As against my instincts as government intervention is, I think this was caused by artificial manipulation by a quasi-governmental agency (ERCOT) and the legislature will probably step in and reset the situation, for better or worse.
$9000/MWh is literally price gouging in a declared emergency and while I don’t have a philosophical problem with price gouging, I do when the government mandates it and the law does under most circumstances.
ERCOT was told by the PUC to do it. The PUC is supposed to look out for us but… nope.
And ERCOT is immune - shielded from lawsuits. A case was up before the SCOTX last summer to review and decide on that immunity after ERCOT lied to companies that built new power plants, but I can’t find any update to this court case. The story said no date was set for the court to look at it.
I see class-action suits in their future.
Denton county, and probably a lot of other power companies, are in serious trouble after the price hike:
Re: your first article, griddy is asking ERCOT for pricing relief: https://www.griddy.com/post/griddy-seeks-relief-from-ercot-for-customers-exposed-to-non-market-pricing
At $9000/MWh, generators made something like 300 days of income per day. Sure, their costs went up, but fractionally, not multiple orders of magnitude. As soon as the mandated max price was removed, prices swiftly descended to their normal ~$30/MWh, or in some cases went negative, such was the surplus.
First-order thinkers? Or masterminds of wealth transfer?
I wonder if ERCOT and the PUC realize that by forcing the price up to the cap, they created a disincentive to return generating capacity along with an incentive to take some capacity off the grid in order to extend the length of the scarcity event?
Do they realize their actions incentivized the very companies that failed to winterize? Sure, individual generators that were down didn’t generate revenue, but how many companies had 100% of their capacity off line? At 180x prices operating a fraction of capacity is much more profitable than 100% if 100% means the prices return to normal.
Or maybe they didn’t care and knowingly transferred non-discretionary funds from every Texas resident to the power generation companies. Even if you are on a fixed price plan, you will pay in the coming months through higher plans and higher consumer prices. I feel like we are all on the receiving end of a short squeeze.
I saw elsewhere that the wholesale billing for this week is approximately the same as the total wholesale billing for the past 3 years combined. Obviously the current set up is legally mandated price gouging.
Costs went up by orders of magnitude. Spot prices for Natural Gas were 200x to 300x of normal spot same day delivery.
That would be true if there were a single generating facility, or a single company that is in charge of generation.
But there’s not. There are MANY.
That’s how the system is designed. It intentionally creates a prisoner’s dilemma, with the added bonus of if 2 or more companies are caught colluding to artificially create scarcity, it’s a serious felony.
Do they realize their actions incentivized the very companies that failed to winterize? Sure, individual generators that were down didn’t generate revenue, but how many companies had 100% of their capacity off line?
Just the opposite, in fact. The generation facilities that all went down lost out on the opportunity to make a tremendous profit on the spot market.
This also ignores that the vast bulk of generation capability doesn’t get sold on spot, it’s sold via futures contracts, which kind of blows up your whole theory. The spot market exists to level out the problems that happen when the futures market is insufficient to meet delivery needs.
Even if you are on a fixed price plan, you will pay in the coming months through higher plans and higher consumer prices.
Again, that assumes that there are only 1 or 2 retail electric provider choices - but there aren’t, there are hundreds.
If you don’t like the prices your current REP is offering you, you go buy from another REP. It takes a day to switch from one to another.
And the assumption that ALL of the REPs are going to boost prices is just incorrect. I did a quick check, and there are at least 10 REPs in my zip code that are offering 12- and 24-month contracts that cost less than the contract I’m on right now. It’s only $0.015 less, but still less.
Good to see that markets for another critical-infrastructure commodity are similarly twitchy so as to allow massive profit-taking.
EDIT: I’ll be leaving this specific topic of discussion alone now.
Lucky for us, the price was CAPPED at 9 grand. Coulda gone higher.
I just hope none of this was intentional manipulation to try and bust co-ops and Denton (they have their own generator plant.)
Did Denton’s plant trip offline?
If not, they would have made bank during the storm.
Spot prices went way up because so many “gas wells froze up.” Once the price went way up, the wells magically unfroze. Purely coincidental, I’m sure.
No… and it didn’t produce all the power for the city’s demand so they are having to get commercial paper in place to cover the massive costs until Austin can magically make the rates lower.
Once the price went way up, the wells magically unfroze. Purely coincidental, I’m sure.
I’ve got a pretty good friend who works the fields out in the Permian, and everything was frozen solid. He couldn’t even get service guys out to the fields because of snow and ice until Wednesday.
When you bring natural gas up from the ground, a lot of water comes with it that you have to store and then inject somewhere, and that water is what froze up all the wells (and the feeder pipes).
Then, once they’re thawed, you have to inspect the whole pipe leading to the feeder concentration plant for leaks from an ice plug breaking the line.
Given @TBJK’s experience here, I don’t know why it would be hard to imagine that the outdoor fields in the Permian froze over.
Individuals that signed up for wholesale electricity got exactly what they wanted. Electricity at wholesale whether it was $0.01 per KWh or $9.00 per KWh. Nobody was complaining about paying ridiculously low rates on other days. It’s two sides of the same coin. Whether you think this is a flaw or a feature depends on a lot of factors.
ERCOT did exactly what it was asked to do. If that’s not what Texans want then it could change. It’s up to whoever gets elected and their constituents.
The part I have a problem with, is I have a municipal owned power company. And they had enough to power us, but had to turn down based on other communities. It wasn’t equitable, and caused our 57 square miles to be at the whim of other areas. This isn’t a case of NIMBY, but rather, we were still being punished for having a system that works well. We had 0 issues in 2011. The overall ERCOT structure fails to consider too many factors.
It ain’t star trek yet, and I am deeply saddened by the shear losses encumbered by many of our friends, while places like highland park had no outages?!?!? It’s baloney to be polite. I’d rather use a different b word.
Highland Park and University Park had plenty of outages… causing frozen houses and frozen pipes and plenty of damage, just like everyone else. I personally know people affected.
Where I was in Dallas there were no outages at all, possibly because a hospital is nearby that put the area in a Safe-zone.
Still shocking to me that our “smart meters” couldn’t be used to target rolling outages and keep the downtime to a minimum for each residence and make it equitable and tolerable for all. That’s the real failure i think. Targeted load shedding is the answer for high demand periods.