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The Texas Legislature is in session right now, and a major topic of discussion is about who is going to end up with the short end of the high utility bill stick

by hrunt 6y ago

The Texas Legislature is in session right now, and a major topic of discussion is about who is going to end up with the short end of the high utility bill stick. While the media has played up bills of thousands or tens of thousands of dollars, that really only affected Griddy customers. Most consumers in Texas buy power at a fixed negotiated rate, and this rate functions somewhat like insurance. You pay a little bit more than market all of the time so you pay much, much less than market during these kinds of rare events. Knowing that, it is easy to say that the power providers who signed these deals eat the costs, just like insurance companies. Again, the reality is more complicated. A large number of power /generators/ had to pay very high rates to buy power on the open market when their generation capability went offline and they had contracts to provide power to the downstream providers. That is what happened to the Brazos cooperative. Should they be screwed? What I do not hear anyone talking about is that the biggest reason for the spike in power was ERCOT adding cost to the market prices in order to entice generators to get more power on the grid quickly. ERCOT has the authority to supplement energy prices with "adders" up to the max allowed cost of $9000/MWh. ERCOT did this for almost the entire duration, even when the market price for power was only at the astronomically high level of $250/MWh. No one is really discussing whether ERCOT should retroactively unapply these adders as a means of clearing things up. Given that $9000/MWh was not enticing /anyone/ back on the grid (burning that money to unfreeze pipes and valves would have gotten capacity back online faster), ERCOT could easily justify pulling those back. Generators who were online would still make plenty of profit, and the rest of the power ecosystem in Texas would not struggle with a bankruptcy event. What is likely to happen is that consumers will end up holding the bag. Griddy customers already feel this, but everyone else will see this in the form of higher negotiated rates over the next decade. This article shines a light on the true nature of the beast, though. Neither the PUC nor anyone else roaming the halls of the Texas legislature are going to support the consumer. The consumer is simply not represented by the lobbyists in downtown Austin.

brundolf 6y ago
This was the most disturbing part for me: > D’Andrea’s views carry more weight than usual because he speaks for the entire three-member utility commission following the resignations of chairman DeAnn Walker and commissioner Shelly Botkin in the wake of the crisis. Both were also appointed by Abbott. > D’Andrea indicated that he expects to remain the sole regulator over the electric markets for the foreseeable future. He said he doesn’t think Abbott is interested in appointing new commissioners during the legislative session, when appointees would have to be confirmed by lawmakers. “I went from being on a very hot seat to having one of the safest jobs in Texas,” D’Andrea said. “I think it’s just going to be me for a while.” > Given the focus on the PUC and its oversight of the market, new appointments would likely be “a big slog of a fight,” he said. Instead, he believes Abbott will wait at least until the end of the regular session in May before nominating anyone. “I think they probably enjoy having just one person up there because they can secure promises from me and I can’t say, ‘Oh, well, my fellow commissioners wouldn’t go along.’ It’s easier for everyone, actually. At a time like this when I’m communicating all the time with the Legislature, it’s easier to just be going through one person.”
tablespoon 6y ago
> What I do not hear anyone talking about is that the biggest reason for the spike in power was ERCOT adding cost to the market prices in order to entice generators to get more power on the grid quickly. ERCOT has the authority to supplement energy prices with "adders" up to the max allowed cost of $9000/MWh. ERCOT did this for almost the entire duration, even when the market price for power was only at the astronomically high level of $250/MWh. Wow, that's free market thinking gone mad. High prices can't conjure power stations out of thin air on short notice.
- ac29 6y ago
  Especially in Texas, where in the interest of avoiding as much federal regulation as possible, they have largely isolated their electrical grid. Theres no reason other than political that it couldn't be connected to the rest of the region, or country, or continent. That would have gone a long way in avoiding the worst outcomes.
- londons_explore 6y ago
  > Wow, that's free market thinking gone mad. High prices can't conjure power stations out of thin air on short notice. Except it can... With high enough prices businesses requiring power will shut down because it's more profitable to shut down and sell the electricity you no longer need than it is to stay open. The key thing stopping this working well is how few people who have the ability to do arbitrage. If I run a Subway shop and I have paid my power provider $0.10/kWh for power for my ovens for the year flat rate, then when the price spikes way up, I should be able to take that power I've already paid for, switch the ovens off, and sell it back to the grid for $99 /kWh, keeping a tidy profit, and effectively acting as a virtual power plant. A few big companies can already do this, but unless that ability is given to most market participants the market will always be vulnerable to collapse.
  - tablespoon 6y ago
    >>> What I do not hear anyone talking about is that the biggest reason for the spike in power was ERCOT adding cost to the market prices in order to entice generators to get more power on the grid quickly. >> Wow, that's free market thinking gone mad. High prices can't conjure power stations out of thin air on short notice. > Except it can... With high enough prices businesses requiring power will shut down because it's more profitable to shut down and sell the electricity you no longer need than it is to stay open. > The key thing stopping this working well is how few people who have the ability to do arbitrage. If I run a Subway shop... Nope, sorry. For one, that's basically a fantasy. Few business, and certainly not little sandwich shops, are going to have electricity traders on staff to jump at once-in-a-lifetime arbitrage opportunities (we hope). If sandwiches shop owners are spending their mental energy being ready for electricity arbitrage opportunities of the sandwich business, we're living in a dystopia. Secondly, apparently the high prices were meant to "get more power on the grid quickly," not encourage shuffling the grid's insufficient amount of power around market-style. Your idea doesn't actually solve the problem.

by hrunt 6y ago

brundolf 6y ago

This was the most disturbing part for me: > D’Andrea’s views carry more weight than usual because he speaks for the entire three-member utility commission following the resignations of chairman DeAnn Walker and commissioner Shelly Botkin in the wake of the crisis. Both were also appointed by Abbott. > D’Andrea indicated that he expects to remain the sole regulator over the electric markets for the foreseeable future. He said he doesn’t think Abbott is interested in appointing new commissioners during the legislative session, when appointees would have to be confirmed by lawmakers. “I went from being on a very hot seat to having one of the safest jobs in Texas,” D’Andrea said. “I think it’s just going to be me for a while.” > Given the focus on the PUC and its oversight of the market, new appointments would likely be “a big slog of a fight,” he said. Instead, he believes Abbott will wait at least until the end of the regular session in May before nominating anyone. “I think they probably enjoy having just one person up there because they can secure promises from me and I can’t say, ‘Oh, well, my fellow commissioners wouldn’t go along.’ It’s easier for everyone, actually. At a time like this when I’m communicating all the time with the Legislature, it’s easier to just be going through one person.”

tablespoon 6y ago

> What I do not hear anyone talking about is that the biggest reason for the spike in power was ERCOT adding cost to the market prices in order to entice generators to get more power on the grid quickly. ERCOT has the authority to supplement energy prices with "adders" up to the max allowed cost of $9000/MWh. ERCOT did this for almost the entire duration, even when the market price for power was only at the astronomically high level of $250/MWh. Wow, that's free market thinking gone mad. High prices can't conjure power stations out of thin air on short notice.

ac29 6y ago
Especially in Texas, where in the interest of avoiding as much federal regulation as possible, they have largely isolated their electrical grid. Theres no reason other than political that it couldn't be connected to the rest of the region, or country, or continent. That would have gone a long way in avoiding the worst outcomes.
londons_explore 6y ago
> Wow, that's free market thinking gone mad. High prices can't conjure power stations out of thin air on short notice. Except it can... With high enough prices businesses requiring power will shut down because it's more profitable to shut down and sell the electricity you no longer need than it is to stay open. The key thing stopping this working well is how few people who have the ability to do arbitrage. If I run a Subway shop and I have paid my power provider $0.10/kWh for power for my ovens for the year flat rate, then when the price spikes way up, I should be able to take that power I've already paid for, switch the ovens off, and sell it back to the grid for $99 /kWh, keeping a tidy profit, and effectively acting as a virtual power plant. A few big companies can already do this, but unless that ability is given to most market participants the market will always be vulnerable to collapse.
- tablespoon 6y ago
  >>> What I do not hear anyone talking about is that the biggest reason for the spike in power was ERCOT adding cost to the market prices in order to entice generators to get more power on the grid quickly. >> Wow, that's free market thinking gone mad. High prices can't conjure power stations out of thin air on short notice. > Except it can... With high enough prices businesses requiring power will shut down because it's more profitable to shut down and sell the electricity you no longer need than it is to stay open. > The key thing stopping this working well is how few people who have the ability to do arbitrage. If I run a Subway shop... Nope, sorry. For one, that's basically a fantasy. Few business, and certainly not little sandwich shops, are going to have electricity traders on staff to jump at once-in-a-lifetime arbitrage opportunities (we hope). If sandwiches shop owners are spending their mental energy being ready for electricity arbitrage opportunities of the sandwich business, we're living in a dystopia. Secondly, apparently the high prices were meant to "get more power on the grid quickly," not encourage shuffling the grid's insufficient amount of power around market-style. Your idea doesn't actually solve the problem.