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There's a crazy detail in here that I don't get. A big part of this article is about the price gouging which led to a windfall for gas companies and huge debts

• dflock 5y ago
  • GlassKingdom 5y ago
    Seeing lots of these Reddit-tier comments recently. Hope HackerNews stays high quality and doesn’t become populist garbage.
    • Aloha 5y ago
      I live here. For example, The Railroad Commission regulates oil and gas production, but not railroads, while insane is not the word I would use, some things about Texas are extra quirky. The utility (electricity) rates during part of the crisis are rational if eye watering.
      • scollet 5y ago
        Was forgiven on my end, which is some social justice.
        • SaintGhurka 5y ago
          Could you clarify that? Are you saying you were charged some crazy price during the storm and the bill was forgiven? I do recall the legislature (or courts, maybe) stepping in and offering some relief to the people who had "market-rate" plans.
      • deleted 5y ago
        [deleted]
      • causi 5y ago
        The price going up during power shortages, even to that level, is reasonable. Making people pay that rate without warning them they're about to do the equivalent of running their oven on champagne is what's nonsensical bordering on evil. Even without the use of smart meters or some alert system, a page on their signup paperwork that says "Energy prices may increase drastically during overload conditions. Please indicate the maximum rate you are willing to pay" with a few checkboxes at 2x, 5x, 10x, 25x, 100x, etc would be fine.
        • Aloha 5y ago
          I'm not sure any consumers ended up paying those rates in the end. That said, the pay-go market rate plans do make (it's in the electricity facts statement) it abundantly clear that you'll pay more, potentially a lot more, during extraordinary times.
        • Karrot_Kream 5y ago
          +1 You just need a circuit breaker here. It's a classic case of resource exhaustion. At some point your system's production is just too far from its consumption and the queue will not drain. Spare the people their money and protect your own service. Win win.
        • viraptor 5y ago
          Are there any smart metres which can do this? I'm not familiar with Texas, but every place I lived at was basically always connected and the gas/electricity would have to be turned off manually. I know pre-paid metres exist, but that's slightly different.
          • causi 5y ago
            Even something like sending a text to the phone number attached to the account with a warning would be fine.
      • SyzygistSix 5y ago
        I think the word "corrupt" would be a better choice than "quirky" in this instance. The kind of corruption that occurs in capitalist, communist, and mixed markets alike because of the the commonality that they are run by humans.
    • kodah 5y ago
      Any time someone comments on Texas or California you can be assured state based nationalism will show it's ass. I live in California and was raised in Texas. I love both states and am extra tired of people's edgy comments about either.
      • mullingitover 5y ago
        I live in California and am an enthusiastic proponent of dissolving the states entirely, devolving their powers to the municipal level. I have no loyalty to any state, they are the middle management of government.
    • teh_klev 5y ago
      https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html Please don't post comments saying that HN is turning into Reddit. It's a semi-noob illusion, as old as the hills.
• saddlerustle 5y ago
  The price dropped because load on the grid dropped after ERCOT ordered blackouts. This was the correct thing to do as despite lower load there was still clearly insufficient supply, and as long as there is insufficient supply you don't want expensive peaker plants to stop getting paid.
  • Dylan16807 5y ago
    The price to keep all those plants running is a lot less than $9k though.
    • jweir 5y ago
      ERCOT does not have a capacity market. So you can’t get paid merely to have a functioning plant that will never run. It is the only market not to have one. So you get to set the price when you do run. The price limit is 9999.99 which is the DB column size for price AFAIK. https://cpowerenergymanagement.com/why-doesnt-texas-have-a-capacity-market/ https://cpowerenergymanagement.com/why-doesnt-texas-have-a-c...
      • Dylan16807 5y ago
        Yes, but that's a separate concern from keeping them all on right now. Are you saying with confidence that was the motivation? And that still isn't much of how they make the decision including how long to override it.
      • dustintrex 5y ago
        Perhaps we should be happy they're apparently running COBOL on a mainframe, so the price limit was not INT_MAX.
        • Moru 5y ago
          From what I remember of COBOL I would feel much safer with that than to use INT's for money calculations...
• raverbashing 5y ago
  > The computer system that runs the market, though, interpreted this as an oversupply (in the middle of blackouts!) and dropped prices Ah yes, the intelligence of automated systems with limited visibility Looks like someone forgot to add grid frequency as an input to the price engines
• beerandt 5y ago
  For one thing, the DOE emergency market waiver to temporarily exceed emissions limits set a market floor price of $1500. [0] So that's your starting price before buyers ever bid/compete for those MW. (Emissions limits are especially difficult in cold weather due to a less complete burn off and less atmospheric mixing. But this isn't to spinup new dirty power, so much as to run existing plants at full capacity without having to reduce output to more ideal levels for emissions purposes.) To dispel a few other points that get repeated without much thought: Texas' grid isolation didn't contribute. Surrounding grids including in Louisiana and Oklahoma were also undersupplied and operating under emergency conditions with requests for voluntary reduced consumption, and were also dangerously close to blackouts. Connections to grids without surplus power doesn't solve anything. Wind power was frozen in and decreased over 97% over the previous 2 weeks as blades iced over or wind speed exceeded allowable limits. Solar was also iced over. Which led to a premature demand for gas peaker plants to offset this loss via a 450%+ increase in generation. So peakers were needed to offset intermittent renewables instead of as a buffer to meeting peak demand. "Winterizing" NG plants, wells and lines is complex. What's simple and mostly ignored, is an overloaded NG system causes pressure drops, and pressure drops contribute disproportionately to condensate (both water and methane hydrates) freezing and reducing flow, which is a runaway condition. Pressure drops affects this much greater than temperature (even propane tanks in summer ice up when used at a high rate for an extended time). An increase in NG supply (more wells and pipes) would have greatly improved things without any "winterizing". Coal and nuclear plants don't suffer from this fuel supply limitation since they have on-site fuel supplies, and the recent closure of 20%+ of the states coal capacity surely contributed, as do the remaining closures going back a decade+ of increased EPA regulation. [0]https://www.energy.gov/sites/default/files/2021/02/f82/DOE%20202%28c%29%20Emergency%20Order%20-%20ERCOT%2002.14.2021.pdf https://www.energy.gov/sites/default/files/2021/02/f82/DOE%2...
  • cloverich 5y ago
    I guess the follow up question would be: How do our more northern areas go about winterizing -- do they do the extra NG system as you suggest? Or do they also freeze and nobody does it any better than Texas? I had thought the winterization claims stemmed from areas that experience this weather more frequently having solved it, or at least improved it, so it would be more interesting to compare to how they handle it. Esp if the cited mandates are federal and e.g. affect them as well?
• rossdavidh 5y ago
  So, it's bogus, and I (as a Texan) didn't like it, but there is a rationale. The market incentive for having excess capacity (that isn't always needed), is that you will get paid windfall profits when you are needed. Some power sources, if not needed most of the time, would not be profitable to build. The market system is supposed to reward building excess capacity (needed for occasions like this one) by providing occasional windfall profits. The alternative, non-market way would be to guarantee revenue even in times when the excess capacity isn't needed (most of the time), by paying more than the spot market price would normally provide. Personally, I prefer that way. But, if you're using a market system for electricity, you need an incentive to build excess capacity. Then, when a non-market mechanism (the order to impose blackouts) interferes with that, you need to make up for that somehow. Again, I'm not saying I totally buy this, but there is the rationale.
  • mindslight 5y ago
    The integral of occasional short intervals of extremely high prices is not a predictable value. Thus this market dynamic is not one capable of providing appropriate investment. The alternative market based way is to a have an additional "capacity market" for which providers offer bids for committing to provide future capacity. Thus providers who can guarantee they will provide a certain capacity are compensated for it, without needing to have a shortage of electricity to make the dynamic pay out. This is how it is done for the rest of the US. Texas uniquely forewent the capacity market as a subsidy for wind, since wind providers are unable to supply guaranteed capacity and thus unable to bid in the capacity market. This creates a much more raw dynamic where grid capacity is fine right up until it is not.
    • rossdavidh 5y ago
      While Texas' method was not the standard, I believe California did something similar (with similar results in the late 90's, leading to the decline of Gray Davis' political fortunes). I agree it's not the best way.
  • cherrycherry98 5y ago
    Thanks for this explanation. There should be incentive for providing excess capacity but there are issues with the approach being taken. If I'm not mistaken, customers have little idea that a price surge is in effect and what the rate is until they get billed. It's not like going to a gas station, seeing a price, and being able to opt in to the transaction, seek alternatives, or plan to self ration your consumption, as you're prepaying for the energy. The way the Texas model works it seems to assume that customers have a financial buffer that they're able to tap into to pay the higher rates. Everyone should plan for such a buffer but for those that don't have one it places hardship on them. It's also a risk for the provider that they won't get paid their windfall. You can't send huge surprise bills and expect people to pay them. A sensible approach is to charge a bit extra under normal conditions to build a communal buffer that is used to pay for emergency power production. As long as there's good governance, this derisks the system. Another alternative might be energy bill insurance, if such a thing exists. It's easier to plan for a fixed monthly premium than a surprise payment in an emergency.
• mschaef 5y ago
  > manually set prices at the maximum of $9,000 per megawatt hour. $9,000 was a cap. If it wasn't for the cap, I'm sure prices would have gone up much higher under market rules. (ie: It's not like the market operators pushed prices up to that point, the operators capped it at that point.) > (By comparison, the average hourly price in 2020 was $25.73 Commodities markets are notoriously volatile when there is mismatch between demand and supply. (There are also cases where power prices go negative, when there is more supply than demand. What's happening there is that generators are paying for the right to say online, on the premise that a shutdown is more costly. For large baseload units, this can absolutely be the case.)
  • zardo 5y ago
    > (ie: It's not like the market operators pushed prices up to that point, the operators capped it at that point.) That's exactly what the article says happened. They brought on extra power generation which dropped the market price, which they then overrode manually.