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Texas Electric Bills Were $28B Higher Under Deregulation

134 points by pedrocr 6y ago

gok 6y ago
I'm not sure I totally buy this analysis. The ability to shop around for your electricity provider came along with a renewable portfolio standard, which was fully expected to raise overall rates a bit. And Texas has low rates overall compared to most US states.
finiteseries 6y ago
Search “Texas Electric Bills Were $28 Billion Higher Under Deregulation” via Google, and click the WSJ article link in the results to sidestep the paywall.
diryawish 6y ago
Is there a way to read past the paywall?
- Dirlewanger 6y ago
  Disable JS on the site. One click to do so if you have uBlock Origin.
nonameiguess 6y ago
Having lived through this here in Dallas and California's post-Enron adventure back in the day, it gives me strong priors against deregulated utilities, but I don't think this is a super strong argument against it. 60% of the population of Texas is about 17 million people, and dividing $28 billion over 17 years equally between them is about $98 a year, so did we get $98 a year better service? I have no idea how to answer that, but I don't think you can just see a higher price and say it's automatically worse. I will say my biggest complaint as a consumer of electricity has nothing at all to do with who sells me the power. It's the fact that our power lines are all above ground and the city does nothing to keep trees trimmed, so in an area with consistent high winds, my power is going out all the damn time because the lines are constantly getting cut. Reliability in this case is downstream of the utilities themselves. The energy company doesn't own the transmission lines or the trees. I have no idea what prevents the lines from getting buried. Seemingly just cost, but avoiding excess costs at the price of crappier service is common to regulated, unregulated, and direct government providers alike.
- bradstewart 6y ago
  This. The biggest problem with deregulation is the lack of incentive to build in redundancy and maintenance costs.
  - CivBase 6y ago
    What is the incentive for utilities and public providers? Just the fact that they can spend whatever they want and pass the bill on to the end user because they have no choice in the matter?
    - deleted 6y ago
      [deleted]
    - Spooky23 6y ago
      The same as the incentive for a slumlord... you minimize capital expenses and maximize return on equity. You can milk capital assets for a long time. The partners and shareholders yield higher dividends, and somebody (taxpayers, insurance, new investors, ratepayers) gets stuck with the bill when things go bad.
- adamc 6y ago
  Pretty clearly we didn't, since even before the latest disaster, we had frequent brownouts.
- solarhoma 6y ago
  It is beyond incredibly expensive to bury 138/345/720kV transmission lines. Orders of magnitude more expensive than running structures. With that said the vegetation surrounding the lines should be trimmed.
  - carlob 6y ago
    I don't think OP was talking about high-voltage lines: in most of Europe high voltage is way higher than most vegetation and within cities lines run underground.
question000 6y ago
I really suggest that people look into the life of Leland Olds if you want to understand the current state of the energy "industry" in the US. He created the modern power grid in the US, creating not only the biggest expansion of electrification in history of the US, but multiplied the private profits by forcing them to lower prices. He was fired as part of the Red Scare and the grid hasn't progressed much since then.
- WhompingWindows 6y ago
  "The grid hasn't progressed much since the Red Scare" -- that's a vast overstatement. The amount of changes in the last 60+ years since McCarthy's day has been tremendous. We've seen numerous technological advancements like solar, wind, gas, which provide new electrons from new distributed locales. We've seen new transmission projects, not as many as ideal admittedly. There have been new pipelines and new drilling technologies, enabling natural gas peakers while we work out renewable storage. We've also seen a decarbonization of the dirtiest coal and oil plants -- do you consider huge public health wins "not much progress"?. Even further, batteries, demand response, weatherization, LEDs, and many nascent technologies are all doing their part now to head towards an unthinkable scenario in 1960: a carbon neutral grid by 2050. To entirely revamp your energy system in 100 years is astounding. I'd recommend checking out Greentech Media and the Energy Gang podcast, you'll hear the latest in energy since the Red Scare.
casefields 6y ago
Mirror: https://archive.md/HgpBp https://archive.md/HgpBp
u678u 6y ago
Texas population has grown from 21 to 30 million people in that time. Its tough to really know what would have happened if something else was done.
- piva00 6y ago
  Shouldn't economies of scale dictate that the average price per person should go down (inflation-adjusted) rather than up though? I understand that adding capacity to support 9 million people and modern appliances over 17 years is a significant cost but when you average it down per capita I'd have believed that increases in productivity and technology would drive that figure down, not up.
  - fat_pikachu 6y ago
    Energy prices have outpaced inflation in that time frame despite productivity gains.
  - u678u 6y ago
    I was going to suggest that the original hydro and nuclear has lower costs than newer plant, but there doesn't seem to be any hydro and nuclear is small so I can't say.
  - Spooky23 6y ago
    Not necessarily. Electricity is driven by peak demand, and adding capacity takes time and is expensive.
minikites 6y ago
There shouldn't be a profit motive attached to basic services like electricity, policing (private prisons), or medicine. These functions are best handled by government because they should be services available fairly and equitably to every single citizen. Capitalist profit seeking necessarily excludes some individuals or generates perverse incentives (private prisons).
- tomp 6y ago
  This is exactly the wrong mentality that leads to exactly the wrong outcomes (e.g. the title of this article). The goal of “basic services” should never be cheap, but good instead (i.e. quality, not price). And that is what should be regulated (e.g. metrics like “health outcomes” in medicine, “number of blackouts” in power distribution, ...). Then, the market should take over, to optimise for price (== profit), because that also optimises for social well-being (e.g. in medicine, “cheaper” directly leads to “more affordable healthcare” and indirectly to “healthier population”). The idea that “profit” shouldn’t be optimised or that the government should take over is obviously misguided, because there is no guarantee or reason why the government would maintain quality if the free market cannot (instead of “profit” they would optimise for “employment” or “corruption” or “size of bureaucracy”).
  - CaptainZapp 6y ago
    > Then, the market should take over, to optimise for price (== profit) The problem with that is that it's far more attractive for a private entity to book profits, instead of investing into their infrastructure. Thinking about it, the Texas disaster seems to be quite a nice illustration of that.
    - tomp 6y ago
      So the metrics should measure the quality of the infrastructure and regulation should reflect that. Without the proper metrics, there’s no guarantee that the government will invest in infrastructure either (instead of, say, corruption - paying outrageous amounts of money to friends&family for subpar service).
jinkyu 6y ago
Texas has also been forced to overutilize more expensive means of energy production as well. this article misses lots of pertinent points for the agenda of bashing a state that it doesn't like politically
WaylonKenning 6y ago
I've seen a lot of news reports talking about people receiving $16,000 bills. Yes, that's because they're with a power company that charges the market rate for electricity. When there's a scarcity of electricity, the market rate goes way up. In fact, during those events that price increase is what encourages generators to bring on more supply to capture that revenue. All of that in itself isn't evil. But the retailer could have been more proactive to say "During terrible winter storms, paying the market rate is a bad idea. Switch companies now." Or a better idea would have been to charge $X a day as insurance, that would cap the price per kWh to $X. That way people have certainty as to what their maximum charge is. Imagine if the power company said "Pay $10 extra a month, and we'll make sure that in an adverse event, your bill for your normally consumed 1000 kWh would be $1000". The New Zealand electricity market is similarly deregulated like Texas and has some of the same benefits and problems. The great thing is you can choose your power retailer, that all have different types of plans that work for different people. Some only buy from 'green generators'. Some allow you to buy 'packs of electricity' in advance, a bit like buying a hedge. Imagine having 1000 kWh in your bank to spend during this peak event. Some don't charge daily rates for your holiday home. I like the innovation in the retail market. But that doesn't prohibit transmission companies, and generators from investing in their assets. Transmission companies are a natural monopoly so should be constrained from the free market. In NZ most of those have a maximum rate of return they're allowed to extract from their assets, so their profit is restricted. In turn they lobby to invest more into their assets which in turn increases their allowed profit. This leads to an outcome of overinvestments in assets, which in Texas's case might not be such a bad thing. Generators make their typical profit based on stable generation. They make their windfall based on adverse weather events, different hydrology, competing generator capacity going offline etc. The NZ market would have automated 5 minute auctions where the Grid Operator would purchase the cheapest bid from generators to meet the grid demand in that 5 minute block. There would also be diesel generators that would be guaranteed to provide the most expensive supply if things went wrong, so that would be the upper limit on the market. If all of this is interesting, check out the real time market pricing at https://www.em6live.co.nz/ https://www.em6live.co.nz/
- TulliusCicero 6y ago
  > But the retailer could have been more proactive to say "During terrible winter storms, paying the market rate is a bad idea. Switch companies now." I thought they did exactly that? https://www.bloomberg.com/news/articles/2021-02-15/texas-power-retailers-in-face-of-freeze-please-leave-us https://www.bloomberg.com/news/articles/2021-02-15/texas-pow... > One power supplier, Griddy, told all 29,000 of its customers that they should switch to another provider as spot electricity prices soared to as high as $9,000 a megawatt-hour. Griddy’s customers are fully exposed to the real-time swings in wholesale power markets, so those who don’t leave soon will face extraordinarily high electricity bills. > “We made the unprecedented decision to tell our customers -- whom we worked really hard to get -- that they are better off in the near term with another provider,” said Michael Fallquist, chief executive officer of Griddy. “We want what’s right by our consumers, so we are encouraging them to leave. We believe that transparency and that honesty will bring them back” once prices return to normal.
CivBase 6y ago
$28B / 17 years / (29M people * 60%) = $94.66 average per year per person My electric bill usually hovers around $100 per month. If it increased by $8 per month over the course of two decades, I wouldn't bat an eye. It looks like inflation alone could account for the difference (38.48% since 2004). That said, the recent incident suggests that quality-of-service has probably decreased. EDIT: I forgot about households. Looks like there is an average of 2.85 people per household in Texas. $94.66/yr * 2.85 = $269.78/yr or $22.48/mo. EDIT 2: I originally cited 9% inflation since 2016. I have no idea why I did that. I've corrected it to show 38.48% inflation since 2004. EDIT 3: The $28B only applies to 60% of residents. I've corrected the equations again to account for that.
- ryneandal 6y ago
  Since this math is per-person, I'd definitely notice a $25/month increase.
  - CivBase 6y ago
    Good point. I didn't consider households.
    - ryneandal 6y ago
      Another important note (although it's solely based on anecdote I've observed and heard from friends) is electric costs don't scale linearly with the addition of people in a household. No worries about not considering households, that's just life before starting a family. Lots of learning occurs :)
      - deleted 6y ago
        [deleted]
- tryptophan 6y ago
  This article was disappointing. It provided 0 information about whether or not the deregulation was the cause for the increased prices. The headline could have just as easily been "Texas electric bills were 28B higher as adoption of EVs increased(or any other thing that has changed since 16 years ago)".
hippich 6y ago
Before the freeze, I ordered this generator - https://www.amazon.com/gp/product/B07Q1DLKBG/ https://www.amazon.com/gp/product/B07Q1DLKBG/ (yet to receive it tho) As stated on the website, it can provide 9.5kWh per half a gallon, which is about $1 in Texas right now. Which becomes about 10c/kWh or $100/MW. Question is - why we do not hear stories about homeowners selling their gas-generated electricity into the grid and capturing the difference between $0.1/kWh and $9/kWh?
- AtlasBarfed 6y ago
  Can you reverse meter in Texas? Did you price solar panels too?
- rcurry 6y ago
  My guess is that the window for that kind of arbitrage closed faster than people would have been able to get set up to transact against it; I think you need a special account and meter if you want to sell power back to the grid.
- mbreese 6y ago
  Does Texas allow home owners to push power back onto the grid? I know this is common in some places, particularly for solar, but is that a thing in Texas? The cost of the equipment to allow customers to sell energy back onto the grid has got to be far more expensive than the savings from adding an individual 9.5 kW system. Particularly a gas powered system that won’t be consistently available.
  - barbacoa 6y ago
    If you tried to feedback to the grid you would need a generator that can phase match the grid power. Don't imagine any residential grade generators that are rated to do that. Plugging a regular generator into your house grid with the power on would cause very bad things to happen as you have 2 high power electrical waves fight one another and would burn down your house in quick order.
    - 6y ago
skynet-9000 6y ago
http://powertochoose.org/ http://powertochoose.org/ is the state of Texas' website for choosing your local electric provider that shows different providers and their prices. Not all of Texas is deregulated, so you'll need to choose a zip code that is.

134 points by pedrocr 6y ago

gok 6y ago

I'm not sure I totally buy this analysis. The ability to shop around for your electricity provider came along with a renewable portfolio standard, which was fully expected to raise overall rates a bit. And Texas has low rates overall compared to most US states.

finiteseries 6y ago

Search “Texas Electric Bills Were $28 Billion Higher Under Deregulation” via Google, and click the WSJ article link in the results to sidestep the paywall.

diryawish 6y ago

Is there a way to read past the paywall?

Dirlewanger 6y ago
Disable JS on the site. One click to do so if you have uBlock Origin.

nonameiguess 6y ago

Having lived through this here in Dallas and California's post-Enron adventure back in the day, it gives me strong priors against deregulated utilities, but I don't think this is a super strong argument against it. 60% of the population of Texas is about 17 million people, and dividing $28 billion over 17 years equally between them is about $98 a year, so did we get $98 a year better service? I have no idea how to answer that, but I don't think you can just see a higher price and say it's automatically worse. I will say my biggest complaint as a consumer of electricity has nothing at all to do with who sells me the power. It's the fact that our power lines are all above ground and the city does nothing to keep trees trimmed, so in an area with consistent high winds, my power is going out all the damn time because the lines are constantly getting cut. Reliability in this case is downstream of the utilities themselves. The energy company doesn't own the transmission lines or the trees. I have no idea what prevents the lines from getting buried. Seemingly just cost, but avoiding excess costs at the price of crappier service is common to regulated, unregulated, and direct government providers alike.

bradstewart 6y ago
This. The biggest problem with deregulation is the lack of incentive to build in redundancy and maintenance costs.
- CivBase 6y ago
  What is the incentive for utilities and public providers? Just the fact that they can spend whatever they want and pass the bill on to the end user because they have no choice in the matter?
  - deleted 6y ago
    [deleted]
  - Spooky23 6y ago
    The same as the incentive for a slumlord... you minimize capital expenses and maximize return on equity. You can milk capital assets for a long time. The partners and shareholders yield higher dividends, and somebody (taxpayers, insurance, new investors, ratepayers) gets stuck with the bill when things go bad.
adamc 6y ago
Pretty clearly we didn't, since even before the latest disaster, we had frequent brownouts.
solarhoma 6y ago
It is beyond incredibly expensive to bury 138/345/720kV transmission lines. Orders of magnitude more expensive than running structures. With that said the vegetation surrounding the lines should be trimmed.
- carlob 6y ago
  I don't think OP was talking about high-voltage lines: in most of Europe high voltage is way higher than most vegetation and within cities lines run underground.

question000 6y ago

I really suggest that people look into the life of Leland Olds if you want to understand the current state of the energy "industry" in the US. He created the modern power grid in the US, creating not only the biggest expansion of electrification in history of the US, but multiplied the private profits by forcing them to lower prices. He was fired as part of the Red Scare and the grid hasn't progressed much since then.

WhompingWindows 6y ago
"The grid hasn't progressed much since the Red Scare" -- that's a vast overstatement. The amount of changes in the last 60+ years since McCarthy's day has been tremendous. We've seen numerous technological advancements like solar, wind, gas, which provide new electrons from new distributed locales. We've seen new transmission projects, not as many as ideal admittedly. There have been new pipelines and new drilling technologies, enabling natural gas peakers while we work out renewable storage. We've also seen a decarbonization of the dirtiest coal and oil plants -- do you consider huge public health wins "not much progress"?. Even further, batteries, demand response, weatherization, LEDs, and many nascent technologies are all doing their part now to head towards an unthinkable scenario in 1960: a carbon neutral grid by 2050. To entirely revamp your energy system in 100 years is astounding. I'd recommend checking out Greentech Media and the Energy Gang podcast, you'll hear the latest in energy since the Red Scare.

casefields 6y ago

Mirror: https://archive.md/HgpBp https://archive.md/HgpBp

u678u 6y ago

Texas population has grown from 21 to 30 million people in that time. Its tough to really know what would have happened if something else was done.

piva00 6y ago
Shouldn't economies of scale dictate that the average price per person should go down (inflation-adjusted) rather than up though? I understand that adding capacity to support 9 million people and modern appliances over 17 years is a significant cost but when you average it down per capita I'd have believed that increases in productivity and technology would drive that figure down, not up.
- fat_pikachu 6y ago
  Energy prices have outpaced inflation in that time frame despite productivity gains.
- u678u 6y ago
  I was going to suggest that the original hydro and nuclear has lower costs than newer plant, but there doesn't seem to be any hydro and nuclear is small so I can't say.
- Spooky23 6y ago
  Not necessarily. Electricity is driven by peak demand, and adding capacity takes time and is expensive.

minikites 6y ago

There shouldn't be a profit motive attached to basic services like electricity, policing (private prisons), or medicine. These functions are best handled by government because they should be services available fairly and equitably to every single citizen. Capitalist profit seeking necessarily excludes some individuals or generates perverse incentives (private prisons).

tomp 6y ago
This is exactly the wrong mentality that leads to exactly the wrong outcomes (e.g. the title of this article). The goal of “basic services” should never be cheap, but good instead (i.e. quality, not price). And that is what should be regulated (e.g. metrics like “health outcomes” in medicine, “number of blackouts” in power distribution, ...). Then, the market should take over, to optimise for price (== profit), because that also optimises for social well-being (e.g. in medicine, “cheaper” directly leads to “more affordable healthcare” and indirectly to “healthier population”). The idea that “profit” shouldn’t be optimised or that the government should take over is obviously misguided, because there is no guarantee or reason why the government would maintain quality if the free market cannot (instead of “profit” they would optimise for “employment” or “corruption” or “size of bureaucracy”).
- CaptainZapp 6y ago
  > Then, the market should take over, to optimise for price (== profit) The problem with that is that it's far more attractive for a private entity to book profits, instead of investing into their infrastructure. Thinking about it, the Texas disaster seems to be quite a nice illustration of that.
  - tomp 6y ago
    So the metrics should measure the quality of the infrastructure and regulation should reflect that. Without the proper metrics, there’s no guarantee that the government will invest in infrastructure either (instead of, say, corruption - paying outrageous amounts of money to friends&family for subpar service).

jinkyu 6y ago

Texas has also been forced to overutilize more expensive means of energy production as well. this article misses lots of pertinent points for the agenda of bashing a state that it doesn't like politically

WaylonKenning 6y ago

I've seen a lot of news reports talking about people receiving $16,000 bills. Yes, that's because they're with a power company that charges the market rate for electricity. When there's a scarcity of electricity, the market rate goes way up. In fact, during those events that price increase is what encourages generators to bring on more supply to capture that revenue. All of that in itself isn't evil. But the retailer could have been more proactive to say "During terrible winter storms, paying the market rate is a bad idea. Switch companies now." Or a better idea would have been to charge $X a day as insurance, that would cap the price per kWh to $X. That way people have certainty as to what their maximum charge is. Imagine if the power company said "Pay $10 extra a month, and we'll make sure that in an adverse event, your bill for your normally consumed 1000 kWh would be $1000". The New Zealand electricity market is similarly deregulated like Texas and has some of the same benefits and problems. The great thing is you can choose your power retailer, that all have different types of plans that work for different people. Some only buy from 'green generators'. Some allow you to buy 'packs of electricity' in advance, a bit like buying a hedge. Imagine having 1000 kWh in your bank to spend during this peak event. Some don't charge daily rates for your holiday home. I like the innovation in the retail market. But that doesn't prohibit transmission companies, and generators from investing in their assets. Transmission companies are a natural monopoly so should be constrained from the free market. In NZ most of those have a maximum rate of return they're allowed to extract from their assets, so their profit is restricted. In turn they lobby to invest more into their assets which in turn increases their allowed profit. This leads to an outcome of overinvestments in assets, which in Texas's case might not be such a bad thing. Generators make their typical profit based on stable generation. They make their windfall based on adverse weather events, different hydrology, competing generator capacity going offline etc. The NZ market would have automated 5 minute auctions where the Grid Operator would purchase the cheapest bid from generators to meet the grid demand in that 5 minute block. There would also be diesel generators that would be guaranteed to provide the most expensive supply if things went wrong, so that would be the upper limit on the market. If all of this is interesting, check out the real time market pricing at https://www.em6live.co.nz/ https://www.em6live.co.nz/

TulliusCicero 6y ago
> But the retailer could have been more proactive to say "During terrible winter storms, paying the market rate is a bad idea. Switch companies now." I thought they did exactly that? https://www.bloomberg.com/news/articles/2021-02-15/texas-power-retailers-in-face-of-freeze-please-leave-us https://www.bloomberg.com/news/articles/2021-02-15/texas-pow... > One power supplier, Griddy, told all 29,000 of its customers that they should switch to another provider as spot electricity prices soared to as high as $9,000 a megawatt-hour. Griddy’s customers are fully exposed to the real-time swings in wholesale power markets, so those who don’t leave soon will face extraordinarily high electricity bills. > “We made the unprecedented decision to tell our customers -- whom we worked really hard to get -- that they are better off in the near term with another provider,” said Michael Fallquist, chief executive officer of Griddy. “We want what’s right by our consumers, so we are encouraging them to leave. We believe that transparency and that honesty will bring them back” once prices return to normal.

CivBase 6y ago

$28B / 17 years / (29M people * 60%) = $94.66 average per year per person My electric bill usually hovers around $100 per month. If it increased by $8 per month over the course of two decades, I wouldn't bat an eye. It looks like inflation alone could account for the difference (38.48% since 2004). That said, the recent incident suggests that quality-of-service has probably decreased. EDIT: I forgot about households. Looks like there is an average of 2.85 people per household in Texas. $94.66/yr * 2.85 = $269.78/yr or $22.48/mo. EDIT 2: I originally cited 9% inflation since 2016. I have no idea why I did that. I've corrected it to show 38.48% inflation since 2004. EDIT 3: The $28B only applies to 60% of residents. I've corrected the equations again to account for that.

ryneandal 6y ago
Since this math is per-person, I'd definitely notice a $25/month increase.
- CivBase 6y ago
  Good point. I didn't consider households.
  - ryneandal 6y ago
    Another important note (although it's solely based on anecdote I've observed and heard from friends) is electric costs don't scale linearly with the addition of people in a household. No worries about not considering households, that's just life before starting a family. Lots of learning occurs :)
    - deleted 6y ago
      [deleted]
tryptophan 6y ago
This article was disappointing. It provided 0 information about whether or not the deregulation was the cause for the increased prices. The headline could have just as easily been "Texas electric bills were 28B higher as adoption of EVs increased(or any other thing that has changed since 16 years ago)".

hippich 6y ago

Before the freeze, I ordered this generator - https://www.amazon.com/gp/product/B07Q1DLKBG/ https://www.amazon.com/gp/product/B07Q1DLKBG/ (yet to receive it tho) As stated on the website, it can provide 9.5kWh per half a gallon, which is about $1 in Texas right now. Which becomes about 10c/kWh or $100/MW. Question is - why we do not hear stories about homeowners selling their gas-generated electricity into the grid and capturing the difference between $0.1/kWh and $9/kWh?

AtlasBarfed 6y ago
Can you reverse meter in Texas? Did you price solar panels too?
rcurry 6y ago
My guess is that the window for that kind of arbitrage closed faster than people would have been able to get set up to transact against it; I think you need a special account and meter if you want to sell power back to the grid.
mbreese 6y ago
Does Texas allow home owners to push power back onto the grid? I know this is common in some places, particularly for solar, but is that a thing in Texas? The cost of the equipment to allow customers to sell energy back onto the grid has got to be far more expensive than the savings from adding an individual 9.5 kW system. Particularly a gas powered system that won’t be consistently available.
- barbacoa 6y ago
  If you tried to feedback to the grid you would need a generator that can phase match the grid power. Don't imagine any residential grade generators that are rated to do that. Plugging a regular generator into your house grid with the power on would cause very bad things to happen as you have 2 high power electrical waves fight one another and would burn down your house in quick order.
  - 6y ago

skynet-9000 6y ago

http://powertochoose.org/ http://powertochoose.org/ is the state of Texas' website for choosing your local electric provider that shows different providers and their prices. Not all of Texas is deregulated, so you'll need to choose a zip code that is.