Why did the Texans end up with huge electricity bills in February

The Conversation

Jul 19, 2021

The deregulated market prices may be the reason behind the sky-high numbers

Along with 16 other states, Texas has a deregulated market in power generation. 85% of Texans live in areas with retailer power supplies, this means they can choose electric services from retailers rather than local utilities if they get offered a better deal.


But when homeowners choose a provider online, they may not know that, some plans bill the customers at fixed rates, while others charge differing rates that reflect wholesale market prices. The prospect of lower electricity rates may lead some consumers to forget about the possibility of high or volatile bills that come with fluctuations in the demand.


When cold weather hit Texas in February this year, prices on the ERCOT (Electric Reliability Council of Texas) wholesale market rose upto $9,000 per megawatt-hour –which is the maximum price allowed by the Public Utility Commission of Texas. The commission made an emergency provision, ordering ERCOT to keep its $9,000-per-megawatt-hour price all week which would pressure the customers to conserve energy so that the demand and the price drop which in turn would reduce the burden on the grid.


The sky-rocketing electric bills in Texas were partly due to a deregulated market system that enabled volatile wholesale costs to be passed directly to the consumers. If the retail market remained regulated, they would likely have spread those high electric costs over time.


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