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Texas’ electricity mess goes way beyond the devastating winter storm in February 2021. The Watchdog explains how deregulation, ERCOT, bailouts and confusing plans left Texans paying for past mistakes.<\/p>\n
2022 File Photo\/Shafkat Anowar<\/p>\n
I keep thinking of a fictional family who moved here for, let\u2019s say, a new job. They comprise just a few of the thousand newcomers who move to Texas every day. If I could, I\u2019d sit the newcomers down and warn them that they are not only launching a new life in Texas, but they also are becoming enmeshed in one of the biggest scandals<\/a> in state history. The cockamamie electricity system.<\/p>\n It\u2019s so messed up that you\u2019ll be paying for past mistakes along with almost everyone else, even if you didn\u2019t live here. The Watchdog prepared this primer for you. But as for everyone else, see how much you remember.<\/p>\n The start<\/p>\n People think our most serious problems<\/a> began with February 2021\u2019s devastating winter storm. Most of us suffered with limited electricity during\u00a0a four-day crisis<\/a>.\u00a0But actually the problems began much sooner.<\/p>\n Article continues below this ad<\/p>\n Enron, a Houston-based company grew into the largest energy company in the world. But its top executives played endless games with their financial books. The company used loopholes to hide bad debts. Enron also inflated its earnings.The company went bankrupt in 2001 and closed. Executives went to prison. The shutdown harmed thousands of investors. Losses were said to be $74 billion. Thousands of employees lost their jobs.<\/p>\n Why is this included here?\u00a0Enron pushed hard for deregulation. Even though the company failed, Texas leaders pushed the Enron model through when they launched deregulation.<\/p>\n ERCOT<\/p>\n ERCOT is the Electric Reliability Council of Texas, a nonprofit that operates the independent Texas electricity grid. The Texas grid connects to the national grid in only a few places. Leaders say they want to keep federal regulators out of our business. ERCOT\u2019s record is hardly clean. In its early days, some managers were convicted in a bidding scam.<\/p>\n ERCOT was repeatedly criticized by state lawmakers for its leaders\u2019 arrogance and lack of transparency. But nobody fixed any of these flaws in time to save Texans. What happened?<\/p>\n Article continues below this ad<\/p>\n When the weather turned cold with icy precipitation in 2021, ERCOT was ordered by the Public Utility Commission of Texas to keep electricity prices at the $9,000-per-megawatt-hour cap \u2014 10 times the previous $900 maximum \u2014 as millions of Texans lost power.<\/p>\n Texans froze in their homes. Electricity and gas companies lost millions of dollars during the crisis.<\/p>\n ERCOT leaders, trying to justify their actions, said they were a mere 4 minutes and 37 seconds away from a massive blackout that could have shut the grid down. I always had doubts about that number.<\/p>\n PUC leadership<\/p>\n During testimony it became clear that\u00a0PUC commissioners didn\u2019t see it as part of their jobs to be more aggressive.<\/p>\n Article continues below this ad<\/p>\n \u201cYou\u2019re the commissioner!\u201d one Republican senator chastised\u00a0PUC chairperson DeAnn Walker: \u201cY\u2019all don\u2019t have any teeth,\u201d another scolded.<\/p>\n She replied meekly, \u201cIf you believe we have that authority, I\u2019m open to moving forward with it.” She resigned in disgrace and was replaced by Arthur\u00a0D\u2019Andrea. He lasted only two weeks as chair. He was caught telling investors not to worry about their losses. Affected businesses wanted to make certain that billions of dollars in overcharges would not be reversed. In his words he vowed to do everything in his power \u2018to tip the scale as hard as I could\u2019 on behalf of businesses.<\/p>\n Even though his prediction was true and would come to pass, he quickly resigned too.<\/p>\n Securitization<\/p>\n Securitization is such an ugly word, especially in this situation.<\/p>\n Article continues below this ad<\/p>\n So many companies suffered severe losses when prices jumped during the 2021 winter crisis that many didn\u2019t know what to do. They lobbied hard for bailouts. The purchase of bonds would save them. That\u2019s\u00a0securitization. State leaders from the governor on down liked the idea of buying billions in bonds to, as they said, make dozens of companies \u201cwhole.\u201d<\/p>\n With a state budget surplus around $40 billion, leaders could have raided that fund to pay for the bonds.\u00a0Did they do that? Nope. They sold bonds by the billions and tacked that on to our electric bills for the next 20 to 30 years.<\/p>\n The Texas Railroad Commission, which regulates the gas industry, started out with $3.4 billion. Of that\u00a0Atmos Energy was slated to receive $1 billion. According to the initial setup, bonds could be repaid by current users as far off as 2050. That\u2019s 24 more years.To all newcomers, see what you got into?\u00a0<\/p>\n Overpayments<\/p>\n As I explained in my previous column on this subject, a new study by a retail energy expert argues that a typical family overpaid<\/a> $480 in one year on their power bill.<\/p>\n Article continues below this ad<\/p>\n The system does not favor consumers.<\/p>\n Energy expert Laurel Peltier wrote in her study, \u201cRetail suppliers do not compete to deliver the lowest long-term price. They compete to capture customers during brief promotional \u00a0windows and then monetize those relationships through deceptive autorenewables, uncapped variable rates and opaque green offerings. In this environment, disclosure alone cannot protect consumers, and caveat emptor\u00a0\u2014 \u2018buyer beware\u2019\u2014is not a viable public policy for an essential service.\u201d<\/p>\n Marketing \u00a0<\/p>\n<\/p>\n
On the electricity side, the PUC handled $2.1 billion in bonds for company bailouts such as $409 million for\u00a0TXU Energy and Direct Energy, $117 million.
Unlike most companies, Reliant Energy said it would not pass its $312 million cost on to customers. Instead, the company said investors would absorb the loss.<\/p>\n