5 ms·

What a disaster. I would suppose that as a public policy matter, in such a situation if all rules are going to go out the window to fix it / sort out who pays

What a disaster. I would suppose that as a public policy matter, in such a situation if all rules are going to go out the window to fix it / sort out who pays now, when you have to assign losses you would first squeeze the people who didn't "actually" incur costs that they have to pay? I would guess -- the power producers who although were promised $9000 / MWh, didn't actually incur that much to produce the power (subject to verification)? Claw back any payments to them first? Rather than stick the bill to the customers who were "unwittingly" participating in this whole scheme involuntarily (yet were somewhat informed and just underestimated the risks)? Or spread the cost to other retail sellers of electricity who may have been behaving correctly and now are the only ones standing left to pay the bills?

deleted 6y ago
[deleted]
rrmm 6y ago
Someone in the middle (ercot) could also go bankrupt (strategically or not). It'll be interesting to see if TX makes any major structural fixes or just slaps a band-aid on it (e.g., legislate some max rate or maybe special rules under disaster conditions). It is a mess indeed; entirely anticipated and seen ahead of time.
wmf 6y ago
It looks like Griddy is going out of business so anybody who owes them money may be able to avoid paying. ERCOT hasn't paid the producers yet (because they don't have the money as the article says) so they may end up paying them cents on the dollar.
- nradov 6y ago
  If Griddy goes bankrupt that won't erase their customers' debts. The customers will still be legally required to pay the receiver, who will pass on those payments to Griddy's creditors.
  - ThrustVectoring 6y ago
    There's a reason consumer debt is worth pennies on the dollar. The average legal obligation to pay Griddy's receiver $5000 will probably end up collecting somewhere between $500 and $50 after collection costs. Anyhow the point is that Griddy's creditors are also taking a haircut.
listenallyall 6y ago
Is this the desired outcome? Once power production falls below demand, which it did, heavily, then all power deliveries have opportunity costs. Heating a private home during an ice storm meant that amount of electricity was unable to be delivered to a more urgent (like a hospital) or more efficient (an emergency shelter, or apartment building) usage. I can empathize with the Griddy customers, largely because they likely did not realize they were essentially participating in an auction (as you stated, "unwittingly participated"), and probably would have chosen to lose power temporarily, rather than rack up 5-figure bills, but that's between them and Griddy to sort out. However, in general, it is unhealthy to refund -- i.e. subsidize -- private consumers who insist on receiving power when the large majority of others are going without. When a resource gets extremely scarce, it needs to become extremely expensive to help ensure it gets allocated efficiently. (just a sidenote, but yes I'd be in favor of state/local regulations that prioritize hospitals, shelters, emergency vehicles, etc to receive power at below-market rates)
ThrustVectoring 6y ago
You run the bailout through bankruptcy courts. The businesses are often normally profitable, so a debt-for-equity swap works for turning bankrupt businesses into operating businesses of some sort. There might be chains of bankruptcies where you have to cram down creditors-of-creditors, but that's the risk they took in these sorts of markets. Worst case there are power plants and other electric infrastructure that someone needs to operate, and that can be bought outright from bankrupt companies at fair value as a matter of public policy.

deleted 6y ago

[deleted]

rrmm 6y ago

Someone in the middle (ercot) could also go bankrupt (strategically or not). It'll be interesting to see if TX makes any major structural fixes or just slaps a band-aid on it (e.g., legislate some max rate or maybe special rules under disaster conditions). It is a mess indeed; entirely anticipated and seen ahead of time.

wmf 6y ago

It looks like Griddy is going out of business so anybody who owes them money may be able to avoid paying. ERCOT hasn't paid the producers yet (because they don't have the money as the article says) so they may end up paying them cents on the dollar.

nradov 6y ago
If Griddy goes bankrupt that won't erase their customers' debts. The customers will still be legally required to pay the receiver, who will pass on those payments to Griddy's creditors.
- ThrustVectoring 6y ago
  There's a reason consumer debt is worth pennies on the dollar. The average legal obligation to pay Griddy's receiver $5000 will probably end up collecting somewhere between $500 and $50 after collection costs. Anyhow the point is that Griddy's creditors are also taking a haircut.

listenallyall 6y ago

Is this the desired outcome? Once power production falls below demand, which it did, heavily, then all power deliveries have opportunity costs. Heating a private home during an ice storm meant that amount of electricity was unable to be delivered to a more urgent (like a hospital) or more efficient (an emergency shelter, or apartment building) usage. I can empathize with the Griddy customers, largely because they likely did not realize they were essentially participating in an auction (as you stated, "unwittingly participated"), and probably would have chosen to lose power temporarily, rather than rack up 5-figure bills, but that's between them and Griddy to sort out. However, in general, it is unhealthy to refund -- i.e. subsidize -- private consumers who insist on receiving power when the large majority of others are going without. When a resource gets extremely scarce, it needs to become extremely expensive to help ensure it gets allocated efficiently. (just a sidenote, but yes I'd be in favor of state/local regulations that prioritize hospitals, shelters, emergency vehicles, etc to receive power at below-market rates)

ThrustVectoring 6y ago

You run the bailout through bankruptcy courts. The businesses are often normally profitable, so a debt-for-equity swap works for turning bankrupt businesses into operating businesses of some sort. There might be chains of bankruptcies where you have to cram down creditors-of-creditors, but that's the risk they took in these sorts of markets. Worst case there are power plants and other electric infrastructure that someone needs to operate, and that can be bought outright from bankrupt companies at fair value as a matter of public policy.