Scott Willoughby must have thought he was one of the lucky ones last week, able to keep his lights on while others in the Dallas suburbs suffered in the cold and darkness.
Then he got the bill from his power company, which had helpfully deducted what they were owed from his credit card. The amount? $16,752.
As reported by The New York Times:
“My savings is gone,” said Scott Willoughby, a 63-year-old Army veteran who lives on Social Security payments in a Dallas suburb. He said he had nearly emptied his savings account so that he would be able to pay the $16,752 electric bill charged to his credit card — 70 times what he usually pays for all of his utilities combined. “There’s nothing I can do about it, but it’s broken me.”
Mr. Willoughby is among scores of Texans who have reported skyrocketing electric bills as the price of keeping lights on and refrigerators humming shot upward. For customers whose electricity prices are not fixed and are instead tied to the fluctuating wholesale price, the spikes have been astronomical.
As The Times article explains, the astronomical bills now being charged to many Texans are “in part a result of the state’s uniquely unregulated energy market, which allows customers to pick their electricity providers among about 220 retailers in an entirely market-driven system.”
The theory behind this “free market” scheme is that, when prices spike due to increased overall demand, consumers naturally reduce their power consumption to save money, and power companies will respond by producing more electricity. Or at least that’s the way it’s supposed to work.
But when last week’s crisis hit and power systems faltered, the state’s Public Utilities Commission ordered that the price cap be raised to its maximum limit of $9 per kilowatt-hour, easily pushing many customers’ daily electric costs above $100. And in some cases, like Mr. Willoughby’s, bills rose by more than 50 times the normal cost.
Willoughby’s provider, described in The Times article, has a playful sounding name: “Griddy.” Griddy (with the approval of the Texas Utilities Commission) sets its rates based on the wholesale price of electricity, passing that volatility (or stability) directly to its 29,000 customers. The risky nature of this arrangement is often not clear to consumers, who, as The Times notes, can quickly sign up for service in a few easy steps. And to its credit, last week Griddy did advise Willoughby and other customers to switch to another provider, in light of the massive increases in wholesale prices looming, with expected power outages due to the coming winter freeze.
But some people, including Willoughby, were either unable or unwilling to do that. As a result, many are now being socked with four- and five-figure energy bills.
Consumer groups are horrified that a company like Griddy is even allowed to exist in Texas.
“To the Texas Utilities Commission: What are you thinking, allowing the average type of household to sign up for this kind of program?” Tyson Slocum, the director of the energy program at Public Citizen, a consumer advocacy group, said of Griddy. “The risk-reward is so out of whack that it never should have been permitted in the first place.”
According to William W. Hogan, described by The Times as the “architect” of the Texas energy market, the system is doing exactly what it is designed to do—jack up prices in response to a rapid decrease in supply. In other words, behold the pitiless, invisible hand of the “free market.”
And, in a perverse twist, it appears that some of the federal assistance (i.e., taxpayer dollars) now on its way to Texas in the form of emergency relief may be allocated to customers hit with these exorbitant charges.
The Texas Republican Michael McCaul, formerly chair of the House homeland security committee, spoke to CNN’s State of the Union.
“The current plans with the federal assistance bill are to help the homeowners both repair, because we have a lot of water leaks a lot of water damage pipes bursting, but also [pay] their electricity bills as well,” he said.
(emphasis supplied; h/t jrfrog from the comments)
So, in the end, Americans all throughout the country may wind up footing the bill for Texas’ dysfunctional energy policies.