As Texans begin to thaw out from the mid-February freeze that led to widespread outages across the state and left more than four million homes without power, the long-term costs of the electricity crisis are just beginning to come into focus. “For Texans, the situation could go from bad to worse,” said Marcie Zlotnik, former chairman of Houston-based StarTex Power, an electricity retailer. “I’m concerned about increasing power prices, job losses across the industry, and the long-term implications for the market and consumers, who have already suffered through a horrendous ordeal.”

Factoring in property damage from burst pipes and lost output from factories and businesses, the storm could be the costliest in Texas history, exceeding the $125 billion financial fallout from Hurricane Harvey. The blackout also resulted in a horrendous death toll: at least forty, a number that is expected to rise and could surpass the roughly one hundred who died in Harvey.

But the financial reckoning is only getting started. One week after the storms, the state’s grid operator, the Electric Reliability Council of Texas, which collects payments from retailers and makes sure they get to the proper electricity sellers, was short about $1.3 billion in payments, stoking concerns about the liquidity of the power market and the possibility that many retail electricity providers will file for bankruptcy. Money is running tight all across the system, raising the prospect that much of the cost for the lack of winter storm preparation will ultimately fall to consumers.

Paula Gold-Williams, CEO of CPS Energy, the San Antonio–owned municipal utility, which supplies both electricity and gas for heating, said the impact of skyrocketing prices is “going to be huge.” Typically, customers would pay for higher wholesale costs through adjustment charges that would hit their bills in 45 to 60 days, but given the size of the potential fees, they could be spread out over ten years or more, she said. (Some Californians are still paying extra on their electricity bills for an Enron-inspired crisis there two decades ago.)

While national headlines have focused on residential consumers stuck with five-figure electricity bills, those horror stories are limited to a single provider, Griddy. In competitive markets like Dallas and Houston, where customers can pick their electricity provider, most have fixed-rate contracts, which will mute the immediate impact. However, they may be forced to find new providers or accept more expensive contracts when they renew. And many of those providers may be forced out of business entirely as the costs of the outages ripple through the market.

Some reports put the number of potential defaults by retail providers, municipal utilities, and cooperatives at almost two dozen. Brazos Electric Power Cooperative, one of the state’s largest co-ops, filed for Chapter 11 bankruptcy on Monday, citing a $1.8 billion bill from ERCOT.

A year from now, it’s almost certain that Texans will have fewer electricity providers to choose from, and those that remain are more likely to be owed by companies with deep pockets, such as generators NRG (based in Houston), Vistra (based in Irving), and Chicago-based Exelon (which owns Maryland-based Constellation, which in turn owns Houston-based StarTex).

“Texas may be back to just a few players, and those retailers that survive will likely be owned by generators—essentially reassembling two key pieces of the old regulated market,” said Josh Pesikoff, president and CEO of Infuse Energy, a retail electricity provider in Houston.

Meanwhile, it’s clear that the government will have to do more to avoid a repeat of the crisis. Over the past twenty years, the state has taken a largely hands-off approach to the electricity market, opting, for example, not to require measures that are standard in other states that were hit by the same February storm but avoided the disaster. And during the storm itself, the two state agencies most responsible for our energy infrastructure fumbled badly, exacerbating the cataclysm.

The electricity shortages actually started in the natural gas market. On February 12, the day after the first round of ice blasted the state, the Texas Railroad Commission, which regulates the oil and gas industry, issued an emergency order that prioritized delivery of natural gas to residences, hospitals, schools, churches, and “other human needs customers.” That order, however, didn’t actually help the majority of Texans get heat. Only 40 percent rely on natural gas for heating; about 60 percent of Texas homes use electricity. The Railroad Commission’s order had an unintended consequence: power plants that use natural gas to create electricity had to wait in line.

As the cold settled in, the gas supply shrank drastically. Everything from wellheads in West Texas to pipeline equipment froze, creating a shortage. Local prices jumped as much as $400 per billion cubic feet and averaged some $162 more than usual. Gas production in the Permian Basin, which had been running 11.5 billion cubic feet a day, fell to as little as just 3 billion.

The three railroad commissioners, who are elected, made their emergency order independently from the Public Utility Commission, whose three commissioners are appointed by the governor and who oversee the electricity markets and ERCOT. Only five floors of the William B. Travis Building, just north of the Capitol, separate the two agencies, but “they might as well be in separate countries,” one former PUC official told me. What’s more, the markets they oversee are highly technical, and neither really understands what the other does.

The day after the storms ended, PUC chairman DeAnn Walker acknowledged this problem at a meeting, saying, “We have committed to work together better between the two agencies.” She also acknowledged that the commissions should develop a joint framework to ensure that gas gets to generating units as quickly as possible. But Walker, who drew the ire of lawmakers during public hearings this week, resigned on Monday.

Even generators that had prepared their plants for the extreme cold couldn’t find the gas to run them. Vistra, which operates nineteen plants in Texas capable of producing 18 gigawatts of power, had 90 percent of its gas-fired plants available, but they operated at 75 percent capacity because of a lack of gas, CEO Curt Morgan told a House panel investigating the outages. CEOs for other big generators such as NRG and Calpine told similar stories. “There were times when 60 percent or more of our total offline had to do with gas supply,” Calpine CEO Thad Hills said to lawmakers.

The result was a cascading loop of failures: power companies couldn’t get gas to generate electricity, which in turn meant that more natural gas producers couldn’t get electricity to power compressors and production equipment, which meant they provided less gas to the power plants. And so it went until the grid had lost half its generating capacity—as much as 46,000 megawatts of electricity generation, or enough to power more than nine million homes.

When that much power is lost, it should send the wholesale electricity market into a frenzy. This is the arcane world that consumers rarely see, in which generators, traders, cities, co-ops, and retailers buy and sell electricity, often on a minute-by-minute basis. On a typical day with normal weather, wholesale electricity might sell for between $10 and $30 per megawatt-hour, but in extreme shortages, it can soar to three hundred times that amount or more. To keep some control over these price spikes, ERCOT sets a price limit at $9,000 per megawatt-hour.

When prices reach this level, generators have an incentive to put every possible electron they can find on the grid because they can make a year’s profit in a single day. Conversely, those who sit out of the pricing frenzy could be passing up hundreds of thousands of dollars in a matter of hours. In other words, the crisis pricing is supposed to be a free-market incentive to make every single spark of power available.

“The theory assumes that skyrocketing prices during system emergencies will create incentives to correct shortages and blackouts,” a recent report by electricity analysts Larry Kellerman and Robert McCullough said. “All evidence is that this does not work.”

It certainly didn’t this time.

Because of a wrinkle in ERCOT’s algorithms, prices weren’t initially allowed to shoot straight up to the $9,000 cap, so the PUC issued its own emergency order, telling ERCOT to raise prices to $9,000.

Most consumers are unaware of the price swings in the wholesale market, and since most buy fixed-price contracts from their electric companies, they don’t need to worry—at least not immediately. What happened next, though, could have a profound impact on consumers across the state. The final snowstorms subsided on the afternoon of Thursday, February 18, but ERCOT and the PUC left the $9,000 price order in place until nine the following morning, some eighteen hours after the worst of the crisis was over and prices in much of the state had returned to normal.

At those prices, wholesale electricity for a typical home that uses about 2,000 kilowatt-hours per month might cost a retail provider $640 for a single day, as opposed to $2 on a typical day. That’s great for the generators, which are selling power at peak prices. Typically, such pricing stays in place for only a few hours, but this time the maximum was in place for days, creating dire financial consequences for the companies that had to buy power at those prices.

Neither ERCOT nor the PUC has explained why the emergency prices remained in place so long, but plenty, including the much-maligned Griddy, have pointed out that it’s not how the market is supposed to work. The PUC used its authority to set a maximum price for generation “when the market’s true supply and demand conditions called for far less,” Griddy wrote in a statement on February 18. “The market is supposed to set the prices, not political appointees.”

Griddy is an unusual electricity provider because it charges $9.99 a month in exchange for giving consumers access to the wholesale market. Most days, Griddy’s customers pay less than other consumers. As prices began climbing on February 11, it emailed customers encouraging them to switch to another provider. Those who didn’t were facing those $10,000-plus bills that generated national headlines. By March 1, ERCOT had shut the company down. Attorney General Ken Paxton took time away from multiple personal legal problems and filed suit, accusing the company of deceptive trade practices.

But the plight of Griddy’s customers is now shared by retail providers, municipal utilities, and cooperatives who find themselves squeezed between soaring wholesale prices and fixed-price agreements with customers. They simply won’t be collecting enough from consumers to pay for the electricity delivered during the crisis. In other words, many companies and other entities that buy wholesale electricity are facing bills they can’t afford.

If you’re in the competitive retail market, and your retailer is forced out of business, you wind up with what’s known as a “provider of last resort.” Typically, these providers charge higher prices to customers who can’t buy power from any other company because of poor credit scores. Customers who find themselves in this situation can switch quickly—assuming that there are any other retailers left.

At a February 19 meeting, PUC commissioner Arthur D’Andrea said, “The promise of the ERCOT market is that private capital bears the risk, not ratepayers.” But D’Andrea also acknowledged that the financial impact on at least some retail providers, city-owned utilities, and co-ops could ultimately result in higher rates for residential consumers. Commercial customers raised similar concerns. In a filing with the PUC, the Coalition of Concerned Customers, an ad hoc group of 36 businesses and cities, suggested that “the impact of the $9,000 per megawatt-hour prices will be disproportionately felt by commercial and industrial customers.”

For example, a manufacturing company with a $19,000 electricity bill for January can expect a bill of almost $1.7 million for the same electricity use in February, the group said. Had the caps been lowered when they should have been, it would have shaved $90,000 off that bill. In the days after the storm, ERCOT demanded bigger down payments from retailers for future power purchases. Most simply can’t afford it.

Of course, feeding the outrage over this crisis is the knowledge that much of it was preventable. Texas has struggled to meet electricity demand at times of peak usage since 2011, when a February freeze knocked out power to thousands of homes. The state faced another shortage that summer. The Federal Energy Regulatory Commission reviewed those outages and recommended changes that included winterizing power plants and establishing power reserves for bad weather. FERC had made similar suggestions as far back as 1989, but they were never mandated.

Houston mayor Sylvester Turner, a Democrat who was in the House of Representatives ten years ago, sponsored a bill that would have required ERCOT to secure reserve power for use in a crisis. The bill never got a committee hearing. Republican comptroller Glenn Hegar was in the Senate then, and he sponsored a bill, which was passed into law, requiring generators to file regular reports with the PUC outlining their preparedness for extreme weather. The bill, however, was toothless: it didn’t give the PUC the authority to mandate the weather protections.

Such preparations can be costly (although far less so than the fallout from the storm), and, because of the Texas climate, they are rarely needed. Former Houston mayor Bill White, who served on the North American Electric Reliability Council and also as deputy U.S. energy secretary, told me that both weatherization and reserve capacity are insurance policies against a crisis like the one we just experienced. You essentially pay up front for peace of mind. But because neither regulators nor state lawmakers ordered anybody to pay, nothing was done. “The whole issue of the insurance policy was ignored,” White said.

This time, given the severity, expense, and loss of life, it may be different. The Legislature, which has already begun hearings to investigate the outages, will likely take some sort of regulatory action, even if it’s just adopting the measures first proposed by Turner a decade ago. Whatever the market looks like as the fallout from the 2021 freeze-out subsides, though, it’s likely to be more costly, offer fewer consumer choices, and require more government oversight—the very opposite of what deregulation was supposed to deliver.

Disclosure: Loren Steffy was hired last fall by the Rockefeller Family Foundation to write a report on abandoned oil and gas wells in Texas. That will be released next week by Commission Shift, a newly formed organization that advocates reform of the state’s oversight of the oil and gas industry. Steffy has no association with Commission Shift.