A disaster was brewing for the Texas electricity market. It’s been staved off — for now.
L.M. Sixel April 6, 2020
A disaster was brewing last month in the Texas electricity market. The coronavirus pandemic was spreading, stores and offices were closing and people were losing their jobs. Texas consumers were flooding the phone lines at the Public Utility Commission complaining their power was getting shut off because they couldn’t pay their bills.
The commissioners called an emergency meeting in mid-March and praised utilities for suspending service disconnections for non-payment. But it turned out the disconnection moratorium exacerbated the problem facing the Texas power market because electricity sellers had no way to force customers to pay their bills.
Something had to be done, or the big Texas experiment of electricity deregulation that started two decades ago couldn’t withstand the financial strain as hundreds of thousands of Texans lost their jobs and couldn’t pay their bills.
Traditionally integrated utilities that generate and sell and distribute power in other states can halt disconnections and then petition regulators to recover the losses during the next rate case.
But the deregulated parts of Texas that includes Houston and Dallas don’t have that option. Retail electric providers — a group that includes NRG Energy, Vistra Energy and Direct Energy, which together sell more than two-thirds of the power in Texas — have no way to recoup their losses.
If the dominoes of bad debt cascaded as expected, the competitive electricity market was facing industry upheaval and bankruptcies, according to regulatory filings.