5 ms·

This is a trend. PG&E in CA started it and now Texas... I guess climate change is risky business after all.

bsder 6y ago
Or you could say that CA and TX are demonstrating that deregulation is a failed strategy. "Vital infrastructure" and "market driven" are rarely a good match.
- refurb 6y ago
  To say CA is "deregulated" is kind of a bastardization of the term.
  - bsder 6y ago
    That may be, but what deregulation there has been has almost uniformly been a disaster (see: Enron). Vital infrastructure, practically by definition, is unprofitable. That's not a good match to profit driven markets.
    - astrange 6y ago
      PG&E's budget has a line-item veto by their regulator CPUC, who are just as happy if not more so to defer maintenance because they're mainly interested in not letting anyone's bills ever go up. They're investor-owned but not really privately controlled.
    - m12k 6y ago
      The free market is great at incentivizing companies to solve problems - but also to later "unsolve" solved problems so the company can keep their high profit margins even after the solutions have become trivial (see also Gillette, printer companies, out-of-patents drugs). The market solution to this "should" be that a competitor can undercut someone doing that, and drive them out of business - but why would anyone bother doing that, if the reward is to conquer a commoditized market that by all rights shouldn't be all that profitable, and isn't after your price war. If you have the chops to do that, you'll probably go into some other more profitable market instead (in that vein, hats off to that new drug company backed by Mark Cuban, if they end up actually doing that with generic drugs). Or someone does it, then gets an offer they can't refuse, so the upstart gets acquired by the incumbent, who can go back to exploiting their captive audience.
  - dalbasal 6y ago
    Honestly, there are few usages of the terms "deregulation" that aren't bastardized. It very rarely refers to a removal of laws. Deregulation can mean a change of laws, change of regulator, establishing a regulating consortium... etc. One deregulation doesn't necessarily have anything in common with another. We've reached a meta stage where "deregulation" means the types of policies favoured by the deregulation camp. It's not like Texas' grid is actually unregulated. They have their own regulatory structure. It's just kinda sorta supposed to behave like a unregulated grid would... if that sort of thing was actually possible. Extreme results in extreme conditions are more or less intentional. It's never going to be economical to prepare for 10 year events to avoid a few days of lost revenue. That, in deregulation-camp terms, means that it is a bad investment and wasteful. The whole pricing debacle is a great case in point: "ERCOT triggered the squeeze when it pushed up spot-market rates to $9,000 per megawatt hour" On one hand, the heart of the "deregulation" idea here is that "regulation" destroys pricing systems. On the other hand, what kind of a laissez faire market has a body that sets prices? In this case, it seems like there is a price regulator that is trying to replicate a failure in pricing systems... when demand and supply curves don't intersect and price goes to infinity.
- waterhouse 6y ago
  The infrastructure to produce food is pretty vital, but I think it's also mostly market-driven and works well. I think the issues around power utilities are more to do with a lack of competition, and legislation that creates perverse incentives. (I don't know what the current perverse incentives are, but at least as of 2010, an energy startup founder said[1] that power companies were legislated monopolies that were "restrained to charge a price only up to a certain regulated return on their capital", which meant it was "in the utility’s interest to buy the most capital intensive equipment that the regulatory commission will allow".) Can you legislate a monopoly and write enough careful regulations to make it do what you want without giving it perverse incentives that will cause some disasters here and there? I doubt this has been solved even in the absence of regulatory capture. [1] https://daniellefong.com/2010/02/11/how-law-shapes-the-business-landscape-and-a-patent-puzzle/ https://daniellefong.com/2010/02/11/how-law-shapes-the-busin...
  - deleted 6y ago
    [deleted]
  - klodolph 6y ago
    If you don't like the supermarket or farm, you can shop elsewhere. The infrastructure that brings food to our tables is roads and railways, the power grid which brings electricity to refrigerators and freezers, and water and sewage utilities. A supermarket or a farm are not part of our infrastructure. They may be "vital" but they are not infrastructure. You (as an individual) can't really comparison shop for infrastructure, unless you want to move.
    - bzbarsky 6y ago
      In your analogy, where the grid corresponds to roads and railways, the equivalent of the supermarket or farm is a wholesale electricity provider or power plant, right? In Massachusetts you can absolutely comparison shop for specific power plants or sets thereof as an individual, at least to the extent of explicitly picking which generation company your money goes to by default. Of course in the end the way the grid works these companies end up effectively buying electricity from each other as needed... So this analogy only goes so far; supermarkets do not usually buy food from each other, I'd think.

Or you could say that CA and TX are demonstrating that deregulation is a failed strategy. "Vital infrastructure" and "market driven" are rarely a good match.

refurb 6y ago
To say CA is "deregulated" is kind of a bastardization of the term.
- bsder 6y ago
  That may be, but what deregulation there has been has almost uniformly been a disaster (see: Enron). Vital infrastructure, practically by definition, is unprofitable. That's not a good match to profit driven markets.
  - astrange 6y ago
    PG&E's budget has a line-item veto by their regulator CPUC, who are just as happy if not more so to defer maintenance because they're mainly interested in not letting anyone's bills ever go up. They're investor-owned but not really privately controlled.
  - m12k 6y ago
    The free market is great at incentivizing companies to solve problems - but also to later "unsolve" solved problems so the company can keep their high profit margins even after the solutions have become trivial (see also Gillette, printer companies, out-of-patents drugs). The market solution to this "should" be that a competitor can undercut someone doing that, and drive them out of business - but why would anyone bother doing that, if the reward is to conquer a commoditized market that by all rights shouldn't be all that profitable, and isn't after your price war. If you have the chops to do that, you'll probably go into some other more profitable market instead (in that vein, hats off to that new drug company backed by Mark Cuban, if they end up actually doing that with generic drugs). Or someone does it, then gets an offer they can't refuse, so the upstart gets acquired by the incumbent, who can go back to exploiting their captive audience.
- dalbasal 6y ago
  Honestly, there are few usages of the terms "deregulation" that aren't bastardized. It very rarely refers to a removal of laws. Deregulation can mean a change of laws, change of regulator, establishing a regulating consortium... etc. One deregulation doesn't necessarily have anything in common with another. We've reached a meta stage where "deregulation" means the types of policies favoured by the deregulation camp. It's not like Texas' grid is actually unregulated. They have their own regulatory structure. It's just kinda sorta supposed to behave like a unregulated grid would... if that sort of thing was actually possible. Extreme results in extreme conditions are more or less intentional. It's never going to be economical to prepare for 10 year events to avoid a few days of lost revenue. That, in deregulation-camp terms, means that it is a bad investment and wasteful. The whole pricing debacle is a great case in point: "ERCOT triggered the squeeze when it pushed up spot-market rates to $9,000 per megawatt hour" On one hand, the heart of the "deregulation" idea here is that "regulation" destroys pricing systems. On the other hand, what kind of a laissez faire market has a body that sets prices? In this case, it seems like there is a price regulator that is trying to replicate a failure in pricing systems... when demand and supply curves don't intersect and price goes to infinity.
waterhouse 6y ago
The infrastructure to produce food is pretty vital, but I think it's also mostly market-driven and works well. I think the issues around power utilities are more to do with a lack of competition, and legislation that creates perverse incentives. (I don't know what the current perverse incentives are, but at least as of 2010, an energy startup founder said[1] that power companies were legislated monopolies that were "restrained to charge a price only up to a certain regulated return on their capital", which meant it was "in the utility’s interest to buy the most capital intensive equipment that the regulatory commission will allow".) Can you legislate a monopoly and write enough careful regulations to make it do what you want without giving it perverse incentives that will cause some disasters here and there? I doubt this has been solved even in the absence of regulatory capture. [1] https://daniellefong.com/2010/02/11/how-law-shapes-the-business-landscape-and-a-patent-puzzle/ https://daniellefong.com/2010/02/11/how-law-shapes-the-busin...
- deleted 6y ago
  [deleted]
- klodolph 6y ago
  If you don't like the supermarket or farm, you can shop elsewhere. The infrastructure that brings food to our tables is roads and railways, the power grid which brings electricity to refrigerators and freezers, and water and sewage utilities. A supermarket or a farm are not part of our infrastructure. They may be "vital" but they are not infrastructure. You (as an individual) can't really comparison shop for infrastructure, unless you want to move.
  - bzbarsky 6y ago
    In your analogy, where the grid corresponds to roads and railways, the equivalent of the supermarket or farm is a wholesale electricity provider or power plant, right? In Massachusetts you can absolutely comparison shop for specific power plants or sets thereof as an individual, at least to the extent of explicitly picking which generation company your money goes to by default. Of course in the end the way the grid works these companies end up effectively buying electricity from each other as needed... So this analogy only goes so far; supermarkets do not usually buy food from each other, I'd think.