In February 2021, a historic winter storm swept across Oklahoma, Texas, and other parts of the United States, leaving millions without power. As the storm raged, energy traders took advantage of the chaos to engage in market manipulation, driving up energy prices and making billions of dollars in profits at the expense of consumers.
A Dallas area resident received an electricity bill of $16,752 for a period of just a few days during the storm. A Houston area resident received a bill of $8,162 for just five days of electricity usage. Natural gas prices spiked from $3 per unit before the storm to as much as $1,250 at the peak: an increase of more than 40,000%. The financial impact of these bills was devastating for many Texans, particularly those who were already struggling financially due to the COVID-19 pandemic. Some consumers reported having to dip into their savings or take out loans to pay their bills, while others simply could not afford to pay and faced the possibility of having their electricity shut off.
As prices surged, energy traders engaged in market manipulation, using a variety of tactics to drive prices even higher. One of the most common methods was to artificially limit the supply of energy by refusing to sell power to the grid, thereby creating a shortage and driving up prices. Traders also used software programs to submit and cancel large volumes of orders in rapid succession, creating false demand and further increasing prices. In response to the market manipulation, regulators and lawmakers began investigating energy traders for their actions during the winter storm. In May 2021, the Federal Energy Regulatory Commission (FERC) issued a notice of alleged violations to a number of energy companies, accusing them of engaging in market manipulation and imposing fines and penalties on those found guilty.
The impact of the market manipulation during the 2021 winter storm went beyond just the immediate financial burden on consumers. Due to the exorbitant prices charged by energy suppliers, many Oklahoma and Texas utilities were forced to take on billions of dollars in debt to pay for their energy purchases during the crisis. This debt will be paid off over several decades through increased rates charged to ratepayers, leading to long-term financial consequences for consumers. According to a report by the Oklahoma and Texas Coalition for Affordable Power, the cost of the winter storm could lead to a 10-year increase in electricity bills of up to $15.3 billion for Oklahoma and Texas consumers. These long-term increased costs represent a significant financial burden for households and businesses, many of which are still recovering from the impacts of the storm, Covid-19, and surging inflation.
The Oklahoma Corporation Commission approved OG&E’s proposal to charge consumers an extra $760 million spread out over the next 28 years. ONG is charging rate payers more than $1 billion more spread out over 25 years, which means an average of around $8 per month per customer. All told, Oklahoma households will spend upwards of $200 extra each year for the next quarter century.
Price gouging is generally defined as charging excessively high prices for goods or services during a time of crisis, such as a natural disaster or emergency situation. While laws against price gouging vary by state, many states have specific statutes in place to protect consumers from such practices. In Oklahoma and Texas, where the winter storm had a significant impact, there are several laws that prohibit price gouging during a declared disaster. Under these laws, businesses are prohibited from charging excessive prices for necessities such as food, fuel, and shelter. In addition, the Oklahoma and Texas Deceptive Trade Practices-Consumer Protection Act allows for legal action against businesses engaged in deceptive or fraudulent practices, including price gouging.
As a result of these laws, there have been a number of lawsuits filed against energy suppliers and traders in Oklahoma and Texas in connection with the winter storm. These lawsuits allege that the companies engaged in market manipulation and price gouging, resulting in inflated energy prices and financial harm to consumers.
In February 2023 Kansas attorney general filed suit against Macquarie Energy, LLC, an Australian company, accusing it of market manipulation costing Kansas ratepayers hundreds of millions of dollars. Macquarie Energy also reaped hundreds of millions of manipulated profits from Oklahoma ratepayers. Though Oklahoma Attorney General Gentner Drummond is “aware of the Kansas litigation” and is reviewing the situation, he hasn’t yet decided to vindicate Oklahoman ratepayers regarding the billions in damages they suffered. Hopefully, he will do that soon. Stay tuned