Variable Rate Electricity Plans Under Scrutiny After Texas Power Bill Chaos 

Tyler Durden's Photo
by Tyler Durden
Tuesday, Feb 23, 2021 - 07:45 PM

There are a couple of types of electricity plans for commercial and residential customers. Some power companies offer fixed-rate electricity plans, while others provide variable-rate electricity plans. It's up to the customer which plan they select - not knowing the difference can be financially painful when power rates rise, as many in Texas found out last week. 

More than a dozen states allow power companies to offer variable rate plans, which fluctuate with power prices. As of 2019, about 11 million homes and businesses nationwide were enrolled in variable-rate programs, according to the U.S. Energy Information Administration. 

Scrutiny of dynamic pricing comes as last week's power grid chaos in Texas resulted in rolling blackouts for days. Power prices spiked to unprecedented levels as various power generations froze due to the polar vortex dumping Arctic weather into the state. 

As the energy crisis unfolded, we were one of the first to note variable rate plans would go to the "moon" as power prices spiked. We then provided shocking accounts of some residents who were slapped with multi-thousand dollar energy bills. 

In particular, Texan resident Ty Williams told local news WFAA that his average electric bill is around $660 per month. After the rolling blackouts, his power bill jumped to $17,000. 

John Howat, a senior energy analyst with National Consumer Law Center, a consumer advocacy group, told Reuters that electric suppliers in other states pushed customers to join variable-rate style plans. 

Since the Texas energy crisis, multiple states have opened probes into surging utility bills. Oklahoma Attorney General Mike Hunter told reporters Monday that his team will be investigating whether power companies violated Oklahoma laws that cap prices of goods to a 10% rise after an emergency is declared.

"The goal there is to, in as substantive and productive a way as possible, figure out ways to mitigate the impact of this utility bill phenomenon we're expecting to see in the next couple of months," Hunter said.

Texas utility regulators have said a temporary ban is in place from billing customers or cutting off their power for non-payment. 

Catherine Webking, a partner at Austin-based law firm Scott Douglass & McConnico, said there is some good news among residential power customers; most do not have variable-rate plans.

"It's important to understand that is such a small, small sliver," Webking said.

Unfortunately, when energy demand is high, the wholesale price of power can be quite expensive. Certainly, scrutiny is building across multiple state governments about how some energy companies charge their customers. 

One Texas resident was slapped with a multi-thousand dollar power bill. She said:

"I'm not exactly sure what I'm supposed to do - should I take from my 401K? Should I get a loan?"