility Commission of Texas ordered ERCOT to set prices at the $9,000 cap, arguing that scarcity prices should reflect the emergency and draw in every available generator. The price stayed at the cap for days, including about two days after outages had ended, which critics said produced about $16 billion in overcharges.
For a customer paying wholesale rates, $9,000 per megawatt-hour works out to $9 per kilowatt-hour. A home using 50 kWh a day to stay warm could rack up hundreds of dollars daily. Griddy urged its roughly 29,000 customers to switch providers before the storm, but many could not move in time.
The people behind the bills
Scott Willoughby, a 63-year-old Army veteran living on Social Security in a Dallas suburb, was charged $16,752, about 70 times what he normally paid for all his utilities. He told reporters his savings were gone.
Jose Del Rio of Haltom City had kept the thermostat at 60°F in a vacant house he was trying to sell, to stop the pipes freezing. His usual bill was $125 to $150 a month; within days about $630 had been taken from his account and roughly $2,600 more was owed, NBC News reported. "There is no one living in that house," he said. Another couple in Willow Park saw charges of nearly $10,000 drain their linked bank card in a few days.
Customers posted their bills on social media in disbelief, tagging news outlets and politicians.
When your electric company tells you to switch but there has been a hold on switching for over a week now. Using as little as possible 1300 sq ft house and this is my bill. . How is this fair. I only paid $1200 for the whole 2020 year @FoxNews @wfaa @tedcruz @GovAbbott pic.twitter.com/AylTS4m0j4
— kat and tony (@katandtonyT) February 18, 2021
Political fallout
Governor Greg Abbott held an emergency meeting with lawmakers and promised Texans would not be stuck with skyrocketing energy bills. He also said he was taking responsibility for the state of ERCOT. Several ERCOT board members resigned, and the grid operator's chief executive was dismissed.
Senator Ted Cruz faced a backlash after he flew to Cancún, Mexico, with his family while millions of constituents were without heat. He first said he had gone to drop off his daughters, but leaked messages suggested a hastily planned holiday. He returned and called the trip a mistake.
In June 2021 the Legislature passed Senate Bill 2, which shrank ERCOT's board and gave state politicians more control over it, and Senate Bill 3, which required weatherization of power plants and critical gas facilities. Critics argued SB 3 was too weak because enforcement provisions were trimmed and many gas facilities were exempt unless designated critical.
What became of Griddy's customers
Griddy filed for bankruptcy in March 2021, and the Texas Attorney General sued it over the bills. Under a settlement finalised in August 2021, former customers were released from all outstanding balances owed to Griddy unless they opted out. Those who had already paid for electricity used during the storm could file claims in the bankruptcy court. Several other small retailers also went out of business after the storm.
Lessons for electricity customers
- Know your plan type. A fixed-rate contract protects you from wholesale spikes; an indexed or variable plan does not.
- Read the electricity facts label that Texas retailers must provide, and check the contract length and early-exit fees.
- Watch automatic payments. Plans that debit your account as you use power can empty a bank account quickly.
- Prepare for outages: insulate exposed pipes, keep blankets and batteries ready, and never run generators or grills indoors because of carbon monoxide.
- If a bill looks wrong, contact the retailer in writing and file a complaint with the Public Utility Commission of Texas.
The freeze showed that a market designed to send price signals in an emergency can send those signals straight to household budgets. For most Texans the bigger story was the outages themselves, but for a few thousand families the bill that arrived afterwards was its own disaster.
Sources: NBC News, February 2021: Texans now face electricity bills of $10,000; Boston.com, 21 February 2021: Enormous electric bills come due for Texans; Wikipedia: 2021 Texas power crisis; Texas Attorney General, 30 August 2021: Finalized settlement with Griddy Energy.
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