During February, the winter storm that engulfed the U.S.’s central region created a massive demand for energy consumption to heat homes. The unusually high demand hit Texas’s state particularly hard as energy producers were caught off guard by the amount of snow and ice that taxed the energy infrastructure to the point of failure for some companies.
Tens of millions of Texans were without power, but for other energy suppliers that managed to stay in operation during the storm, a massive amount of revenue has been potentially acquired. It is hard to determine if the total revenue will be realized since some of the income might be corrected. Texas lawmakers debated whether to readjust a potential billing error the state’s power grid operator, ERCOT, had allegedly made the week of the storm.
Companies such as the Australian-based Macquarie Group, Goldman Sachs, and Bank of America could be seeing profits in the hundreds of millions through the sale of power, natural gas, and financial trades that caused energy consumption to soar last month.
On paper, the storm’s profits are substantial as the Macquarie Group saw its profits increase 5-10% over 2020, totaling $213 million. However, not all of the increased income may come to fruition, as some might be written off through companies’ bankruptcies that cannot collect and pay the sky-high energy bills their customers in Texas incurred.
Texas State Attorney General sues Griddy
Macquarie has a financial stake in Griddy, an energy provider that the Texas State Attorney General is suing for issuing huge bills to its customers during the storm. Griddy had warned customers that its prices would see a massive spike before the storm. Still, the increase in pricing was hard to control as the Electric Reliability Council of Texas, ERCOT, had changed the wholesale price per megawatt-hour to surge to 9,000.
The failure to winterize energy infrastructure before the storm, as the federal government had recommended after a storm hit Texas 10 years ago, caused some energy suppliers to go offline during the week of freezing weather. The Texas electric grid is independent of surrounding states that share grids with other regions. When electric supplies are low in one area, a neighboring grid can funnel electricity to another region through an interconnection. Being closed off from other grids, Texas could not share power supplies from neighboring states. As a result, millions lost power and water as suppliers shut down in the freezing weather or did not have the reserves to keep up with demand. Some companies will be filing for bankruptcy as they have defaulted payment to ERCOT, such as Brazos Electric Power.
Customers in Texas have received bills in the thousands for the week of the storm that resulted in citizens’ deaths from hypothermia and carbon monoxide poisoning. Potomac Economics Limited, a company hired to monitor the state power market, believes the wholesale price of $9,000 per megawatt-hour was active for 32 hours longer than it should have been, which equals roughly a $3 billion overcharge.
Texas lawmakers call for repricing, but Public Utility Commissioner (PUC), Arthur D’Andrea, and Governor Greg Abbot are pushing back on changing the price retroactively, which the commissioner believes will do more harm than good. D’Andrea believes the PUC does not have the authority to reprice, and it would be illegal to do so. That’s a decision that Lieutenant Governor Dan Patrick and other state officials disagree with. It is yet to be seen if Texas citizens will gain financial relief from a storm that has cost many citizens thousands of dollars.