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The rational profit-maximizing strategy is to minimize spending on routine maintenance and winterization, which predictably results in supply that will occasion

The rational profit-maximizing strategy is to minimize spending on routine maintenance and winterization, which predictably results in supply that will occasionally fail catastrophically, and then pocket billions in windfall profits during each catastrophe. If the state's objective is to maximize corporate profits at the expense of ratepayers, they have succeeded. But if the objective is to reduce the frequency of catastrophes, the state might consider reducing the incentive to produce catastrophes.

weaksauce 5y ago
> If the state's objective is to maximize corporate profits at the expense of ratepayers, they have succeeded. welcome to republican lead texas that deregulated the power grid and decided to isolate the grid instead of playing well with others.
specialist 5y ago
aka Disaster Capitalism
coryrc 5y ago
Unless all of your company's generators go down and you have to buy from another company to supply your fixed-rate customers, then you'll lose your shirt. Or if you tried to cheap out and always buy at market rate.
netizen-936824 5y ago
From your statement it sounds like profit maximization is anything but rational
roenxi 5y ago
Are you sure about that? Because people often come up with theories about how the capitalists are about to abandon everyone to their fate and then it turns out capitalism leads to Waffle House [0]. It makes capitalist sense to do disaster planning. There needs to be evidence that the incentives point to scrimping on maintenance. Usually the incentives for capitalists is to preserve their capital and keep it is great repair. The is a strong, rational incentive to solve problems like winterisation because the revenue is higher than normal if someone can (and potential profits are much higher). Capitalism will just try to do it cheaply and to a standard that customers are happy with rather than in a politically showy fashion with gold plated "see I've thrown the kitchen sink at this!" style. But it will nevertheless do it if there is any money at all to be had. [0] https://en.wikipedia.org/wiki/Waffle_House#Disaster_recovery https://en.wikipedia.org/wiki/Waffle_House#Disaster_recovery
- mjburgess 5y ago
  https://en.wikipedia.org/wiki/Collective_action_problem https://en.wikipedia.org/wiki/Collective_action_problem
  - roenxi 5y ago
    You're going to need to spell your point out a little more than just a link. If I manage to get in a position where I'm the only person in Texas selling power in a snowstorm I'm going to die filthy rich. That is the opposite of the collective action problem. There are enormous rewards for an actor the less other people act. Which is one of the reasons bigger corporations do disaster planning, it lets them scoop up profits when prices are higher. Capitalists don't give up easily if there is a person willing to spend money on something. They have flaws, but motivation to provide goods and services isn't one of them.
    - mjburgess 5y ago
      My point was that simple a-priori logic of the kind you offered regularly fails. A fast-food restaurant who wants to keeps its machines running has profit-driven feedback loops of a radically different nature than those of an energy market (esp. when such a market has natural monopolies). And likewise, markets are amoral. If the "market" opts for a failure every decade over a higher-priced day-to-day run... this isnt "rational" or "correct" or "ethical" or whatever. The way a market happens to function is amoral. You can make the argument that over fairly short time horizons in non-critical areas "meeting consumer demand" in most cases has a certain consequentialist justification. This doesnt carry over, a-priori to all possible cases. Ie., it is quite reasonable for a society via a democratic expression of ethical judgement to say "the market is not here considering the long-term impact in the right ethical manner"... ie., that being without power when it's -20 outside & affecting the whole population in ways not priced in by the market is a *moral failure*. It is the prerogative of the collective to say at once "here's how it should be", rather than via iterated interactions "here's how its happened to be".
- fsagx 5y ago
  No one gets a bonus because no disaster has happened in decades. Squeezing a percent or two out of a maintenance budget is exactly the kind of behavior that regularly is incentivized.

weaksauce 5y ago

> If the state's objective is to maximize corporate profits at the expense of ratepayers, they have succeeded. welcome to republican lead texas that deregulated the power grid and decided to isolate the grid instead of playing well with others.

specialist 5y ago

aka Disaster Capitalism

coryrc 5y ago

Unless all of your company's generators go down and you have to buy from another company to supply your fixed-rate customers, then you'll lose your shirt. Or if you tried to cheap out and always buy at market rate.

netizen-936824 5y ago

From your statement it sounds like profit maximization is anything but rational

roenxi 5y ago

Are you sure about that? Because people often come up with theories about how the capitalists are about to abandon everyone to their fate and then it turns out capitalism leads to Waffle House [0]. It makes capitalist sense to do disaster planning. There needs to be evidence that the incentives point to scrimping on maintenance. Usually the incentives for capitalists is to preserve their capital and keep it is great repair. The is a strong, rational incentive to solve problems like winterisation because the revenue is higher than normal if someone can (and potential profits are much higher). Capitalism will just try to do it cheaply and to a standard that customers are happy with rather than in a politically showy fashion with gold plated "see I've thrown the kitchen sink at this!" style. But it will nevertheless do it if there is any money at all to be had. [0] https://en.wikipedia.org/wiki/Waffle_House#Disaster_recovery https://en.wikipedia.org/wiki/Waffle_House#Disaster_recovery

mjburgess 5y ago
https://en.wikipedia.org/wiki/Collective_action_problem https://en.wikipedia.org/wiki/Collective_action_problem
- roenxi 5y ago
  You're going to need to spell your point out a little more than just a link. If I manage to get in a position where I'm the only person in Texas selling power in a snowstorm I'm going to die filthy rich. That is the opposite of the collective action problem. There are enormous rewards for an actor the less other people act. Which is one of the reasons bigger corporations do disaster planning, it lets them scoop up profits when prices are higher. Capitalists don't give up easily if there is a person willing to spend money on something. They have flaws, but motivation to provide goods and services isn't one of them.
  - mjburgess 5y ago
    My point was that simple a-priori logic of the kind you offered regularly fails. A fast-food restaurant who wants to keeps its machines running has profit-driven feedback loops of a radically different nature than those of an energy market (esp. when such a market has natural monopolies). And likewise, markets are amoral. If the "market" opts for a failure every decade over a higher-priced day-to-day run... this isnt "rational" or "correct" or "ethical" or whatever. The way a market happens to function is amoral. You can make the argument that over fairly short time horizons in non-critical areas "meeting consumer demand" in most cases has a certain consequentialist justification. This doesnt carry over, a-priori to all possible cases. Ie., it is quite reasonable for a society via a democratic expression of ethical judgement to say "the market is not here considering the long-term impact in the right ethical manner"... ie., that being without power when it's -20 outside & affecting the whole population in ways not priced in by the market is a *moral failure*. It is the prerogative of the collective to say at once "here's how it should be", rather than via iterated interactions "here's how its happened to be".
fsagx 5y ago
No one gets a bonus because no disaster has happened in decades. Squeezing a percent or two out of a maintenance budget is exactly the kind of behavior that regularly is incentivized.