Winter storms Uri and Viola struck the United States in early February 2021. The ice and snow storms hit with a powerful one-two punch that severely impacted homes and businesses across 15 states, most notably in Texas where more than 4 million customers lost power. Some for days.
When the infrastructure stops due to power issues there is a major waterfall effect of having no electrical power hits both residents and commercial business,” said Paul Kottler, U.S. President – Global Technical Services at Crawford.
“Currently, we are seeing everything from residential property damage claims water damage claims to contingent business income claims. Similar to the issues with Power Generating and Delivery firms in California there will undoubtedly be litigation surrounding the claims being paid by insurance carriers and self-insureds.”
Shortly after the storms, Vistra, Texas’ largest power supplier revealed that it expects a one-time financial impact of $900 million to $1.3 billion due to the Texas power crisis.
Exelon Corp., which has a small presence in Texas with three power plants, said that when those plants went offline during the storms, it cost the company between $750 million and $950 million.
This financial impact is largely due to increases in the cost of energy. The demand amid the cold forced prices above $1,000 per million BTUs. And natural gas from Comstock Resources’ Haynesville Shale wells in East Texas sold on the spot market for as much as $179 per thousand cubic feet. That’s compared to prices under $4 during the week prior to the snowstorms.
The huge increase in prices caused Comstock’s CFO to describe the situation as “hitting the jackpot.” He later apologized and called his comments “inappropriate” and “insensitive.”
Vistra, the parent company to retail providers TXU and Ambit, says that it is financially sound. Vistra also says that final tally of the financial impact will depend on pricing and settlement information from the Electric Reliability Council of Texas, potential corrective action by the state, and the outcome of litigation arising from the storms.
It may never be clear which companies profited or suffered a loss from the storms. That’s because much of the data will remain confidential, either because it is held by private companies or because Texas officials have not made their data public.
“Due to power outages the entire economy was affected, including residential and commercial businesses and industry,” said Kottler. “Claims submitted to date include water damage, loss of use, contingent time element, ingress/egress, service interruption, and business income. Similar to other historical catastrophic events of this nature, there will undoubtedly be investigations in the chain of events by local, state, and federal authorities.”
In fact, the Public Utility Commission of Texas, the state's utility regulator, has announced that it has opened an investigation into the factors that combined with the devastating winter weather to disrupt the flow of power to millions of Texas homes.
The Federal Energy Regulatory Commission also announced it is launching an investigation into the parallel price spikes in electricity and natural gas markets. Of particular interest, the agency said, is the possibility that some firms were manipulating the markets — presumably by withholding power or gas to drive up the price.
“In addition to the investigations, I expect there will be lawsuits from customers due to things like water damage caused by pipes that burst as a result of the loss of power and heat,” said Michael Law, Vice President at Crawford GTS. “And it’s almost certain that there will also be large insurance claims from the power companies.”
Meanwhile, at least two energy companies are filing for Chapter 11 bankruptcy protection. They include Griddy Energy, the Texas electricity provider accused of charging customers thousands of dollars during Winter Storm Uri, and Brazos Electric Power Cooperative, Texas’ largest and oldest power cooperative.
