(CBS MONEYWATCH) – A Texan woman who was hit by a $ 9,000 electricity bill this month has sued her electricity company for price cuts to highlight the risks some consumers face in the state’s deregulated energy market.
The suit is the first of its kind after a harrowing week of snow and sub-freezing temperatures that resulted in skyrocketing energy prices for thousands of customers across the state and blackouts for millions of others. The economic toll from the extreme weather event could exceed $ 200 billion, equating the frost with some of the most costly natural disasters in the United States.
Lisa Khoury, a resident of Chambers County, Houston, filed a class action lawsuit against her electricity supplier Griddy Energy on Monday. According to the lawsuit, Khoury was billed $ 9,546 between February 1 and 19, an amount 40 times her typical billing range of $ 200 to $ 250.
Khoury said Griddy withdrew $ 1,200 from her bank account using an auto-pay system before stopping paying through her bank. However, according to the complaint, she still owed over $ 8,000 for electricity that was only sporadically available. Khoury and other class members in the lawsuit are calling for $ 1 billion in financial relief.
“Griddy attacked Khoury in the middle of a disaster. She and her husband were mostly without electricity in their home from Wednesday, February 17, 2021 to Thursday, February 18, 2021. At the same time, Khoury housed her parents and in-laws, who are in their eighties, during the storm. Even then, due to the high prices, it further minimized power consumption, ”the complaint said.
Khoury attorney Derek Potts, national managing partner of Potts law firm, said Griddy’s billing violated Texas consumer protection laws – and that it likely affects thousands of electricity users.
Griddy said the lawsuit was “unfounded” in a statement made to the Dallas Morning News. The electricity company did not immediately respond to a request from CBS News for comment. On its website, the company says it doesn’t benefit from high electricity prices and blamed the Texas Public Utility Commission for the astronomical hikes last weekend.
“You’re effectively paying the same price as a utility or retail utility,” explains Griddy on his website, noting that these prices change every five minutes.
“The PUCT changed the rules on Monday” when it instructed the Texan network operator to allow astronomically high electricity prices, Griddy said, adding that he was trying to “make things easier” from ERCOT for affected customers.
Plans like Griddy’s are a relatively new feature in the largely deregulated energy market in Texas. According to Andrew Barlow, spokesman for the Utilities Commission, most Texans have fixed tariffs where users pay a set amount for every piece of electricity they consume. In variable plans like Griddy’s, consumers pay wholesale prices, which means their bills are low in times of low demand but can rise quickly in times of crisis.
An analysis by the Wall Street Journal earlier this week found that customers in Texas were paying $ 28 billion more for electricity than traditional plans after deregulation over the past 20 years.
Some energy industry experts have described variable rate utility contracts as predatory. Others have compared them to adjustable rate mortgages that were popular during the housing boom in the early 2000s. Under such mortgages, a homeowner could get a slightly lower interest rate but was hooked for future interest rate hikes.
“It sure looks like consumers have been lured into the promise of a little cheaper electricity. The fine print reads,” Oh, if there’s a grid emergency, you might get a $ 5,000 bill, “said Costa Samaras, Associate Professor at Carnegie Mellon and Associate Analyst at RAND, “It may be legal, but is it right?”
The historic failures have led some Texan lawmakers to consider the once unthinkable: enact stricter regulations for the state’s energy sector.
Misled “grossly unfair”
“There’s a decent claim that these contracts are unusable,” said Richard Alderman, director of the University of Houston Consumer Rights Center and professor emeritus at the university.
Texas law protects consumers who are “grossly unfairly exploited,” Alderman said, adding that spikes in electricity prices of thousands of dollars should be considered grossly unfair law.
“Would someone in their right mind sign a contract who knew this would happen? In my mind, no, ”he said.
However, such lawsuits face several hurdles. Many contracts force consumers into private arbitration, an unjudged system that businesses prefer. Even if a consumer makes it to court, the judge is often not on his side.
“The courts in Texas are generally very conservative and often tell consumers,” You signed this contract, you should have read it and understood what it said, “Alderman noted.
Currently, Texas Governor Greg Abbott has named utility bills a “top priority” for lawmakers. Utilities cannot disconnect customers for non-payment and must suspend billing.
Energy supplier surprised
The residents weren’t the only ones faced with a thousand dollar utility bills. Some municipalities and alternative electricity providers were also caught unawares. The city of Denton spent $ 207 million on electricity during the outages, close to its annual electricity budget. Electricity company Just Energy said it could lose up to $ 250 million from the episode and potentially go out of business.
When several power sources went down over the weekend, the Commission and the Texan grid operator ERCOT let the wholesale prices for energy rise to 300 times their typical level in order to bring more electricity into the grid. At that time, Griddy took the unprecedented step of asking customers to switch to other providers. However, many suppliers were unable to acquire new customers during the freezing process. People like Lisa Khoury said they were forced to wait.
According to Bloomberg, nearly a dozen domain names have been registered potentially seeking class action customers, including TexasPowerLawsuit.com, TexasPowerFailureLawsuit.org, and ClassActionTexasPower.org.
Consumer advocates hope that federal funding or Texas lawmakers can help customers stick to astronomical bills – and prevent such spikes in the future.
“The money has to come from somewhere,” said Samaras. “The question is, will Texas save these customers or are there any regulations?”
© 2021 CBS Interactive Inc. All rights reserved.