Operators working for the Electric Reliability Council of Texas weren’t alone in peering into an abyss opened by a polar vortex that last week stupefied the state’s power grid.
Elected Texas leaders and thousands of electricity consumers also got a peek into the pit, where they witnessed the gaping maw and jagged teeth of an unregulated market rising to take a bite.
The politicians, as always, also saw an urgent need to feed that beast with public money and apply other government action to prevent the market from doing all the things an unregulated utility market can do, such as drain the bank accounts of unwary consumers.
At issue is the fact about 25 percent of Texas electric consumers, roughly 6 million on the ERCOT grid, are on variable-rate plans, which by design link the retail price of kilowatts to the wholesale price of megawatts.
When the price of those megawatts last week spiked to about $9,000 apiece from a pre-storm price of about $50 — which is a 17,900 percent increase — the retail price at meters on houses and businesses across the state necessarily followed.
Consumers not protected from that power surge by fixed-rate contracts now face bills ranging into many thousands of dollars for electricity they used to avoid freezing in the dark.
As it turns out, some of us without power for a long time actually caught a break.
In response to the possibility of consumers being crushed in a supply-demand-price vise, the state of Texas has taken steps to fetter the free market.
The Public Utility Commission of Texas, for example, has forbidden electricity retailers from disconnecting their customers’ service for nonpayment.
Meanwhile, lawmakers from both parties are talking about dipping into the state’s $10 billion Economic Stabilization Fund, the so-called Rainy Day Fund, to pay for some sort of bailout.
It might be absolutely appropriate to use some of that money to keep Texas consumers from going bankrupt over colossal power bills. That’s perhaps more true for some than others, however.
Apparently, many Texas power consumers are on variable-rate plans because they didn’t formally renew their expiring contracts and their providers quietly changed the terms of service. Many likely didn’t even know the change had been made.
The fine print — another great benefit of an unregulated utility market.
A smaller pool got stuck with bank-breaking bills because they were playing the wholesale market through companies like Griddy, as one might play the stock market, and lost. Do we owe them a bailout?
Whatever public dollars state lawmakers pump into this crisis will, at least in part, be hush money.
The last thing clerics in the church of free markets above all, who’ve had near monopoly power for 25 years, want is for thousands of Texans to get a hard lesson in what deregulation of essential utilities can mean for them. A blow that hard they might remember come election time.
If a public bailout is the solution to this free market problem, however, it must be accompanied by some regulation.
It should be illegal, for example, for power sellers to change the terms of service contracts without clear consent by consumers.
It should also be illegal for power generators to withhold electricity from the grid during times of life-threatening crisis simply because the price is not as high as they want it to be.
It’s clear that happened during this hard freeze.
Doubt that? Here’s what the Public Utility Commission said when we asked whether generation companies withheld power waiting for prices to rise:
“It has happened many times before, by design. Power sold on the real-time market at the offer cap has happened most often during peak demand times in the summer and is an expected element of the modeling that both generators and retail electric providers use in their calculations.
“The extended duration of the situation caused by the once-in-a-century weather and its effects on supply and demand has amplified the impact.”
People died and others endured misery so power generators could maximize profits. That ought to be illegal.
• Michael A. Smith