What Happened in Texas--and Why It Matters

They say that “everything is bigger in Texas,” and the reach of their recent energy fallout is no exception. This past month, millions of Texans found themselves freezing, frozen, flooded, and fed up with the blackouts that persisted for weeks across the state.

Estimates count a minimum of 56 verified, related deaths, with further estimates ranging up to above 80.

For those watching the crisis from the outside, it was difficult to understand what was happening—how bad was this crisis? Was it still ongoing? Were people okay? And more than anything, onlookers asked themselves: who and what was responsible?

Rumors and blame circulated—while electricity did not—as Texans and outsiders alike struggled to trace root causes. And to add insult to injury, electricity prices during the crisis for those that still had power exploded to tens of times their usual price. Thousands of Texans have reported electric bills ranging anywhere from $15-20,000 for homes whose bills are usually only a few hundred dollars. Myriad homes also suffered costly damage from burst pipes caused by the cold, no longer protected in what should have been heated homes, exacerbating the already painful monetary burden of the storm.

So, what happened? What went wrong—and what are the larger implications of this failure for the world at large?

Blame and lawsuits are flying. The crisis has been extraordinarily expensive, and no one wants to take the blame. Texas Governor Greg Abbott blamed the outage on renewable energy and private power companies, neither of which he argues were adequately prepared for the frosty weather. Meanwhile, many consumers blame ERCOT: the regulatory board for Texas’s independent power grid.

According to its website, “ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature.” Though ERCOT’s actual supervision by Texas legislature appears limited at best, in this case, it was indeed the Public Utility Commission of Texas that ordered ERCOT to raise power prices from $22 per megawatt hour to up to $9000 per megawatt hour in some cases, claiming that power outages were caused by a mismatch of supply in demand:

The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market. Energy prices should reflect scarcity of the supply. If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest (read the entire order here).

This quote is part of a larger order from the PUC to ERCOT ordering the rise in prices that financially devastated Texans. There’s a large debate over whether fault lies with the computer system (as ERCOT and the PUC claim), with a lack of regulation, or with something else entirely.

Regardless of who was responsible, thousands of Texans now owe power bills with the potential to deplete their entire life savings. Independent power companies, reliant on ERCOT’s power, have suffered extraordinary losses because of the unexpected price raises. And unfortunately, although there are cries for the Federal and State Government to offset these charges, it remains unclear where the money from this crisis is actually going. Because it certainly doesn’t seem to be returning to those whose life savings it depleted.

There is no evidence that anyone is considering just “returning” the funds like you’d return an unwanted purchase, but there may be more roundabout ways for victims of the storms to be made whole. Individuals that live and work in presidentially declared disaster areas are allowed deduct personal property losses on their tax returns that are not covered by insurance or other reimbursements that exceed ten percent of their adjusted gross income. Because Texas was declared a federal disaster area, taxpayers in the area may be eligible for tax breaks on their 2021 tax returns.

Regardless of how things end for those seeking restitution, no one wants a similar event to happen in the future. At the end of it all, Texans and spectators alike are faced with two important questions:

First, what went wrong in the regulatory processes that allowed Texas energy companies to charge exorbitant prices for essential energy—during a life-threatening crisis, no less? Could something similar occur in other states in the US or other countries abroad? Though it once seemed obvious that such a thing could and would never happen, the events of this past month have spoken differently.

Second, what climate crises are nations and cities around the world unprepared for? Regulatory woes aside, Texas’s power grid was also simply unprepared for the abnormally cold weather. And it’s not the first time that a state has found its preparations lacking—last year, California’s power grids experienced blackouts across the state during the stifling heat waves that peppered the state.

Business owners and local governments would both benefit strongly from a careful revisitation of their local power sources: are they prepared for potentially unexpected and unprecedented swings in climate, humidity, and/or precipitation? The patterns that have supported digital and electric stability for the past 250 years are changing rapidly, and any unprepared state or region stands to become the newest exhibit in a rising string of climate-based technological disasters.

58 views0 comments