Even Texans with fixed electricity plans may face high energy costs due to this fee

Haley Samsel
·6 min read

Heather Helton thought she was in the clear, at least when it came to her February electricity bill. As she and her husband waited out the winter storm in their Fort Worth home, they lost power for 36 hours and were without water for three days after their pipes burst on Feb. 17.

Despite those headaches, Helton considered herself spared from the brunt of the electricity crisis. She has a fixed rate plan with Berkshire Hathaway’s MidAmerican Energy Services, which insulates her from the skyrocketing electricity prices faced by Texans who signed up for variable rate plans with companies like Griddy.

“I didn’t have any concerns for myself,” Helton said. “It didn’t even cross my mind that I, as a fixed rate customer with a big company, would get hit with any sort of ‘pass through charge.’ It was quite a shock to my system when I got the email.”

In a Feb. 22 email, MidAmerican warned its 5,800 residential customers in Texas that the company expects “significant increases in ancillary charges,” also known as pass through charges, due to the disastrous effects of the storm. The provider has more than 1.6 million customers in states like Nebraska, Illinois and South Dakota.

Between Feb. 13 and Feb. 21, MidAmerican’s ancillary service fee — the price of which is overseen by the Electric Reliability Council of Texas — was 100 times larger than an average monthly fee, said company spokesman TJ Page.

“As a majority of MidAmerican Energy Services’ customers, including all of its residential customers, are on fixed energy supply rate contracts, ancillary fees paid to ERCOT exceeded MidAmerican Energy Services’ cost for actual energy during the defined period,” Page wrote in an email.

The company is far from alone, as electricity cooperatives, municipal utilities and retail providers of all sizes face astronomical costs for ancillary services.

In Georgetown, the municipal electricity provider was charged $17.8 million for one week of ancillary services, compared to $710,000 for the entirety of 2020. Those costs alone were 25 years worth, according to a city council presentation, and were part of the reason why the city decided to issue $47.8 million in debt that will be paid over 10 years.

At the height of the outages on Feb. 15, some ancillary services cost nearly $22,000 per megawatt hour, a price that was previously unheard of in the power industry.

“The formula that was used to calculate ancillary services generated some answers in the $20,000s,” Public Utility Commission chairperson Arthur D’Andrea said during a March 3 meeting, according to S&P Global. “I haven’t talked to anyone yet who thought they could get above $9,000. That was surprising — I think, shocking — to a lot of us.”

Ancillary service charges are a catch-all term for the functions provided by the electric grid that support the continuous flow of electricity. Those charges tend to fall under two categories: regulation service and responsive reserves and non-spinning reserves, the latter of which drove the price increase during the winter storm.

Responsive reserves services are used when the grid is at or near a state of emergency due to not having enough power generation, according to ERCOT policies. That emergency scenario played out in the early hours of Feb. 15, leading to higher demand for those services and a surge in prices.

“It’s defined as the charge from ERCOT for reliability functions performed,” Helton said. “But they weren’t reliable and they didn’t perform their function. So why am I being charged a higher rate when they didn’t hold up their end of the bargain?”

In some cases, massive ancillary fee increases could be passed down to unsuspecting customers, who are responsible for paying non-energy costs to ERCOT and local utilities that distribute power. Those costs are not fixed and can be passed through to customers based on changes in the ERCOT tariff rates and market prices, according to an email to MidAmerican customers on Feb. 25.

Costs for MidAmerican customers will vary depending on actions taken by the Public Utility Commission, which oversees ERCOT, and state legislators, Page wrote. No one will be charged ancillary fees for when they were not using energy, and the company later told customers that it “will not pass through any ancillary adjustments until a ruling is made by the commission.”

The Public Utility Commission, under fire amid public hearings on the energy catastrophe, instructed ERCOT on March 3 to “claw back” payments to ancillary service providers that did not perform during the crisis.

But D’Andrea and commissioner Shelly Botkin stopped short of reducing ancillary service prices to $9,000 per megawatt-hour, as recommended by the commission’s independent market monitor, Potomac Economics. The move would affect relatively few market participants, D’Andrea said on March 3.

During a March 5 meeting, the pair announced their decision to reject Potomac’s proposal to correct $16 billion in overcharges to the electricity market during the February storm. They left the door open to retroactively correcting ancillary service fees, with D’Andrea noting that the decision did not need to be made immediately.

“Repricing the energy, I’m more inclined to say that we’re not going to do that,” Botkin said. “The ancillary services one, I can get there, but on the other hand, kind of for the same reasons, you could argue: Well, if you’re OK with repricing, then just do all of it or if you’re against it, then don’t do any of it.”

It’s unclear how many electricity providers are facing significant financial damage from the fees, and a spokesperson for Reliant, one of the largest providers in Texas, did not directly address ancillary fees when reached by email.

“A customer’s electricity bill is typically made up of the energy charge, determined by the retail electricity provider, and the delivery charge, determined by the local TDSP — transmission and distribution service provider,” spokesperson Megan Talley wrote. “Any changes to delivery charges or fees are set by the TDSP. The delivery charges include both a fixed monthly and variable charge based on total usage.”

Meanwhile, MidAmerican has encouraged its customers to contact the commission with their concerns about ancillary service prices. Helton emailed D’Andrea’s office and received a prompt reply, forwarding her concern to customer protection officials within the commission.

For Helton, the outages felt like history repeating itself. When she lived in Richland Hills in 2011, her power was out for three days as Arlington hosted the Super Bowl. This time, she hopes that state leaders can learn from their mistakes.

“Ten years ago, they had legislative hearings and recommendations, but they didn’t follow through and they didn’t take the steps to winterize the Texas electricity grid,” Helton said. “Now we’re back here again, but it’s affected millions more people and caused billions of dollars of damage to Texans across the state.”

She added: “Hopefully all the attention that’s been given to this will make the people that have the power to make changes do the right thing for the people of Texas, and not for the energy companies.”