Texas Electric Bills Were $28B Higher Under Deregulation(wsj.com)
wsj.com
Texas Electric Bills Were $28B Higher Under Deregulation
https://www.wsj.com/articles/texas-electric-bills-were-28-billion-higher-under-deregulation-11614162780
160 comments
I don't know why the city would be the ones responsible for trimming the trees.
They have no expertise in trimming trees near powerlines which comes with special concerns and risks. Using trained personnel for powerlines probably gives them a chance to do inspection on powerlines to insure that they are in good condition.
It seems those companies which are profiting or engaging in business should be paying some sort of fee to whomever does maintain the lines. If they aren't trimming, then maybe they aren't paying enough. Which is exactly how the entire situation with not winterizing came about in the first place. I imagine those people who bought and traded electricity on the market balked at paying maintenance fees.
They have no expertise in trimming trees near powerlines which comes with special concerns and risks. Using trained personnel for powerlines probably gives them a chance to do inspection on powerlines to insure that they are in good condition.
It seems those companies which are profiting or engaging in business should be paying some sort of fee to whomever does maintain the lines. If they aren't trimming, then maybe they aren't paying enough. Which is exactly how the entire situation with not winterizing came about in the first place. I imagine those people who bought and traded electricity on the market balked at paying maintenance fees.
I can tell you that in New Jersey, all the trees on the sidewalk are "town trees". You aren't allowed to cut them down and your municipality is responsible for trimming them. They've got staff and equipment to handle it.
Having said that, I've seen the local power utility trimming those trees as well, so they'll take action to keep the lights on.
Having said that, I've seen the local power utility trimming those trees as well, so they'll take action to keep the lights on.
The utility has an easement for the lines and have the right to maintain trim trees, etc.
The family farm I worked on had a easement/right of way for a pipeline and power lines... they actually maintained a road at their expense to access a valve.
The family farm I worked on had a easement/right of way for a pipeline and power lines... they actually maintained a road at their expense to access a valve.
In Austin here, behind our house there are trees growing up and ivy growing onto the lines. We called every week last spring, the City had no interest in trimming it. We finally got all the neighbors to call in on dedicated days so they were getting a call almost every day.
Still, they haven't trimmed them. With the ice last week, I'm shocked the lines didn't come down.
Still, they haven't trimmed them. With the ice last week, I'm shocked the lines didn't come down.
In New York, utilities trim branches a few feet from lines periodically.
They do this because they have service quality standards set by the public service commission, and it’s cheaper to trim and maintain rights of way than to be fined or denied rate increases for electricity delivery. (Electric supply is based on variable market rates)
They do this because they have service quality standards set by the public service commission, and it’s cheaper to trim and maintain rights of way than to be fined or denied rate increases for electricity delivery. (Electric supply is based on variable market rates)
I'm in western Washington and there are so many trees that it is hard to not have power lines go through them. Here's my power line and my Comcast cable [1]. They are do deeply in that tree that it is in essence an extra pole for them.
Just watching the power lines while driving around, I see zillions of places like that here.
From what I read, if the power company expects the line to end up in trees (or purposefully routes a new line through an existing tree) they use a line with a special insulation designed to handle the abrasion from rubbing against the tree.
Lines that are not meant to go through trees do not have that special insulation, and if they end up going through a tree it can abrade the insulation which can be quite dangerous.
[1] https://imgur.com/gallery/G8eDOgQ
Just watching the power lines while driving around, I see zillions of places like that here.
From what I read, if the power company expects the line to end up in trees (or purposefully routes a new line through an existing tree) they use a line with a special insulation designed to handle the abrasion from rubbing against the tree.
Lines that are not meant to go through trees do not have that special insulation, and if they end up going through a tree it can abrade the insulation which can be quite dangerous.
[1] https://imgur.com/gallery/G8eDOgQ
This. The biggest problem with deregulation is the lack of incentive to build in redundancy and maintenance costs.
What is the incentive for utilities and public providers? Just the fact that they can spend whatever they want and pass the bill on to the end user because they have no choice in the matter?
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The same as the incentive for a slumlord... you minimize capital expenses and maximize return on equity. You can milk capital assets for a long time.
The partners and shareholders yield higher dividends, and somebody (taxpayers, insurance, new investors, ratepayers) gets stuck with the bill when things go bad.
The partners and shareholders yield higher dividends, and somebody (taxpayers, insurance, new investors, ratepayers) gets stuck with the bill when things go bad.
Pretty clearly we didn't, since even before the latest disaster, we had frequent brownouts.
It is beyond incredibly expensive to bury 138/345/720kV transmission lines. Orders of magnitude more expensive than running structures. With that said the vegetation surrounding the lines should be trimmed.
I don't think OP was talking about high-voltage lines: in most of Europe high voltage is way higher than most vegetation and within cities lines run underground.
I recently built a house and had to work with power company to bury the cable instead of running it on poles (for the view mostly, not reliability). From what I hear - they prefer to run low voltage (keep in mind, we run 110V vs 220V in Europe) up-to 150ft. From there it is either a significant voltage drop or expensive thick cable. Hence all these wires on these wooden poles - they are actually high voltage.
I lived in ex-USSR country where 220V were distributed through the street over steel (and corroded) wires on poles. Running a stick welder meant lights flickering for the whole street. Flickering to the point where TVs and computers would restart. (With my current setup, with high voltage running within 75ft off the meter, I can run up to 400 Amps without affecting anyone around me.)
And yeah, it cost me total about $15k for a total of 300ft of the high voltage line to be buried. Vs. $2,400 for two poles of overhead lines.
I lived in ex-USSR country where 220V were distributed through the street over steel (and corroded) wires on poles. Running a stick welder meant lights flickering for the whole street. Flickering to the point where TVs and computers would restart. (With my current setup, with high voltage running within 75ft off the meter, I can run up to 400 Amps without affecting anyone around me.)
And yeah, it cost me total about $15k for a total of 300ft of the high voltage line to be buried. Vs. $2,400 for two poles of overhead lines.
This is a misunderstanding due to a mix-up of terminology.
In power distribution "high voltage" means >50-100 kV. Extra high voltage is everything >200 kV. Low voltage is everything below <50 kV.
Low voltage is what is delivered to neighbourhoods and then stepped down to the end user voltages (230 / 400 V). The power lines that run in streets are never high voltage in the sense utilities use that word.
In power distribution "high voltage" means >50-100 kV. Extra high voltage is everything >200 kV. Low voltage is everything below <50 kV.
Low voltage is what is delivered to neighbourhoods and then stepped down to the end user voltages (230 / 400 V). The power lines that run in streets are never high voltage in the sense utilities use that word.
I think this is one of weird shitty things about modern society which is that even if you're "well off" as an individual (say top 10% of household income) you hit an absolute wall when it comes to affording something like this. At $dayjob we get buried lines run without much fuss but the cost is more than any one employee's salary (more like 5 but still). As an individual you're basically dependent on gov't to get something like this done with no real way around it.
In my state, the utility owns the power lines and is responsible for trimming the trees.
Same here. Every spring it's fascinating seeing the variety of systems our utility uses to cut back vegetation, varying from bucket lifts to helicopters with literal dangling chainsaws!
My favorite is a giant sideways facing "lawnmower" mounted on a small utility truck.
$28B / 17 years / (29M people * 60%) = $94.66 average per year per person
My electric bill usually hovers around $100 per month. If it increased by $8 per month over the course of two decades, I wouldn't bat an eye. It looks like inflation alone could account for the difference (38.48% since 2004). That said, the recent incident suggests that quality-of-service has probably decreased.
EDIT: I forgot about households. Looks like there is an average of 2.85 people per household in Texas. $94.66/yr * 2.85 = $269.78/yr or $22.48/mo.
EDIT 2: I originally cited 9% inflation since 2016. I have no idea why I did that. I've corrected it to show 38.48% inflation since 2004.
EDIT 3: The $28B only applies to 60% of residents. I've corrected the equations again to account for that.
My electric bill usually hovers around $100 per month. If it increased by $8 per month over the course of two decades, I wouldn't bat an eye. It looks like inflation alone could account for the difference (38.48% since 2004). That said, the recent incident suggests that quality-of-service has probably decreased.
EDIT: I forgot about households. Looks like there is an average of 2.85 people per household in Texas. $94.66/yr * 2.85 = $269.78/yr or $22.48/mo.
EDIT 2: I originally cited 9% inflation since 2016. I have no idea why I did that. I've corrected it to show 38.48% inflation since 2004.
EDIT 3: The $28B only applies to 60% of residents. I've corrected the equations again to account for that.
Since this math is per-person, I'd definitely notice a $25/month increase.
Good point. I didn't consider households.
Another important note (although it's solely based on anecdote I've observed and heard from friends) is electric costs don't scale linearly with the addition of people in a household.
No worries about not considering households, that's just life before starting a family. Lots of learning occurs :)
No worries about not considering households, that's just life before starting a family. Lots of learning occurs :)
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This article was disappointing. It provided 0 information about whether or not the deregulation was the cause for the increased prices.
The headline could have just as easily been "Texas electric bills were 28B higher as adoption of EVs increased(or any other thing that has changed since 16 years ago)".
The headline could have just as easily been "Texas electric bills were 28B higher as adoption of EVs increased(or any other thing that has changed since 16 years ago)".
You can compare against the rate of increase of US East or US West. An apples-to-apples of SPP (in East) vs ERCOT puts SPP at $5/MWh cheaper.
It's a filler piece that's there to collect the easy clicks and following ad dollars from the people who see a title who confirms their biases.
Based on the title I knew there was a high risk of it being nothing and I clicked anyway. So I guess it did confirm my biases in an edge-case sort of way.
Based on the title I knew there was a high risk of it being nothing and I clicked anyway. So I guess it did confirm my biases in an edge-case sort of way.
There seems to be a number of confounding factors too? What were the changes in wholesale prices? Retail prices? Was there greater demand? Bigger homes?
How does that price change compare to surrounding states? I mean if Texas went up by $57 per person but other states went up by $75, a smaller increase is a plus.
How does that price change compare to surrounding states? I mean if Texas went up by $57 per person but other states went up by $75, a smaller increase is a plus.
Indeed. Not to mention investments in renewable energy.
According to this random website I found which claims to use data from the US Bureau of Labor Statistics[0], electricity on average across the US costs 51.49% more in 2021 than in 2004. If that's true, Texans might actually be saving quite a bit.
[0] https://www.in2013dollars.com/Electricity/price-inflation/20...
According to this random website I found which claims to use data from the US Bureau of Labor Statistics[0], electricity on average across the US costs 51.49% more in 2021 than in 2004. If that's true, Texans might actually be saving quite a bit.
[0] https://www.in2013dollars.com/Electricity/price-inflation/20...
> That said, the recent incident suggests that quality-of-service has probably decreased.
I don’t even know if this is true. I think _the system_ was never designed for this type of weather. It would have failed had this weather happened in any of the prior years too. We just need to quit ignoring the footnotes when they say “100 year flood” or similar things that people often sweep under the rug when designing building codes, energy system SOP around weather proofing, etc. In Texas, if Harvey and now this event has taught us nothing else it’s that anything can happen at any time. The statistical approach to rareness of certain events should be a warning which it hasn’t been. It’s been a minimum bar to achieve and while debatable where the bar belongs it seems like the bar should be higher.
I don’t even know if this is true. I think _the system_ was never designed for this type of weather. It would have failed had this weather happened in any of the prior years too. We just need to quit ignoring the footnotes when they say “100 year flood” or similar things that people often sweep under the rug when designing building codes, energy system SOP around weather proofing, etc. In Texas, if Harvey and now this event has taught us nothing else it’s that anything can happen at any time. The statistical approach to rareness of certain events should be a warning which it hasn’t been. It’s been a minimum bar to achieve and while debatable where the bar belongs it seems like the bar should be higher.
They were specifically warned about winterizing in 2011, the current governor sued to prevent "over-regulation". While we can't say what would have happened, it can't be said that they didn't have an opportunity to potentialy avoid a problem.
That’s my point. They knew it was a fringe chance this could happen. We do this risk assessment elsewhere and easily ignore the risk like they did. Why did they rebuild New Orleans? We all know it’s flooding again right? They expect it to not happen on their watch but it very well could happen tomorrow. Just like Texas didn’t want to invest in winterizing each and every year just in case a once in a hundred year event happens. I’m suggesting we need to take these fringe occurrences more seriously. Especially when we know weather volatility is likely to increase.
If Texas was on the federal grid they also would have been able to import excess power from other states and ease the energy crunch.
While true, it’s not new information and likely has not eroded services for Texas consumer
The cost of electricity may be a bit higher than in other states, but your overall cost of living in TX is so low that it doesn't really matter. For instance, in terms of my daily commute I'd be paying about $500 more a year just for gasoline if I was driving the same distance (20 miles) in CA every day of the week.
I really suggest that people look into the life of Leland Olds if you want to understand the current state of the energy "industry" in the US.
He created the modern power grid in the US, creating not only the biggest expansion of electrification in history of the US, but multiplied the private profits by forcing them to lower prices.
He was fired as part of the Red Scare and the grid hasn't progressed much since then.
He created the modern power grid in the US, creating not only the biggest expansion of electrification in history of the US, but multiplied the private profits by forcing them to lower prices.
He was fired as part of the Red Scare and the grid hasn't progressed much since then.
"The grid hasn't progressed much since the Red Scare" -- that's a vast overstatement. The amount of changes in the last 60+ years since McCarthy's day has been tremendous.
We've seen numerous technological advancements like solar, wind, gas, which provide new electrons from new distributed locales. We've seen new transmission projects, not as many as ideal admittedly. There have been new pipelines and new drilling technologies, enabling natural gas peakers while we work out renewable storage.
We've also seen a decarbonization of the dirtiest coal and oil plants -- do you consider huge public health wins "not much progress"?. Even further, batteries, demand response, weatherization, LEDs, and many nascent technologies are all doing their part now to head towards an unthinkable scenario in 1960: a carbon neutral grid by 2050. To entirely revamp your energy system in 100 years is astounding.
I'd recommend checking out Greentech Media and the Energy Gang podcast, you'll hear the latest in energy since the Red Scare.
We've seen numerous technological advancements like solar, wind, gas, which provide new electrons from new distributed locales. We've seen new transmission projects, not as many as ideal admittedly. There have been new pipelines and new drilling technologies, enabling natural gas peakers while we work out renewable storage.
We've also seen a decarbonization of the dirtiest coal and oil plants -- do you consider huge public health wins "not much progress"?. Even further, batteries, demand response, weatherization, LEDs, and many nascent technologies are all doing their part now to head towards an unthinkable scenario in 1960: a carbon neutral grid by 2050. To entirely revamp your energy system in 100 years is astounding.
I'd recommend checking out Greentech Media and the Energy Gang podcast, you'll hear the latest in energy since the Red Scare.
I've seen a lot of news reports talking about people receiving $16,000 bills. Yes, that's because they're with a power company that charges the market rate for electricity. When there's a scarcity of electricity, the market rate goes way up. In fact, during those events that price increase is what encourages generators to bring on more supply to capture that revenue.
All of that in itself isn't evil. But the retailer could have been more proactive to say "During terrible winter storms, paying the market rate is a bad idea. Switch companies now." Or a better idea would have been to charge $X a day as insurance, that would cap the price per kWh to $X. That way people have certainty as to what their maximum charge is. Imagine if the power company said "Pay $10 extra a month, and we'll make sure that in an adverse event, your bill for your normally consumed 1000 kWh would be $1000".
The New Zealand electricity market is similarly deregulated like Texas and has some of the same benefits and problems. The great thing is you can choose your power retailer, that all have different types of plans that work for different people. Some only buy from 'green generators'. Some allow you to buy 'packs of electricity' in advance, a bit like buying a hedge. Imagine having 1000 kWh in your bank to spend during this peak event. Some don't charge daily rates for your holiday home. I like the innovation in the retail market.
But that doesn't prohibit transmission companies, and generators from investing in their assets. Transmission companies are a natural monopoly so should be constrained from the free market. In NZ most of those have a maximum rate of return they're allowed to extract from their assets, so their profit is restricted. In turn they lobby to invest more into their assets which in turn increases their allowed profit. This leads to an outcome of overinvestments in assets, which in Texas's case might not be such a bad thing.
Generators make their typical profit based on stable generation. They make their windfall based on adverse weather events, different hydrology, competing generator capacity going offline etc. The NZ market would have automated 5 minute auctions where the Grid Operator would purchase the cheapest bid from generators to meet the grid demand in that 5 minute block. There would also be diesel generators that would be guaranteed to provide the most expensive supply if things went wrong, so that would be the upper limit on the market.
If all of this is interesting, check out the real time market pricing at https://www.em6live.co.nz/
All of that in itself isn't evil. But the retailer could have been more proactive to say "During terrible winter storms, paying the market rate is a bad idea. Switch companies now." Or a better idea would have been to charge $X a day as insurance, that would cap the price per kWh to $X. That way people have certainty as to what their maximum charge is. Imagine if the power company said "Pay $10 extra a month, and we'll make sure that in an adverse event, your bill for your normally consumed 1000 kWh would be $1000".
The New Zealand electricity market is similarly deregulated like Texas and has some of the same benefits and problems. The great thing is you can choose your power retailer, that all have different types of plans that work for different people. Some only buy from 'green generators'. Some allow you to buy 'packs of electricity' in advance, a bit like buying a hedge. Imagine having 1000 kWh in your bank to spend during this peak event. Some don't charge daily rates for your holiday home. I like the innovation in the retail market.
But that doesn't prohibit transmission companies, and generators from investing in their assets. Transmission companies are a natural monopoly so should be constrained from the free market. In NZ most of those have a maximum rate of return they're allowed to extract from their assets, so their profit is restricted. In turn they lobby to invest more into their assets which in turn increases their allowed profit. This leads to an outcome of overinvestments in assets, which in Texas's case might not be such a bad thing.
Generators make their typical profit based on stable generation. They make their windfall based on adverse weather events, different hydrology, competing generator capacity going offline etc. The NZ market would have automated 5 minute auctions where the Grid Operator would purchase the cheapest bid from generators to meet the grid demand in that 5 minute block. There would also be diesel generators that would be guaranteed to provide the most expensive supply if things went wrong, so that would be the upper limit on the market.
If all of this is interesting, check out the real time market pricing at https://www.em6live.co.nz/
> Transmission companies are a natural monopoly so should be constrained from the free market.
They’re only a “natural monopoly” in so far as the government has disallowed competition by preventing development of new competing lines and limiting access to local poles. Doesn’t seem very natural.
They’re only a “natural monopoly” in so far as the government has disallowed competition by preventing development of new competing lines and limiting access to local poles. Doesn’t seem very natural.
Lol.
Yeah... companies are just lining up to spend billions to build out redundant electric lines, only to be thwarted by the heavy hand of Texas energy regulators. </s>
Yeah... companies are just lining up to spend billions to build out redundant electric lines, only to be thwarted by the heavy hand of Texas energy regulators. </s>
> But the retailer could have been more proactive to say "During terrible winter storms, paying the market rate is a bad idea. Switch companies now."
I thought they did exactly that? https://www.bloomberg.com/news/articles/2021-02-15/texas-pow...
> One power supplier, Griddy, told all 29,000 of its customers that they should switch to another provider as spot electricity prices soared to as high as $9,000 a megawatt-hour. Griddy’s customers are fully exposed to the real-time swings in wholesale power markets, so those who don’t leave soon will face extraordinarily high electricity bills.
> “We made the unprecedented decision to tell our customers -- whom we worked really hard to get -- that they are better off in the near term with another provider,” said Michael Fallquist, chief executive officer of Griddy. “We want what’s right by our consumers, so we are encouraging them to leave. We believe that transparency and that honesty will bring them back” once prices return to normal.
I thought they did exactly that? https://www.bloomberg.com/news/articles/2021-02-15/texas-pow...
> One power supplier, Griddy, told all 29,000 of its customers that they should switch to another provider as spot electricity prices soared to as high as $9,000 a megawatt-hour. Griddy’s customers are fully exposed to the real-time swings in wholesale power markets, so those who don’t leave soon will face extraordinarily high electricity bills.
> “We made the unprecedented decision to tell our customers -- whom we worked really hard to get -- that they are better off in the near term with another provider,” said Michael Fallquist, chief executive officer of Griddy. “We want what’s right by our consumers, so we are encouraging them to leave. We believe that transparency and that honesty will bring them back” once prices return to normal.
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One problem is when an event like this happened in New Zealand, other retailers didn't accept new customers at this time. I mean, would you accept new customers paying 20 cents a kWh when the market rate is 500 cents a kWh?
And that is the age old problem. People sign into a "deal" contract to save $5 now, but with a 1/1000 chance of someday losing $1000. And then they hit the spike and what happens?
a) Extra charge is forgiven?
b) Someone else picks up the tab?
c) They are stuck paying it?
And how do you deal with this big picture?
a) Require better legal language in the contracts to sign up for this
b) Ban these kind of contracts, because the user isn't "smart" enough to know how they work
Similar things happen in a floodplain where no one will issue flood insurance. It's mostly fine, until it isn't.
a) Extra charge is forgiven?
b) Someone else picks up the tab?
c) They are stuck paying it?
And how do you deal with this big picture?
a) Require better legal language in the contracts to sign up for this
b) Ban these kind of contracts, because the user isn't "smart" enough to know how they work
Similar things happen in a floodplain where no one will issue flood insurance. It's mostly fine, until it isn't.
That's where I think things like Tesla's Powerwall becomes so handy. Imagine 95 kWh just sitting there on your wall. Or in your Model-S. When there's an adverse power event, use your battery. Or, sell it back to the grid if there's money to be made.
Having a massive virtual peaker plant (https://en.wikipedia.org/wiki/Peaking_power_plant) is a neat idea. Telsa, another new business idea for you!
Having a massive virtual peaker plant (https://en.wikipedia.org/wiki/Peaking_power_plant) is a neat idea. Telsa, another new business idea for you!
What sucks is powerwall cost $7.5k for 6.5 kWh of storage. A decent sized house is going to need 2-4 to handle a reasonable outage, and if you want to be able to power an AC.
My Model Y has a 75 kWh of battery just sitting in my garage, and S/X owners have 100 kWh (maybe 90 after refresh?). Really wish Teslas could use a vehicle to grid to somehow tie into a homebase powerwall for this kind of situation. My understanding is there is no inbuilt way to get more than what is needed to charge the 12V out of a Tesla...
My Model Y has a 75 kWh of battery just sitting in my garage, and S/X owners have 100 kWh (maybe 90 after refresh?). Really wish Teslas could use a vehicle to grid to somehow tie into a homebase powerwall for this kind of situation. My understanding is there is no inbuilt way to get more than what is needed to charge the 12V out of a Tesla...
Well, the banks do this as a part of business, knowing the US will bail them out when their insider trading house of cards crash down.
Flood insurance for a house purchase is very different from a afterthought utility bill that, really, you have no "choice" on procuring.
Flood insurance for a house purchase is very different from a afterthought utility bill that, really, you have no "choice" on procuring.
Wait, but you did have a choice in picking this utility bill. Your choice was:
a) (default choice): Use as much power you as you want, 12c a kWh, it never changes.
b) (other supplier choice): Pay market rate! Currently only 9c a kWh, save 3c per kWh! (Until this event, when it went to $1000 a kWh).
Consumer opted into B to save some cash, but got hit with the downside of their bet.
a) (default choice): Use as much power you as you want, 12c a kWh, it never changes.
b) (other supplier choice): Pay market rate! Currently only 9c a kWh, save 3c per kWh! (Until this event, when it went to $1000 a kWh).
Consumer opted into B to save some cash, but got hit with the downside of their bet.
...and somehow everyone is surprised that consumers do a bad job at assessing risk.
It’s an unconscionable business model with no guardrails. Commercial users don’t sign up for rates like that without breakers or hedges.
It’s an unconscionable business model with no guardrails. Commercial users don’t sign up for rates like that without breakers or hedges.
And commercial users tend to be more sophisticated.
So then we just ban users from such programs?
(I don't know the answer, but this ends up down a pretty strict path of not letting you hurt yourself).
So then we just ban users from such programs?
(I don't know the answer, but this ends up down a pretty strict path of not letting you hurt yourself).
In this case the regulated/government-run provider was an option I think.
> Imagine if the power company said "Pay $10 extra a month, and we'll make sure that in an adverse event, your bill for your normally consumed 1000 kWh would be $1000".
Alternatively, imagine if critical services like this were managed directly by the state, so that the cost of these adverse things was absorbed into the tax base rather than privatized by insurance companies (which eventually go bust and end up bailed out by the state anyway).
Alternatively, imagine if critical services like this were managed directly by the state, so that the cost of these adverse things was absorbed into the tax base rather than privatized by insurance companies (which eventually go bust and end up bailed out by the state anyway).
Imagine if we took those managing the power companies out and shot them. That is the mood of many in Texas.
I live in Ontario at the moment, which is a very regulated power market. I can only buy from one retailer. They in turn get charged a singular price from the generator. The government can mandate what that price is, which is lower at the moment because of Covid.
That stuff is great for me as a consumer. But selling power below the cost of production seems like a weird economic model. And you still pay for these reductions somehow. In Ontario, the government mandates a rebate (https://www.torontohydro.com/for-home/ontario-electricity-re...). But who pays for that rebate? The taxpayers! So you get a discount on your power, paid for from your income!
I'm not an 'all-in free market' guy. I do think regulation is required to constrain the free market to operate within certain parameters. But I also don't agree that all 'critical services' should be managed directly by the state. I remember that the state used to run the Telephone network in NZ, and it would take 6 weeks to get a new phone line. Why? Because there's a process, there's a queue, and there's no competition, so what else will you do? Stuff like that is a crappy experience.
That stuff is great for me as a consumer. But selling power below the cost of production seems like a weird economic model. And you still pay for these reductions somehow. In Ontario, the government mandates a rebate (https://www.torontohydro.com/for-home/ontario-electricity-re...). But who pays for that rebate? The taxpayers! So you get a discount on your power, paid for from your income!
I'm not an 'all-in free market' guy. I do think regulation is required to constrain the free market to operate within certain parameters. But I also don't agree that all 'critical services' should be managed directly by the state. I remember that the state used to run the Telephone network in NZ, and it would take 6 weeks to get a new phone line. Why? Because there's a process, there's a queue, and there's no competition, so what else will you do? Stuff like that is a crappy experience.
Yup, I'm in Ontario too. Fundamentally the issue is that electricity is an essential service, much of the demand is inelastic, and most of the costs are fixed. This is why you have embarrassing situations like having to raise rates to cover those fixed costs because everyone did too good a job of conserving [1].
But it's also why this kind of service is a good fit for a government monopoly. And if that means that some of the mostly-fixed-costs end up covered by the general tax base, that's fine with me: the general tax base is taken on a progressive model where the wealthy pay more into it, and there isn't really a good way to make the wealthy pay a different rate for power (yes, I'm on the upper end of middle class, and I absolutely deserve to pay more for these things than someone else who is just scraping by— not just more because I use more, but also more on a per-kWh basis).
[1]: https://www.fraserinstitute.org/sites/default/files/demand-s...
But it's also why this kind of service is a good fit for a government monopoly. And if that means that some of the mostly-fixed-costs end up covered by the general tax base, that's fine with me: the general tax base is taken on a progressive model where the wealthy pay more into it, and there isn't really a good way to make the wealthy pay a different rate for power (yes, I'm on the upper end of middle class, and I absolutely deserve to pay more for these things than someone else who is just scraping by— not just more because I use more, but also more on a per-kWh basis).
[1]: https://www.fraserinstitute.org/sites/default/files/demand-s...
Well if we talk about the phone market. There's lots of stories about people trying to cancel their phone contract in the German deregulated market and the companies just continuing to charge or not freeing up the line for the customer to change to a competitor. There is a famous case where a debt collector went into the the central office of Telekom (parent of t-mobile) and took a printer, because they were not paying back overcharged money.
Just to say that things aren't all rosy in deregulated phone land either.
>> during those events that price increase is what encourages generators to bring on more supply to capture that revenue.
True, in a perfect theoretical world where infinite capacities can be achieved through price increases. In the real world, there are only so many operational power producers. Raising the prices does literally nothing for powerplants physically incapable of coming online soon enough to enjoy those prices. And as this was such a short-term boom, there is no incentive to weatherize in anticipation of the next boom as the potential yields still outweigh immediate costs. Despite the bluster, Texas's power grid is not a free market utopia where supply and demand solves all problems. Texas simply isn't big enough for such principals to act before running up against hard practical realities.
True, in a perfect theoretical world where infinite capacities can be achieved through price increases. In the real world, there are only so many operational power producers. Raising the prices does literally nothing for powerplants physically incapable of coming online soon enough to enjoy those prices. And as this was such a short-term boom, there is no incentive to weatherize in anticipation of the next boom as the potential yields still outweigh immediate costs. Despite the bluster, Texas's power grid is not a free market utopia where supply and demand solves all problems. Texas simply isn't big enough for such principals to act before running up against hard practical realities.
Retailers charging wholesale rates did say "please switch now", as early as the weekend before the cold snap hit on Sunday evening. The issue was that few retailers were willing to take on those customers, because most didn't have the spare pre-purchased electricity supply to supply these new customers without buying more electricity futures - and futures were already spiking by this point.
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OR, you could collude and not bring power online to reap massive amounts of money in short term predatory bursts, since people can't switch providers quickly when there's no power, internet, etc.
Basically that is some of what caused the California blackouts back in the Enron days. The elasticity of the market with respect to consumers choosing a different provider is pretty inelastic, in the best case it's one month. Meanwhile, Enron was doing hourly manipulations of power plant shutdowns.
What you're posting here, even though it's a garden variety laissez faire microeconomic argument, actually advocates for the opposite: regulation to eliminate spike pricing.
In this case, regulation would have made a more robust system, with better ability to pull from surrounding grids, and avoided the shock pricing.
Can you imagine you show up at a hospital during, say, a large scale pandemic that has reduced the capacity of the hospital, and told that your necessary emergency surgery was going to cost 100x more than normal in order to "incent" more surgeons to work?
And do you think people should be actively switching power providers on a daily basis? Should everyone have a TV "dashboard" indicating energy market conditions? And should they quit their day jobs to do that?
Pure market microeconomics is a fantasy, human computation for market prices is far too limited, information is far too limited. When its pushed to the extremes, chances are what is happening is the Enron-type market manipulators are creating opportunities for them to extract money from created chaos.
Basically that is some of what caused the California blackouts back in the Enron days. The elasticity of the market with respect to consumers choosing a different provider is pretty inelastic, in the best case it's one month. Meanwhile, Enron was doing hourly manipulations of power plant shutdowns.
What you're posting here, even though it's a garden variety laissez faire microeconomic argument, actually advocates for the opposite: regulation to eliminate spike pricing.
In this case, regulation would have made a more robust system, with better ability to pull from surrounding grids, and avoided the shock pricing.
Can you imagine you show up at a hospital during, say, a large scale pandemic that has reduced the capacity of the hospital, and told that your necessary emergency surgery was going to cost 100x more than normal in order to "incent" more surgeons to work?
And do you think people should be actively switching power providers on a daily basis? Should everyone have a TV "dashboard" indicating energy market conditions? And should they quit their day jobs to do that?
Pure market microeconomics is a fantasy, human computation for market prices is far too limited, information is far too limited. When its pushed to the extremes, chances are what is happening is the Enron-type market manipulators are creating opportunities for them to extract money from created chaos.
> Or a better idea would have been to charge $X a day as insurance, that would cap the price per kWh to $X.
What mechanism incentivizes customers to pay for the insurance, though? It seems to me that people are going to buy the cheapest possible electric plan available during normal times, and just forget about black swan events altogether -- unless you find some useful way to force them to.
What mechanism incentivizes customers to pay for the insurance, though? It seems to me that people are going to buy the cheapest possible electric plan available during normal times, and just forget about black swan events altogether -- unless you find some useful way to force them to.
Before the freeze, I ordered this generator - https://www.amazon.com/gp/product/B07Q1DLKBG/ (yet to receive it tho)
As stated on the website, it can provide 9.5kWh per half a gallon, which is about $1 in Texas right now. Which becomes about 10c/kWh or $100/MW.
Question is - why we do not hear stories about homeowners selling their gas-generated electricity into the grid and capturing the difference between $0.1/kWh and $9/kWh?
As stated on the website, it can provide 9.5kWh per half a gallon, which is about $1 in Texas right now. Which becomes about 10c/kWh or $100/MW.
Question is - why we do not hear stories about homeowners selling their gas-generated electricity into the grid and capturing the difference between $0.1/kWh and $9/kWh?
Does Texas allow home owners to push power back onto the grid? I know this is common in some places, particularly for solar, but is that a thing in Texas?
The cost of the equipment to allow customers to sell energy back onto the grid has got to be far more expensive than the savings from adding an individual 9.5 kW system. Particularly a gas powered system that won’t be consistently available.
The cost of the equipment to allow customers to sell energy back onto the grid has got to be far more expensive than the savings from adding an individual 9.5 kW system. Particularly a gas powered system that won’t be consistently available.
If you tried to feedback to the grid you would need a generator that can phase match the grid power. Don't imagine any residential grade generators that are rated to do that. Plugging a regular generator into your house grid with the power on would cause very bad things to happen as you have 2 high power electrical waves fight one another and would burn down your house in quick order.
There are systems that do allow for this, but the most common case I've seen has been residential solar. I personally doubt that this would be possible for a normal gas generator to work this way -- particularly as you said because the waves would never be in sync. At least with a solar system, you're already phase-matching the incoming AC, so could push power out at the correct phase.
Because no sane grid operator would allow that without permitting and appropriate controls. There are constraints to what can be pushed out in a residential area. Plus the pollution would be horrific at scale.
Also, these types of generators are not the best for sustained use.
Also, these types of generators are not the best for sustained use.
My guess is that the window for that kind of arbitrage closed faster than people would have been able to get set up to transact against it; I think you need a special account and meter if you want to sell power back to the grid.
Can you reverse meter in Texas?
Did you price solar panels too?
Did you price solar panels too?
Texas population has grown from 21 to 30 million people in that time. Its tough to really know what would have happened if something else was done.
Shouldn't economies of scale dictate that the average price per person should go down (inflation-adjusted) rather than up though? I understand that adding capacity to support 9 million people and modern appliances over 17 years is a significant cost but when you average it down per capita I'd have believed that increases in productivity and technology would drive that figure down, not up.
I was going to suggest that the original hydro and nuclear has lower costs than newer plant, but there doesn't seem to be any hydro and nuclear is small so I can't say.
Not necessarily. Electricity is driven by peak demand, and adding capacity takes time and is expensive.
Energy prices have outpaced inflation in that time frame despite productivity gains.
http://powertochoose.org/ is the state of Texas' website for choosing your local electric provider that shows different providers and their prices. Not all of Texas is deregulated, so you'll need to choose a zip code that is.
I'm not sure I totally buy this analysis. The ability to shop around for your electricity provider came along with a renewable portfolio standard, which was fully expected to raise overall rates a bit. And Texas has low rates overall compared to most US states.
Search “Texas Electric Bills Were $28 Billion Higher Under Deregulation” via Google, and click the WSJ article link in the results to sidestep the paywall.
Is there a way to read past the paywall?
Disable JS on the site. One click to do so if you have uBlock Origin.
There shouldn't be a profit motive attached to basic services like electricity, policing (private prisons), or medicine. These functions are best handled by government because they should be services available fairly and equitably to every single citizen. Capitalist profit seeking necessarily excludes some individuals or generates perverse incentives (private prisons).
In the most altruistic sense, I would love to believe you. Things like the VA, the FAA, the USPS all point me to Milton Friedman's 4th quadrant of spending money. Quality does not equal efficiency or price.
Maybe the US has been intentionally hampering its privatisable services to make the case for privatisation?
I don't understand the problem with the FAA but the VA and USPS have been deliberately sabotaged in the past to "prove" the political end you state in your post.
The FAA is often at odds with the NTSB about how to keep aviation safe. The streamed hearing of the inquiry into the crash that killed Kobe Bryant is a rare example of that entering the public arena.
On the other hand, commercial aviation has become unprecedently safe, so it is not like the FAA is making a mess of things in general. Nevertheless, the 737 Max debacle has revealed an unhealthy level of regulatory capture.
On the other hand, commercial aviation has become unprecedently safe, so it is not like the FAA is making a mess of things in general. Nevertheless, the 737 Max debacle has revealed an unhealthy level of regulatory capture.
Who do you think is more efficient in terms of utilizing resources, Amazon delivery or USPS, a private hospital vs a public one /VA?
There is no reason what so ever to strive to cut waste, as bureaucrats know they'll be getting paid either way. So in all cases it's always "we need more money" at the taxpayers expense.
Not sure where this notion that government will deliver services in a more efficient ways come from. As the poster above said, there needs to be middle ground.
Not sure where this notion that government will deliver services in a more efficient ways come from. As the poster above said, there needs to be middle ground.
> Not sure where this notion that government will deliver services in a more efficient ways come from.
All the countries where governments deliver healthcare and it is significantly more efficient than the US system?
All the countries where governments deliver healthcare and it is significantly more efficient than the US system?
Canada is entirely private beyond the govt providing the funding with the exception of a few public hospitals (like the US many are privately owned non-profits, academic centers tend to be public).
>There shouldn't be a profit motive attached to basic services like [...]
what about food, shelter, and clothing? Those are all privatized and arguably more important than electricity or medicine.
what about food, shelter, and clothing? Those are all privatized and arguably more important than electricity or medicine.
It’s also a lot easier to shop around for those goods and services.
Excellent point, there should be government-provided options (not the only options, that's clearly infeasible) or subsidies for those as well, for exactly the reasons you state.
You don’t have to speculate on what life is like in conditions you’re describing. There’s tons of first hand accounts of life in East Berlin behind the iron curtain, where the government “provided” food, sheltered, and clothing.
If it's not competitive with the current "capitalist" offerings in those areas, people won't choose them unless necessary. The only reason we have hunger and homelessness in a nation as wealthy as the USA is through choice, not lack of resources.
There's a difference between privatization and extortion..
Also the `whataboutism` isn't productive. There's a clear need for regulation.
The customers shouldn't have to foot the bill for the companies lack of investment in their own infrastructure even after 11 years ago it was advised they had to winterize..
Also customers don't have the choice to choose an 'on-the-grid' supplier.. So ?
Also the `whataboutism` isn't productive. There's a clear need for regulation.
The customers shouldn't have to foot the bill for the companies lack of investment in their own infrastructure even after 11 years ago it was advised they had to winterize..
Also customers don't have the choice to choose an 'on-the-grid' supplier.. So ?
I grew up in Puerto Rico, the power company there is run by the government, and serves a counter example. There are many articles about the age of the infrastructure and how it collapsed after Maria and the Earthquake. Of course part of the problem is poor management by the government and uncontrolled acquisition of debt.
There must be some middle ground that works.
There must be some middle ground that works.
I grew up in Norway. As a grid customer I could shop around for the best power company that fit my situation (e.g. solar? Apartment?). Norway is covered in snow 8-9 months of the year. I think what you're describing is a problem with money not reaching infrastructure investment locally for whatever reason: not public owned infrastructure issues in general.
Its a complicated subject, the power company is a mandated monopoly, its fully owned by the government.
In the 50s or so the infrastructure was created, including power plants etc, it was a profitable venture for the government, so they borrowed against the profits of the energy company, then failed upgrade/update any infrastructure. Add to to that the retirement pensions of all the people which they did not fund and it creates a big problem.
So now as it stands the energy company is in debt ( technically the government owes the energy company money but the government is insolvent ) and they are trying to sell it to a private entity.
Also if you are wondering why anyone would want to get a private pension plan instead of a 401k, well you werent allowed to put your money in a 401k ( same thing happened to the teachers by the way ). It actually very sadto hear the stories of people that worked theur whole life and have nothing to show for it due to the greed of politicians.
In the 50s or so the infrastructure was created, including power plants etc, it was a profitable venture for the government, so they borrowed against the profits of the energy company, then failed upgrade/update any infrastructure. Add to to that the retirement pensions of all the people which they did not fund and it creates a big problem.
So now as it stands the energy company is in debt ( technically the government owes the energy company money but the government is insolvent ) and they are trying to sell it to a private entity.
Also if you are wondering why anyone would want to get a private pension plan instead of a 401k, well you werent allowed to put your money in a 401k ( same thing happened to the teachers by the way ). It actually very sadto hear the stories of people that worked theur whole life and have nothing to show for it due to the greed of politicians.
> in Puerto Rico, the power company there is run by the government
> in Norway (...) I could shop around for the best power company
> in Norway (...) I could shop around for the best power company
The grid is a common good.
It's the same for the grid in Sweden (Svenska kraftnät), also how optic fiber is deployed here in Stockholm, the costly infrastructure was developed and is maintained by the government, private ISPs can lease out capacity but aren't the ones maintaining it. That avoided the costly deployment of multiple similar infrastructure per provider like you see in the US, where corporations cornered some markets and made the barrier of entry so costly that they became de facto monopolies.
It's the same for the grid in Sweden (Svenska kraftnät), also how optic fiber is deployed here in Stockholm, the costly infrastructure was developed and is maintained by the government, private ISPs can lease out capacity but aren't the ones maintaining it. That avoided the costly deployment of multiple similar infrastructure per provider like you see in the US, where corporations cornered some markets and made the barrier of entry so costly that they became de facto monopolies.
I understand that. But the context of this thread was
> there shouldn't be a profit motive attached to basic services like electricity
> there shouldn't be a profit motive attached to basic services like electricity
Ah, now I get that. Adding my two cents on this discussion: if there is a profit motive for any modern basic human need (food, shelter, energy, communications, healthcare) it should be very well regulated to protect society. It may sound paternalistic when seen with a neo-liberal eye to it but I have developed a firm belief that neo-liberalism has utterly failed as a societal experiment to move us forward.
Statnett, a state owned entity operated by the energy ministry, runs the Norwegian grid.
I understand that. But the context of this thread was
> there shouldn't be a profit motive attached to basic services like electricity
> there shouldn't be a profit motive attached to basic services like electricity
I replied to (a comment) and tried to contrast how a state owned power grid can still have profit models attached and function both technically and for it's intended customers.
Interestingly, ERCOT is a non-profit.
(Like most hospitals in the US, by the way, coming back to the original "There shouldn't be a profit motive attached to basic services like electricity, policing (private prisons), or medicine" comment.)
(Like most hospitals in the US, by the way, coming back to the original "There shouldn't be a profit motive attached to basic services like electricity, policing (private prisons), or medicine" comment.)
My understanding is that they're registered as a charitable organization, not a non-profit. These terms are often used interchangeably, but from a tax and earnings perspective they mean different things. This is often further confused with not-for-profit organizations, which is yet another thing.
> My understanding is that they're registered as a charitable organization, not a non-profit.
That's impossible in the US; “charitable organizations”—501(c)(3)—are a subset of nonprofits—501(c).
That's impossible in the US; “charitable organizations”—501(c)(3)—are a subset of nonprofits—501(c).
501(c)(4)
Right, not the same as 501(c)(3), was my point exactly.
501(c)s, including 501(c)(4)s, are nonprofits, so “not a nonprofit” was wrong.
501(c)(3)s are charitable organizations, so “as a charitable organization” was also wrong. But 501(c)(3)s are a subset of 501(c) and thus are also nonprofits, so your implication that they could be a registered charitable organization but not a nonprofit was also wrong.
As a 501(c)(4) they are a nonprofit and not a charitable org; if they were a 501(c)(3) they would be both.
501(c)(3)s are charitable organizations, so “as a charitable organization” was also wrong. But 501(c)(3)s are a subset of 501(c) and thus are also nonprofits, so your implication that they could be a registered charitable organization but not a nonprofit was also wrong.
As a 501(c)(4) they are a nonprofit and not a charitable org; if they were a 501(c)(3) they would be both.
Who says 501(c)(4) are not non-profits?
The 501(c)(3) are the charitable ones, by the way.
The 501(c)(3) are the charitable ones, by the way.
This is usually the correct position. Regulated competition and controlled monopolies try to provide the best of both worlds. Private companies will always push for deregulation or find ways to exercise a monopolistic advantage because they are incentivized to do so. Companies should be allowed to optimize within the regulated structure set forth by government. Aside, this is why government corruption cannot be tolerated and we must have strict laws limiting lawmakers' actions when reentering the private sector and oversight when they are in the public arena. We cannot have lawmakers eroding regulations in the name of increased profit when those regulations guard the public from poor outcomes.
I don’t think the “more laws!” approach will cut it. Many of the most corrupt countries in the world have extremely harsh anticorruption laws (inevitably these laws are applied to political enemies and not the corrupt rulers).
Assuming people are corrupt and greedy and then working backwards from that point imho is the best approach, and that often times means giving people less control over our lives.
Assuming people are corrupt and greedy and then working backwards from that point imho is the best approach, and that often times means giving people less control over our lives.
Less regulation has generally led to more public harm. Toxic waste in rivers, siphoning of pensions and retirement plans, ponzi schemes, and on and on and on. There is always a balance to strike and then a constant rebalancing. We must guard against regulatory capture and many other ways the system can go wrong. This means we should favor the election of informed lawmakers that understand complex systems and then oversee them. This is a very technocratic position, but also a balanced position.
An approach some countries use is to operate it like a company, but have it fully government-owned.
If, say, every county it serves owns a share of the company, you set up a structure in which it isn't supposed to generate a profit: shareholders can't run it into the ground for monetary reasons. On the other hand, being independent from the government itself makes it less vulnerable to corruption and harmful interference.
If, say, every county it serves owns a share of the company, you set up a structure in which it isn't supposed to generate a profit: shareholders can't run it into the ground for monetary reasons. On the other hand, being independent from the government itself makes it less vulnerable to corruption and harmful interference.
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Isn't the middle ground what we have in the US, regulated utilities?
You're saying the US is the middle ground between Texas and Puerto Rico - both parts of the US? Maybe you need to be more specific about where you are referring to.
It's kind of weird to see HN twists itself into knots while putting forth the question of "How did this happen, how can we prevent this". While turning away from the countless regulated states in the country that get cold weather and don't have their systems shutdown because they have some sort of regulation.
The middle ground is what Europe does.
The failures of what the US calls "regulation" is shown by California (where decades of under-investing in both modernization and upkeep has led to countless deadly fires) and the Texas clusterf..k.
In the almost 30 years I've lived in Germany and a bit of Croatia, the only time I can remember I lost power without actively causing it myself by careless drilling was the Nov 2006 europe-wide blackout.
The failures of what the US calls "regulation" is shown by California (where decades of under-investing in both modernization and upkeep has led to countless deadly fires) and the Texas clusterf..k.
In the almost 30 years I've lived in Germany and a bit of Croatia, the only time I can remember I lost power without actively causing it myself by careless drilling was the Nov 2006 europe-wide blackout.
Capitalism works really well when their are penalties for failure.
Sell a terrible car and people buy a different product, but when you have local monopolies like rural hospitals you always run into issues.
With Texas electricity markets you make more money if everyone is generating 1/2 power in an emergency when the market hits it’s legal maximum. That set’s up very poor incentives. It all comes down to this: ERCOT can be more susceptible to wholesale price spikes because it does not have a capacity market, which pays power plants to be on standby during peak demand and weather emergencies, for example. ERCOT’s model means consumers are not paying for generation that may never be called into action. https://www.reuters.com/article/us-electricity-texas-prices-...
PS: It’s an often reported lie that the price was set by regulators, they set a limit well before the storm and the market I created the price to 9$/kWh and then was capped by that limit. If sufficient generation was online the wholesale price would have remained anything below that 9$.
Sell a terrible car and people buy a different product, but when you have local monopolies like rural hospitals you always run into issues.
With Texas electricity markets you make more money if everyone is generating 1/2 power in an emergency when the market hits it’s legal maximum. That set’s up very poor incentives. It all comes down to this: ERCOT can be more susceptible to wholesale price spikes because it does not have a capacity market, which pays power plants to be on standby during peak demand and weather emergencies, for example. ERCOT’s model means consumers are not paying for generation that may never be called into action. https://www.reuters.com/article/us-electricity-texas-prices-...
PS: It’s an often reported lie that the price was set by regulators, they set a limit well before the storm and the market I created the price to 9$/kWh and then was capped by that limit. If sufficient generation was online the wholesale price would have remained anything below that 9$.
> With electricity markets you make more money if everyone is generating 1/2 power in an emergency.
The per-megawatt hour prices might be higher, but is there evidence that overall revenue is higher? I understand that supply is down as well, so overall revenues might be worse or equal to normal levels. Furthermore, people in yesterday's griddy thread mentioned that currently the price is fixed at $9/MGWh by state regulators, which isn't exactly a free market.
The per-megawatt hour prices might be higher, but is there evidence that overall revenue is higher? I understand that supply is down as well, so overall revenues might be worse or equal to normal levels. Furthermore, people in yesterday's griddy thread mentioned that currently the price is fixed at $9/MGWh by state regulators, which isn't exactly a free market.
Real-time wholesale market prices on the power grid operated by the Electric Reliability Council of Texas (ERCOT) were more than $9,000 per megawatt hour late Monday morning, compared with pre-storm prices of less than $50 per megawatt hour, according to ERCOT. https://www.reuters.com/article/us-electricity-texas-prices-...
They where producing less lower but not 50 / 9000 aka 0.56% as much power. That’s how a few people where getting 10k bills for a week spike. Also, prices where capped by regulators, they would have spiked well past 9k/MWh without that regulation. In the long term customers pick up the bill while power generator who generated any power end up making bank.
They where producing less lower but not 50 / 9000 aka 0.56% as much power. That’s how a few people where getting 10k bills for a week spike. Also, prices where capped by regulators, they would have spiked well past 9k/MWh without that regulation. In the long term customers pick up the bill while power generator who generated any power end up making bank.
> prices where capped by regulators
Not true.
Early in the crisis so much generation capacity went offline that there was no way that that it could meet all of the price-insensitive demand (most consumers pay a fixed price, regardless of wholesale prices). If you attempt to run the grid when demand exceeds supply it will damage generators, making the problem worse. To avoid that, regulators shut off power to people who still had a working connection to the grid and would have been happy to consume power at their contracted rates.
As generation came back online, prices dropped quite low because demand was artificially constrained. The regulators then overrode the market and set the price to the maximum allowed by the system to encourage all generators to come online, which would then allow them to start turning people's power back on.
Not true.
Early in the crisis so much generation capacity went offline that there was no way that that it could meet all of the price-insensitive demand (most consumers pay a fixed price, regardless of wholesale prices). If you attempt to run the grid when demand exceeds supply it will damage generators, making the problem worse. To avoid that, regulators shut off power to people who still had a working connection to the grid and would have been happy to consume power at their contracted rates.
As generation came back online, prices dropped quite low because demand was artificially constrained. The regulators then overrode the market and set the price to the maximum allowed by the system to encourage all generators to come online, which would then allow them to start turning people's power back on.
Not quite, prices capped first. Then when that was not enough rolling blackouts where implemented. Those blackouts where excessive and thus reduced the wholesale price below it’s maximum.
As rolling blackouts where implemented by people paying wholesale rates they obviously have an incentive for excessive blackouts. Regulators said, you can only have rolling blackouts while rates are near the maximum because otherwise you’re simply going to keep cutting people’s power off to save yourself money.
Granted, outside of context it seems like really odd behavior. But again this was retroactively filling in periods where prices dropped artificially rather than proactively increasing the prices. It’s no different than the SEC stepping in when someone manipulates a financial market.
PS: That said some of this was simply technical as blackouts aren’t capable of the kind of fine grained second by second control needed to maintain a stable electric grid.
As rolling blackouts where implemented by people paying wholesale rates they obviously have an incentive for excessive blackouts. Regulators said, you can only have rolling blackouts while rates are near the maximum because otherwise you’re simply going to keep cutting people’s power off to save yourself money.
Granted, outside of context it seems like really odd behavior. But again this was retroactively filling in periods where prices dropped artificially rather than proactively increasing the prices. It’s no different than the SEC stepping in when someone manipulates a financial market.
PS: That said some of this was simply technical as blackouts aren’t capable of the kind of fine grained second by second control needed to maintain a stable electric grid.
> Not quite, prices capped first. Then when that was not enough rolling blackouts where implemented
Again, no. The cap was in place before the floor, but was never binding: they did blackouts before the price hit the maximum, not after.
> As rolling blackouts where implemented by people paying wholesale rates they obviously have an incentive for excessive blackouts
The decision to do blackouts was made by ERCOT, not by transmission operators or power retailers. (Retailers are the only ones who have an incentive to do blackouts, though transmitters generally also have a retail operation.)
Again, no. The cap was in place before the floor, but was never binding: they did blackouts before the price hit the maximum, not after.
> As rolling blackouts where implemented by people paying wholesale rates they obviously have an incentive for excessive blackouts
The decision to do blackouts was made by ERCOT, not by transmission operators or power retailers. (Retailers are the only ones who have an incentive to do blackouts, though transmitters generally also have a retail operation.)
What’s the price on an expiring naked short when their isn’t enough of the stock to meet your demand? All your money.
As utilizes are required to sell at contracted prices to the general public and must buy from insufficient supply that’s the situation. Actually breaking equipment isn’t needed to demonstrate this. If you’re doing rolling blackouts from insufficient supply then your at price infinity or whatever price limit is setup to protect you.
I am using utilities rather than TDU’s as while they are required to provide access to others, enough do both to make the distinction meaningless in this instance.
PS: ERCOT making that decision is only relevant if it could have been avoided. So, if you can find someone saying their was sufficient supply to cover demand then I will withdraw my argument.
As utilizes are required to sell at contracted prices to the general public and must buy from insufficient supply that’s the situation. Actually breaking equipment isn’t needed to demonstrate this. If you’re doing rolling blackouts from insufficient supply then your at price infinity or whatever price limit is setup to protect you.
I am using utilities rather than TDU’s as while they are required to provide access to others, enough do both to make the distinction meaningless in this instance.
PS: ERCOT making that decision is only relevant if it could have been avoided. So, if you can find someone saying their was sufficient supply to cover demand then I will withdraw my argument.
> while power generator who generated any power end up making bank
I.e. generators, who are well prepared for the adverse conditions, finally got paid for their investment?
I.e. generators, who are well prepared for the adverse conditions, finally got paid for their investment?
That’s assuming independent operators. Companies who had generators online and online where better off because of the supply shortage than if everything had been online.
Note that it's $9000/mWh, or $9/kWh. That's a regulated maximum wholesale price, not a fixed price.
>That's a regulated maximum wholesale price, not a fixed price.
Seems to be a price floor and/or set price.
> Texas’ Public Utility Commission, appointed by Abbott, raised the wholesale market price of electricity to $9 per kilo-watt hour — a 7,400% increase over the average 12 cents per kilo-watt hour — in response to rising demand. The hope was power generators would be enticed to produce more electricity.
https://news.ycombinator.com/item?id=26244895
Seems to be a price floor and/or set price.
> Texas’ Public Utility Commission, appointed by Abbott, raised the wholesale market price of electricity to $9 per kilo-watt hour — a 7,400% increase over the average 12 cents per kilo-watt hour — in response to rising demand. The hope was power generators would be enticed to produce more electricity.
https://news.ycombinator.com/item?id=26244895
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They didn’t set the price or make any decisions around the storm, they set a price limit.
“Last week, the price shot up to the legal maximum, set by the Public Utility Commission of Texas (PUCT), of $9 per kilowatt hour.” https://krdo.com/news/national-world/2021/02/24/how-texass-d...
It’s the market that chose that price, with sufficient generation is would have stayed at normal rates.
“Last week, the price shot up to the legal maximum, set by the Public Utility Commission of Texas (PUCT), of $9 per kilowatt hour.” https://krdo.com/news/national-world/2021/02/24/how-texass-d...
It’s the market that chose that price, with sufficient generation is would have stayed at normal rates.
>They didn’t set the price or make any decisions around the storm, they set a price limit.
This seems to be contradicted by another source:
>The PUC met Feb. 15 to address the pricing issue and decided to order ERCOT to set prices administratively at the $9,000/MWh systemwide offer cap during the emergency.
>"At various times today (Feb. 15), energy prices across the system have been as low as approximately $1,200[/MWh]," the order states. "The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market. Energy prices should reflect scarcity of the supply. If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest."
https://www.spglobal.com/platts/en/market-insights/latest-ne...
The key thing to note is that in the second paragraph, the utility commission thought the free floating price of $1200 was too low, and bumped it up to $9000 to "reflect scarcity of the supply".
This seems to be contradicted by another source:
>The PUC met Feb. 15 to address the pricing issue and decided to order ERCOT to set prices administratively at the $9,000/MWh systemwide offer cap during the emergency.
>"At various times today (Feb. 15), energy prices across the system have been as low as approximately $1,200[/MWh]," the order states. "The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market. Energy prices should reflect scarcity of the supply. If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest."
https://www.spglobal.com/platts/en/market-insights/latest-ne...
The key thing to note is that in the second paragraph, the utility commission thought the free floating price of $1200 was too low, and bumped it up to $9000 to "reflect scarcity of the supply".
From your article: “Real-time locational marginal prices for the Electric Reliability Council of Texas remained at or near $9,000/MWh cap on Feb.” If they set the rate at 9k it would have stayed at 9k not near 9k.
What your referencing is points in the day when the price fell because rolling blackouts where intentionally created. “If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest.” That’s saying if rolling blackouts are implemented then the price should be at the limit. Grid operators can’t simply turn off more people’s power to reduce the demand arbitrarily below the limit. So, prices where adjusted retroactively.
As to why that’s relevant, Grid operators are stuck with the bill. If they can maintain normal prices by simply cutting off everyone’s power to avoid losing billions that’s what their going to do. But, the are not allowed to arbitrarily cut people’s power because they dislike the current wholesale rates.
Again, choice was made about this storm, just enforcement of existing rules.
What your referencing is points in the day when the price fell because rolling blackouts where intentionally created. “If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest.” That’s saying if rolling blackouts are implemented then the price should be at the limit. Grid operators can’t simply turn off more people’s power to reduce the demand arbitrarily below the limit. So, prices where adjusted retroactively.
As to why that’s relevant, Grid operators are stuck with the bill. If they can maintain normal prices by simply cutting off everyone’s power to avoid losing billions that’s what their going to do. But, the are not allowed to arbitrarily cut people’s power because they dislike the current wholesale rates.
Again, choice was made about this storm, just enforcement of existing rules.
I think there's a place for privately operated power generation. It doesn't have to be one or the other. There should be some avenue for the profit motive to produce effeciency gains. There needs to be effective regulation, though. And perhaps the amount of regulation needs to be proportional to the fraction of power generation that is privately operated.
Yes. Most of the US has privately operated with close regional oversight usually called a public utility commission for gas, electric, water, landline, and sort of for cable. It approves rate changes, assessments for big projects etc.
The system works very well overall, avoiding both extremes of full government and full private. My rates are reasonable and I've very rarely had outages of anything over decades.
Edit. Cable is the exception. They are a PUC approved monopoly or duopoly with intensely abusive customer experience, in most places.
The system works very well overall, avoiding both extremes of full government and full private. My rates are reasonable and I've very rarely had outages of anything over decades.
Edit. Cable is the exception. They are a PUC approved monopoly or duopoly with intensely abusive customer experience, in most places.
Power generation != power distribution.
You can (and should honestly, if you're liberal) have privately owned power generation, but the infrastructure and network? Its a bad idea. Private road, private rail, private lines... The same way, you can have water extraction and cleaning privately owned (and some say you should), but its dangerous to let private sector run the water infrastructure.
And also, if any power generation company is caught lobbying against public infrastructure funding or nuclear power plant funding, kill them. force sell or something. You can't have private owners with skin in the game lobbying public spending.
You can (and should honestly, if you're liberal) have privately owned power generation, but the infrastructure and network? Its a bad idea. Private road, private rail, private lines... The same way, you can have water extraction and cleaning privately owned (and some say you should), but its dangerous to let private sector run the water infrastructure.
And also, if any power generation company is caught lobbying against public infrastructure funding or nuclear power plant funding, kill them. force sell or something. You can't have private owners with skin in the game lobbying public spending.
The issue isn't public vs private, it's the combination of a profit motive + inelastic consumer demand + lack of alternatives. It would make sense to run electricity as a public enterprise, to run it as a deeply regulated private one, or run some kind of mix - public ownership of distribution, private ownership of generation.
For the price I paid for power in Silicon Valley (32c kWh) versus what Texas pays, I could have taken the extra money and purchased a spare generator and a large fuel tank, and then enjoyed a fraction of my current bill while still being prepared for a blackout.
Or took the different and invested it in the cost of solar panels and a battery. We’re taking about almost $100 a month difference.
Or took the different and invested it in the cost of solar panels and a battery. We’re taking about almost $100 a month difference.
I agree with some hard regulatory angle on the power grid, especially considering the very unique technological constraint of maintaining the required frequency.
The thing I am concerned about is masking market forces from consumers. Potential "band-aid" solutions for the current approach might include adding a capacity market, or requiring that all consumers operate on a variable rate plan in order to more fairly mediate demand vs supply. Customers with fixed rate plans in Texas had no incentive to not run things like electric clothes dryers or resistive pool heaters while others were literally freezing to death.
If you think about fundamentals of consumer behavior and markets, a fixed rate electric plan is like buying an insurance policy or options contract on some underlying security. If you have a lot of derivatives in play, bad things almost always happen regardless of the underlying asset types.
The thing I am concerned about is masking market forces from consumers. Potential "band-aid" solutions for the current approach might include adding a capacity market, or requiring that all consumers operate on a variable rate plan in order to more fairly mediate demand vs supply. Customers with fixed rate plans in Texas had no incentive to not run things like electric clothes dryers or resistive pool heaters while others were literally freezing to death.
If you think about fundamentals of consumer behavior and markets, a fixed rate electric plan is like buying an insurance policy or options contract on some underlying security. If you have a lot of derivatives in play, bad things almost always happen regardless of the underlying asset types.
I'm not sure that variable-rate plans would actually have cut demand all that much.
I mean, I agree variable rates could stop people running clothes dryers, close down industrial users and so on. But the remaining demand would be extremely price-inelastic; How much would you pay to stop your pipes bursting? $3000? $10,000? More?
So long as the amount of power being generated is less than the amount of power needed to prevent anyone's pipes freezing someone's pipes are going to freeze, and no amount of shuffling around who gets the power is going to change that fact.
I mean, I agree variable rates could stop people running clothes dryers, close down industrial users and so on. But the remaining demand would be extremely price-inelastic; How much would you pay to stop your pipes bursting? $3000? $10,000? More?
So long as the amount of power being generated is less than the amount of power needed to prevent anyone's pipes freezing someone's pipes are going to freeze, and no amount of shuffling around who gets the power is going to change that fact.
I agree with inelastic demand. There is certainly a bare minimum level beyond which we still have a crisis.
That said, I think the higher order effects of a market regulated to require more responsive rates could lower this threshold.
For instance, if every homeowner in texas might get stuck with an expensive winter heating bill because of new regulations around rates, we would consider requiring all new construction use gas furnaces where possible.
As it currently stands, I was just talking to a friend who got taken to the cleaners because his brand new construction uses resistive/heat pump for heating, despite the trivial & cheap availability of natural gas.
That said, I think the higher order effects of a market regulated to require more responsive rates could lower this threshold.
For instance, if every homeowner in texas might get stuck with an expensive winter heating bill because of new regulations around rates, we would consider requiring all new construction use gas furnaces where possible.
As it currently stands, I was just talking to a friend who got taken to the cleaners because his brand new construction uses resistive/heat pump for heating, despite the trivial & cheap availability of natural gas.
Eh, seems like the opposite to me.
If rates are predictable enough that a gas furnace is sure to pay for itself over the next 10 years, people will easily identify it as a good investment.
On the other hand, if the rates are variable, switching to gas is a gamble. Might save me loads of money, might not save a dime.
If rates are predictable enough that a gas furnace is sure to pay for itself over the next 10 years, people will easily identify it as a good investment.
On the other hand, if the rates are variable, switching to gas is a gamble. Might save me loads of money, might not save a dime.
there should some sort of public/private partnership... when governments monopolize industries and there aren't market forces at play at all, it tends to result in a sub par good/service.
[deleted]
Yes, "but", capitalism! How dare the State/Gov get in the way of private corporations? Why would the State/Govoffer something for free (or reasonably priced?).
What makes it more "fun" (nothing funny about the ordeal and the deaths in Texas)(btw I've been in Texas many many times - wonderful place, great people!) is that Texans are very conservative on one hand, and very pro-super-aggressive-capitalism on the other hand. Which makes no sense.
Seth Meyers said something on his show a couple nights ago: if you tell the antilopes that they are free to wander around in the zoo, it is only fair to tell them that the lions will ALSO be free to wander around in the same zoo.
Seeing this from Europe, I find it brutally ironic when people lose "free" to a corporation (weather reports, software to do your taxes, etc.) You (citizens of the USA) can do 10 things wrong to get yourselves to this predicament, and you take these 10 steps with acrobatic accuracy.
What makes it more "fun" (nothing funny about the ordeal and the deaths in Texas)(btw I've been in Texas many many times - wonderful place, great people!) is that Texans are very conservative on one hand, and very pro-super-aggressive-capitalism on the other hand. Which makes no sense.
Seth Meyers said something on his show a couple nights ago: if you tell the antilopes that they are free to wander around in the zoo, it is only fair to tell them that the lions will ALSO be free to wander around in the same zoo.
Seeing this from Europe, I find it brutally ironic when people lose "free" to a corporation (weather reports, software to do your taxes, etc.) You (citizens of the USA) can do 10 things wrong to get yourselves to this predicament, and you take these 10 steps with acrobatic accuracy.
I generally agree but I can’t in good faith trust anything the US government does. Maybe local and state governments should run free healthcare as many seem to function much better than the federal government, but there are also state governments that are corrupt as well.
Until we fix the government corruption I can’t get on the free healthcare for all train. I already pay nearly 50% of my income in taxes with little to no short or mid term benefit. Jacking that up even more for basic health coverage doesn’t feel worth it.
If you’re wondering what I mean by corruption, just look at the latest Covid bill that sends billions to other countries and sneaks in random bullshit about internet streaming...into a pandemic relief bill. This isn’t a your side vs my side issue. It’s all bad. They’re all corrupt.
Until we fix the government corruption I can’t get on the free healthcare for all train. I already pay nearly 50% of my income in taxes with little to no short or mid term benefit. Jacking that up even more for basic health coverage doesn’t feel worth it.
If you’re wondering what I mean by corruption, just look at the latest Covid bill that sends billions to other countries and sneaks in random bullshit about internet streaming...into a pandemic relief bill. This isn’t a your side vs my side issue. It’s all bad. They’re all corrupt.
Kill companies caught corrupting politicians. A gas to electricity owner corrupting an official to disapprove a nuclear plant project? Force sell the company. A water company caught paying a city concil to reduce spending on water infrastructure/quality control? Kill the company. It is easier than running through corrupt politicians.
> I already pay nearly 50% of my income in taxes
...I am curious as to the math behind that. The highest federal income tax bracket in the US is 37%. Only income over $523,601 (as of 2021) is taxed at that rate.
...I am curious as to the math behind that. The highest federal income tax bracket in the US is 37%. Only income over $523,601 (as of 2021) is taxed at that rate.
Payroll tax, state and local income tax, property tax, sales tax...
Not sure about "over 50%" but "nearly 50%" could be "over 40%".
Not sure about "over 50%" but "nearly 50%" could be "over 40%".
Federal and State income tax alone bring it to 46.9%. Add in property tax and it’s over 50%.
Also it’s not technically income, but there’s also cap gains tax that I pay almost every year.
All in all, Americans pay an insanely high tax for what we get. Our tax dollars go to corrupt politicians that use the money on foreign aid and starting wars, defense contractors and military. It’s disgusting.
Also it’s not technically income, but there’s also cap gains tax that I pay almost every year.
All in all, Americans pay an insanely high tax for what we get. Our tax dollars go to corrupt politicians that use the money on foreign aid and starting wars, defense contractors and military. It’s disgusting.
This is exactly the wrong mentality that leads to exactly the wrong outcomes (e.g. the title of this article).
The goal of “basic services” should never be cheap, but good instead (i.e. quality, not price). And that is what should be regulated (e.g. metrics like “health outcomes” in medicine, “number of blackouts” in power distribution, ...).
Then, the market should take over, to optimise for price (== profit), because that also optimises for social well-being (e.g. in medicine, “cheaper” directly leads to “more affordable healthcare” and indirectly to “healthier population”). The idea that “profit” shouldn’t be optimised or that the government should take over is obviously misguided, because there is no guarantee or reason why the government would maintain quality if the free market cannot (instead of “profit” they would optimise for “employment” or “corruption” or “size of bureaucracy”).
The goal of “basic services” should never be cheap, but good instead (i.e. quality, not price). And that is what should be regulated (e.g. metrics like “health outcomes” in medicine, “number of blackouts” in power distribution, ...).
Then, the market should take over, to optimise for price (== profit), because that also optimises for social well-being (e.g. in medicine, “cheaper” directly leads to “more affordable healthcare” and indirectly to “healthier population”). The idea that “profit” shouldn’t be optimised or that the government should take over is obviously misguided, because there is no guarantee or reason why the government would maintain quality if the free market cannot (instead of “profit” they would optimise for “employment” or “corruption” or “size of bureaucracy”).
> Then, the market should take over, to optimise for price (== profit)
The problem with that is that it's far more attractive for a private entity to book profits, instead of investing into their infrastructure.
Thinking about it, the Texas disaster seems to be quite a nice illustration of that.
The problem with that is that it's far more attractive for a private entity to book profits, instead of investing into their infrastructure.
Thinking about it, the Texas disaster seems to be quite a nice illustration of that.
So the metrics should measure the quality of the infrastructure and regulation should reflect that.
Without the proper metrics, there’s no guarantee that the government will invest in infrastructure either (instead of, say, corruption - paying outrageous amounts of money to friends&family for subpar service).
Without the proper metrics, there’s no guarantee that the government will invest in infrastructure either (instead of, say, corruption - paying outrageous amounts of money to friends&family for subpar service).
That sounds ok until you hears about state companies and how the run. I was born after the communism fell in the eastern block and we didn't have blackouts every now and then, we had electricity every now and then. Blackouts were the rule.
I'm pro capitalism, I think companies work better when there's a profit to be made and I also believe the state should hold a share in what is called "natural monopoly" to keep things on track if it's necessary.
I'm pro capitalism, I think companies work better when there's a profit to be made and I also believe the state should hold a share in what is called "natural monopoly" to keep things on track if it's necessary.
CA very tightly regulates PG&E the “private” company charged with running the electric and gas utilities in Northern CA.
You can search for the minutes of the public utility commission’s decisions on budgets. They micromanage down to costs of replacing fences around facilities.
The result is a massive cluster fuck that has killed dozens in the state.
You can search for the minutes of the public utility commission’s decisions on budgets. They micromanage down to costs of replacing fences around facilities.
The result is a massive cluster fuck that has killed dozens in the state.
If there were no profit motive for medicine, we wouldn't have therapeutics.
Anyone who invents a cure for cancer deserves to be paid handsomely imo.
Anyone who invents a cure for cancer deserves to be paid handsomely imo.
I will say my biggest complaint as a consumer of electricity has nothing at all to do with who sells me the power. It's the fact that our power lines are all above ground and the city does nothing to keep trees trimmed, so in an area with consistent high winds, my power is going out all the damn time because the lines are constantly getting cut. Reliability in this case is downstream of the utilities themselves. The energy company doesn't own the transmission lines or the trees. I have no idea what prevents the lines from getting buried. Seemingly just cost, but avoiding excess costs at the price of crappier service is common to regulated, unregulated, and direct government providers alike.