Otis Singleton
Following the 2021 Texas power crisis, there were widespread allegations of price gouging by electric companies. The state's deregulated energy market, which allowed customers to choose their electricity providers, was criticized for its lack of oversight and volatile wholesale prices. Griddy, a popular wholesale power retailer, faced a $1 billion class-action lawsuit alleging it charged customers exorbitant rates during the crisis. CPS Energy in San Antonio also filed a lawsuit against Energy Transfer Partners for charging $500 per million British thermal units instead of the typical $40. The Texas attorney general and Congress launched investigations into the crisis and energy prices, with demands for relief and accountability from local officials and representatives.
| Characteristics | Values |
|---|---|
| Companies accused of price gouging | Griddy, CPS Energy, Energy Transfer Partners, ERCOT, American Electric Power utility company, Oncor, and other power distribution companies |
| Lawsuits | Griddy was hit with a $1 billion class-action lawsuit for price gouging |
| Affected customers | Texans who used electricity services from Griddy and were charged excessive amounts |
| Bill amounts | As high as $9,340 for one week, compared to a typical monthly bill of $200-$250 |
| Causes | Winter Storm Uri, blackouts, increased cost of power, and a deregulated energy market |
| Regulatory failures | Inadequate oversight of utility companies, limited budget, and voluntary standards |
| Calls for action | Demands for the state government to protect consumers from price gouging and forgive utility bills |
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What You'll Learn
Lawsuits against Griddy for price gouging
In 2021, a $1 billion class-action lawsuit was filed against Griddy, a Texas electricity retailer, for price gouging. The lead plaintiff, Lisa Khoury, a resident of a Houston suburb, claimed that her bill spiked to more than $9,000 during the winter storm that knocked out power across the state. Khoury's normal monthly bill averages $200 to $250. The lawsuit seeks to include all Texans who used electricity services from Griddy and were charged excessive prices due to the storm.
According to the lawsuit, Griddy violated Texas' Deceptive Trade Practices Act by allowing customers to be charged exorbitant amounts for electricity during a natural disaster. The act prohibits false, misleading, or deceptive business practices that take advantage of a disaster declared by the governor. Khoury's attorneys argue that the state law is clear that excessive prices for fuel, electricity, etc. during a natural disaster are unlawful.
Griddy has denied the allegations, stating that they did not profit from raised prices and that they pass wholesale electricity rates directly to customers without mark-ups. The company has also stated that it warned its customers about the impending price hikes and encouraged them to seek alternative electric providers. Griddy has called the lawsuit meritless and has vowed to fight it.
The lawsuit seeks more than $1 billion in financial relief for affected customers, as well as an injunction to prevent Griddy from billing and collecting payment for excessive prices. It also demands forgiveness of any late or unpaid bills from customers. The lawsuit was filed in the 133rd District Court of Harris County, Texas.
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Lawsuits against ERCOT for price gouging
The Electric Reliability Council of Texas (ERCOT) has been at the center of several lawsuits following the Texas power crisis in 2021. The crisis resulted from a perfect storm of events, including the failure of some gas distribution infrastructure, insufficient power generation capacity, and the state's deregulated energy market.
One of the most notable lawsuits was filed by CPS Energy in San Antonio, which accused Energy Transfer Partners of price gouging. CPS Energy claimed that Energy Transfer Partners charged them $500 per million British thermal units (290 kilowatt-hours) instead of a reasonable $40. This lawsuit also accused Enterprise Products Partners, a Houston-based oil and gas supplier, of inflating natural gas prices by up to 12,000% during the winter storm.
ERCOT itself has also been accused of price gouging, with wholesale electricity prices jumping from an average of 3 cents per kilowatt in January to $9 per kilowatt during the crisis. This resulted in massive utility bills for Texans, with some reporting charges in the thousands of dollars for just one week of power. A class-action lawsuit was filed against Griddy, an electricity retailer, by a Chambers County resident who received a $9,340 bill for electricity during the storm week, compared to her usual bill of $200 to $250. This lawsuit seeks more than $1 billion in financial relief for affected customers and an injunction to prevent Griddy from collecting payment for excessive bills.
Additionally, in March 2021, a lawsuit was filed in Nueces County, alleging that ERCOT ignored repeated warnings about weaknesses in the state's electric power infrastructure. Another lawsuit was filed against ERCOT in Fort Bend County, but ERCOT has raised claims of sovereign immunity, arguing that legal cases would disrupt key government services.
The Texas Supreme Court ruled in December 2023 that ERCOT could not be sued based on sovereign immunity. However, a later ruling by a three-judge panel of the 14th Court of Appeals in Houston allowed gross negligence claims against power distribution companies to proceed.
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Lawsuits against CPS Energy for price gouging
CPS Energy, the largest municipally-owned gas and electric utility in the US, filed lawsuits against many of its natural gas suppliers for "unlawful and unconscionable price gouging" during the February 2021 winter storm. CPS Energy claimed that certain natural gas suppliers charged them up to 15,000% more for natural gas, which was the equivalent of buying N95 masks for $3 each before the pandemic and selling them for nearly $462 each during it. CPS Energy said that the price hike came at a critical time when 52% of the electricity generated was from natural gas.
The utility company filed 16 lawsuits, stating that it is willing to pay suppliers $38.83 per unit of gas, a price it deemed to be "the outer reaches of any commercially justified price for natural gas". CPS Energy arrived at this amount by examining price changes of natural gas and other goods in previous natural disasters in Texas, as well as other states' price gouging statutes. However, legal experts predicted that CPS Energy's lawsuits had slim chances of victory, and flaws in their legal strategy could tank their efforts to win relief in court.
In response, gas companies such as Houston Pipe Line Co. and ConocoPhillips countersued CPS Energy, alleging that the utility company had violated its contract by not paying for delivered gas. HPL and ConocoPhillips claimed that CPS Energy knew the price of the gas it was purchasing and still carried out the transactions. CPS Energy, however, argued that the extreme cold "effectively broke the natural gas market", causing prices to swing from "lawful commercial terms to unlawful and unconscionable price gouging over a period of days".
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Lawsuits against Energy Transfer Partners for price gouging
In the wake of the 2021 Texas power crisis, CPS Energy in San Antonio filed a lawsuit against Energy Transfer Partners, alleging that the company committed price gouging by charging $500 per million British thermal units (290 kilowatt-hours) instead of a reasonable price of $40. Energy Transfer Partners is one of the companies in litigation with CPS Energy, and it is estimated that the company made approximately $2.4 billion by selling gas at high prices during the storm.
In response to the lawsuit, Energy Transfer Partners issued a statement claiming that CPS Energy purchased gas at higher prices during the blackout due to a lack of proper preparation before the storm. The company asserted that the gas sold to CPS Energy was offered at fully negotiated and transparent pricing, and that CPS Energy was not obligated to buy gas from them.
The Texas power crisis resulted in millions of Texans being left without power, drinkable water, and other essential services during a massive winter storm. The crisis was attributed to various factors, including insufficient power generation capacity and natural gas supply to power plants. The failure to adequately winterize gas distribution infrastructure also contributed to the issue.
The lawsuits against Energy Transfer Partners are part of a broader context of price gouging allegations against utility companies in Texas during the power crisis. Companies such as Griddy, a wholesale power retailer, faced backlash and lawsuits from customers who experienced skyrocketing bills. The state and federal investigations are ongoing, examining potential market manipulation and the role of the Electric Reliability Council of Texas (ERCOT) in managing the state's electricity grid.
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Lawsuits against American Electric Power for price gouging
In the wake of the 2021 Texas power crisis, several lawsuits were filed against American Electric Power and other utility companies for alleged price gouging. The crisis left millions of Texans without power, drinkable water, and other essentials during a severe winter storm.
One notable lawsuit was filed by a Chambers County resident, Lisa Khoury, who received an electricity bill of $9,340 for the week of the storm, compared to her usual monthly bill of $200 to $250. The class-action lawsuit, seeking over $1 billion in financial relief, accused Griddy of price gouging and included all Texans who used electricity services from Griddy and were charged excessive fees. Griddy, a wholesale power retailer, blamed the Public Utility Commission of Texas and the Electric Reliability Council of Texas (ERCOT) for changing market rules during the crisis.
Another lawsuit was filed in Nueces County, raising allegations against ERCOT and naming American Electric Power as a defendant. This lawsuit claimed that there were repeated warnings about weaknesses in Texas's electric power infrastructure that were ignored. ERCOT has raised claims of sovereign immunity, a legal principle protecting government agencies from lawsuits if litigation costs would disrupt key government services.
CPS Energy in San Antonio also filed a lawsuit against Energy Transfer Partners, alleging price gouging as they were charged $500 per million British thermal units instead of the typical $40. Energy Transfer Partners denied any wrongdoing, stating that their pricing was transparent and that CPS suffered due to poor planning.
The Texas power crisis resulted in billions of dollars in debt for utilities as natural gas prices skyrocketed, leading to lawsuits against major energy companies for price manipulation and excessive rate spikes. The state's energy market, characterized by minimal oversight and voluntary standards, allowed for a highly market-driven system where customers could choose from numerous retailers.
While some companies faced legal action, others, like Comstock Resources Inc., benefited financially from the surge in prices. The Federal Energy Regulatory Commission (FERC) investigated anomalies in the natural gas market, but determining price gouging was challenging due to the lack of reporting requirements for intrastate pipelines.
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Frequently asked questions
Several Texas electric companies have been accused of price gouging, including Griddy, CPS Energy, and Energy Transfer Partners.
Price gouging is when companies charge excessively high prices for essential goods or services during a crisis or emergency.
Griddy, a wholesale power retailer, was hit with a $1 billion class-action lawsuit alleging that it price-gouged customers after a winter storm knocked out power across Texas, resulting in skyrocketing electricity prices and excessive charges for its customers.
It is unclear what the outcome of the Griddy lawsuit was, but the plaintiffs were seeking financial relief for affected customers and an injunction to prevent Griddy from collecting payment for excessive bills.
