In February of 2021, a massive failure of the Texas electric grid in a winter storm pitched millions of Texans into freezing darkness for days. While people struggled to stay safe and warm, state utility regulators responded by raising the price of electricity to its maximum allowable limit.
The decision ultimately added $16 billion to Texas electricity bills. On Tuesday, the Supreme Court of Texas heard arguments over whether what regulators did was against the law.
Why raise electric bills in a blackout?
In 2021, as Texans emerged from the deep freeze and blackout, many were shocked to learn that their energy bills had been raised during the exact days when they had no electricity.
The decision came from the Public Utility Commission of Texas. It was based, largely, on the logic of Texas’ deregulated energy market. That market is supposed to incentivize power generation by increasing the value of electricity when it becomes scarce.
During the blackout, regulators saw that electricity was scarce — literally unavailable for millions — and decided to intervene in the market to increase its value. The move, they argued, could incentivize more power plants to turn on and produce electricity.
But there was a problem: there were no power plants left to turn on. Those plants that could operate were running full bore, and those that couldn’t were inoperable due to weather-related breakdowns or lack of fuel supply.
After the dust settled, the PUC faced lawsuits arguing that it had superseded its authority in ordering the price spike. Those lawsuits were consolidated into one suit, brought by Luminant, an energy firm whose parent company, Vistra, lost at least $1.6 billion during the blackout.
In 2023, an appeals court surprised many by siding with Luminant, and ruling that the PUC had acted outside of its authority to hike power prices. The State of Texas appealed that decision, which is what brought the case to the Texas Supreme Court.
Was the decision illegal or just the wrong call?
In Tuesday's arguments, State Supreme Court Justices were asked not to decide whether regulators made the right call, but whether they acted within their authority.
“The authority existed at the time” to raise rates to try to stabilize the grid, said Lanora C. Pettit, a lawyer for the State Attorney General’s office.
“It’s a distraction by Luminant to say ‘was this [price hike] successful?’" argued Macey Reasoner Stokes, an attorney with Baker Botts, who is representing companies aligned with the Public Utility Commission. “I think this is an attempt to distract from the textual decision that the court has to make.”
Lawyers for Luminant, of course, disagreed.
“This is the first time since the legislature overhauled the Texas [energy] market decades ago that the market was abandoned for a price set by the government,” said lawyer Allyson N. Ho, of Gibson Dunn and Crutcher, who is representing Luminant. “The failure in this case isn’t the failure in the market. It’s the failure of the agency to follow the law.”
Are blackout lawsuits losing ground?
Other recent court decisions stemming from the 2021 blackout have come out against plaintiffs, be they aggrieved utilities or Texans who lost loved ones in crisis.
In March of 2023, the state Supreme Court agreed with lawyers for the Electric Reliability Council of Texas finding that, because ERCOT is an organ of state government, the group is immune from lawsuits related to the blackout.
In December of 2023, a panel of judges from the First Court of Appeals in Houston ruled that big power companies cannot be held liable for failing to provide electricity during the crisis.
In the current case, it’s unclear what, if anything, a ruling against the Public Utility Commission would mean for the estimated $16 billion in added cost created by its decision to hike energy prices.
After the price tag was revealed in 2021, some state lawmakers proposed retroactively re-setting prices to a lower value to protect ratepayers and utilities that risked bankruptcy due to the expense.
That proposal was strongly opposed by other lawmakers, public utility commissioners and groups that profited from the higher electricity costs, including representatives from energy trading markets.
Ultimately, state leaders voted to “securitize” the billions of dollars, essentially creating a way for everyday Texans to pay off the debt over decades in small charges on their electricity bills.
It’s one of the many reasons electricity bills have been higher since the blackout.
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