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You do not pay market rate for electricity. Texas does allow consumers to pay market rate for electricity, you may have heard about last winter people getting

by jweir 4y ago

You do not pay market rate for electricity. Texas does allow consumers to pay market rate for electricity, you may have heard about last winter people getting bills in the several thousands of dollars when prices spiked. CAISO was 97% renewable for only a moment, not the entire day. The 3rd was a Sunday, not a peak day. And the average price for energy for the day was $30.77 (day head) $27.1 (real time) for TH_SP15_GEN-APND (per MWh)

m463 4y ago
> You do not pay market rate for electricity. however it should be ... vaguely ... related. In california it is not. it's easy to pay 40-50 cents/Kwh (~$500/MWh)
samkater 4y ago
My understanding, to put it in AWS EC2 pricing terms, is that we do not pay the market "spot" rate for electricity (variable, often less than what you might pay elsewhere, but could spike up) - which is what Texas allowed. Typically we pay the "on demand" rate which is fixed. Large energy users probably negotiate "reserved" pricing. My point being, we pay the market rate, those massive hikes are just built-in over a long period of time.
- ajross 4y ago
  That only works if the demand curve (the price the market will bear at given levels of shortage) and the cost curve (the actual price to produce the energy) match up. In fact they never do, especially in this market. Texas producers weren't spending 100x (or whatever) more to produce that electricity, that spike just reflected the amount that customers who "had to keep the lights on" were willing to bear. In fact total utility costs are basically flat. They didn't hire 100x more employees or work 100x more hours to get things running again. They didn't have to build 100x more substations, etc... And that's why spot pricing is a disaster for consumers. It creates a perverse incentive for producers to reduce supply.
  - csours 4y ago
    The Texas spike was not what customers were willing to bear, the Texas spike was set to the max price by the regulator because they thought the pricing system wasn't working.
    - sangnoir 4y ago
      > Texas spike was set to the max price by the regulator... IIRC, a member of ERCOT who resigned claimed high-ranked state politician(s) pressured the regulator to do set the max price - so it wasn't the independent judgment of the regulator that the system was working; or that this was the solution.
  - shiftpgdn 4y ago
    There are currently no residential consumers in Texas on spot rate plans since the only provider had their license revoked. https://www.cbsnews.com/dfw/news/ercot-shuts-down-wholesale-electricity-provider-griddy-texas/ https://www.cbsnews.com/dfw/news/ercot-shuts-down-wholesale-...
    - selectodude 4y ago
      Yeah, after the last catastrophe. They learned a lesson.
  - JamesBarney 4y ago
    The economic reason people should be paying 100x the cost to supply is to incentivize people to build spare capacity.
    - notch656a 4y ago
      Generally agree although there is something a bit sinister about a market where you don't really know the price until after you've bought the product. IMO giving a utility provider blank check is like raw-dogging cheap hookers every night and then being surprised when your luck runs out. If people WANT this kind of contract I hope that their consent is an informed one. I'm not one to stop people from engaging in their own reckless behavior.
deleted 4y ago
[deleted]
shiftpgdn 4y ago
You should keep in mind that only one provider allowed end users to pay spot rate and ERCOT revoked their license to operate after the freeze where power rates went to $4000/MWh. The average Texan (excluding people in East Texas who are on the Eastern power grid, and people in Austin) buy their energy on a 12 month contract from an intermediary who THEN negotiates a flat rate or gambles on beating the sold contracts on spot.
hunterb123 4y ago
That's not accurate. 99% of people are on fixed rate plans. Mainly it was one company, Griddy, that sold gullible people variable rate plans. Griddy was then banned as it failed to provide people power during this time, suggesting their users to switch. Most Texans are on fixed rate plans via TXU, Reliant, or the many other normal providers. It was suggested to pass a law preventing variable rate plans that gamble like that, but I'm not sure the state of that.
- lesuorac 4y ago
  What was Griddy telling gullible people that wasn't the truth? As far as I've seen, they've been completely honest about their pricing. > [Griddy] does warn customers, however, that the wholesale price is capped by state regulators at $9 a kilowatt-hour. [1] It's not Griddys fault that Texas doesn't prepare for winter storms that hit the state once per decade. Griddy doesn't produce electricity. Griddy doesn't build power lines. Griddy did however get customers power and thats why many of them were upset about how much the state set the wholesale price at. [1]: https://www.caller.com/story/news/local/texas/state-bureau/2021/03/01/griddy-electric-bills-spiked-during-freeze-explanation/4549742001/ https://www.caller.com/story/news/local/texas/state-bureau/2...
  - hunterb123 4y ago
    Their page downplayed the risks of variable pricing and their process during the ordeal was unprofessional. It was a 100 year freeze, not a decade one. Never in my life until then did we have longer than 2 days of snow/ice. Most of us don't insulate our pipes for that reasoning, though flexpiping is common to help against minor freezing. Same reason as to why a lot of people don't have A/Cs on the West Coast. Yeah the grid should have been winterized, but the pricing problem for customers was entirely on Griddy. I have a question, are you from Texas?
    - lesuorac 4y ago
      > Their page downplayed the risks of variable pricing and their process during the ordeal was unprofessional. That's rather unspecific. As far as I've seen the risk of 9k/MW always comes up in articles about Griddy (even pre-2021) and even happened to customers prior to 2021. And before the storm they notified customers that they should "switch providers" due to expected high prices. The 2021 storm could be a 1/100 year but a non-trival winter storm hits Texas every 10 years. Letting pipes burst due to an extreme event can be a valid strategy but just be honest that the plan is that. https://www.nytimes.com/2011/02/05/us/05storm.html https://www.nytimes.com/2011/02/05/us/05storm.html

by jweir 4y ago

m463 4y ago

> You do not pay market rate for electricity. however it should be ... vaguely ... related. In california it is not. it's easy to pay 40-50 cents/Kwh (~$500/MWh)

samkater 4y ago

My understanding, to put it in AWS EC2 pricing terms, is that we do not pay the market "spot" rate for electricity (variable, often less than what you might pay elsewhere, but could spike up) - which is what Texas allowed. Typically we pay the "on demand" rate which is fixed. Large energy users probably negotiate "reserved" pricing. My point being, we pay the market rate, those massive hikes are just built-in over a long period of time.

ajross 4y ago
That only works if the demand curve (the price the market will bear at given levels of shortage) and the cost curve (the actual price to produce the energy) match up. In fact they never do, especially in this market. Texas producers weren't spending 100x (or whatever) more to produce that electricity, that spike just reflected the amount that customers who "had to keep the lights on" were willing to bear. In fact total utility costs are basically flat. They didn't hire 100x more employees or work 100x more hours to get things running again. They didn't have to build 100x more substations, etc... And that's why spot pricing is a disaster for consumers. It creates a perverse incentive for producers to reduce supply.
- csours 4y ago
  The Texas spike was not what customers were willing to bear, the Texas spike was set to the max price by the regulator because they thought the pricing system wasn't working.
  - sangnoir 4y ago
    > Texas spike was set to the max price by the regulator... IIRC, a member of ERCOT who resigned claimed high-ranked state politician(s) pressured the regulator to do set the max price - so it wasn't the independent judgment of the regulator that the system was working; or that this was the solution.
- shiftpgdn 4y ago
  There are currently no residential consumers in Texas on spot rate plans since the only provider had their license revoked. https://www.cbsnews.com/dfw/news/ercot-shuts-down-wholesale-electricity-provider-griddy-texas/ https://www.cbsnews.com/dfw/news/ercot-shuts-down-wholesale-...
  - selectodude 4y ago
    Yeah, after the last catastrophe. They learned a lesson.
- JamesBarney 4y ago
  The economic reason people should be paying 100x the cost to supply is to incentivize people to build spare capacity.
  - notch656a 4y ago
    Generally agree although there is something a bit sinister about a market where you don't really know the price until after you've bought the product. IMO giving a utility provider blank check is like raw-dogging cheap hookers every night and then being surprised when your luck runs out. If people WANT this kind of contract I hope that their consent is an informed one. I'm not one to stop people from engaging in their own reckless behavior.

deleted 4y ago

[deleted]

shiftpgdn 4y ago

You should keep in mind that only one provider allowed end users to pay spot rate and ERCOT revoked their license to operate after the freeze where power rates went to $4000/MWh. The average Texan (excluding people in East Texas who are on the Eastern power grid, and people in Austin) buy their energy on a 12 month contract from an intermediary who THEN negotiates a flat rate or gambles on beating the sold contracts on spot.

hunterb123 4y ago

That's not accurate. 99% of people are on fixed rate plans. Mainly it was one company, Griddy, that sold gullible people variable rate plans. Griddy was then banned as it failed to provide people power during this time, suggesting their users to switch. Most Texans are on fixed rate plans via TXU, Reliant, or the many other normal providers. It was suggested to pass a law preventing variable rate plans that gamble like that, but I'm not sure the state of that.

lesuorac 4y ago
What was Griddy telling gullible people that wasn't the truth? As far as I've seen, they've been completely honest about their pricing. > [Griddy] does warn customers, however, that the wholesale price is capped by state regulators at $9 a kilowatt-hour. [1] It's not Griddys fault that Texas doesn't prepare for winter storms that hit the state once per decade. Griddy doesn't produce electricity. Griddy doesn't build power lines. Griddy did however get customers power and thats why many of them were upset about how much the state set the wholesale price at. [1]: https://www.caller.com/story/news/local/texas/state-bureau/2021/03/01/griddy-electric-bills-spiked-during-freeze-explanation/4549742001/ https://www.caller.com/story/news/local/texas/state-bureau/2...
- hunterb123 4y ago
  Their page downplayed the risks of variable pricing and their process during the ordeal was unprofessional. It was a 100 year freeze, not a decade one. Never in my life until then did we have longer than 2 days of snow/ice. Most of us don't insulate our pipes for that reasoning, though flexpiping is common to help against minor freezing. Same reason as to why a lot of people don't have A/Cs on the West Coast. Yeah the grid should have been winterized, but the pricing problem for customers was entirely on Griddy. I have a question, are you from Texas?
  - lesuorac 4y ago
    > Their page downplayed the risks of variable pricing and their process during the ordeal was unprofessional. That's rather unspecific. As far as I've seen the risk of 9k/MW always comes up in articles about Griddy (even pre-2021) and even happened to customers prior to 2021. And before the storm they notified customers that they should "switch providers" due to expected high prices. The 2021 storm could be a 1/100 year but a non-trival winter storm hits Texas every 10 years. Letting pipes burst due to an extreme event can be a valid strategy but just be honest that the plan is that. https://www.nytimes.com/2011/02/05/us/05storm.html https://www.nytimes.com/2011/02/05/us/05storm.html