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

Michael A. Smith: 409-683-5206; michael.smith@galvnews.com​.


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(20) comments

Carlos Ponce

More regulation? No. Read the fine print before signing up with a provider.

"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."

So 75% of Texas electric consumers did not sign up for the variable-rate plans.

There's a lesson here.

Bailey Jones

[thumbup] Those who oppose regulation are apparently content with the state of our grid - which according to ERCOT was minutes away from a catastrophic failure that could have led to months of blackouts. Let that sink in for a moment. No power, no heat, no water, no fuel, FOR MONTHS. Imagine the economic devastation with schools closed and unemployment approaching 100% across the state. This is totally unacceptable, and totally the result of a deregulated energy market that rewards energy providers for doing less, not more.

Texas was lucky - this time. I'm tired of relying on luck to save us from the incompetence of Texas lawmakers and the ignorance and hubris of those who believe in surrendering our lives and livelihoods to the whims of corporate bean counters.

Carlos Ponce

"which according to ERCOT was minutes away from a catastrophic failure that could have led to months of blackouts"

Uh, huh. ERCOT speaks, Bailey accepts without question.

Bill Broussard

Carlos. I think you should do just a bit more research. The Wall Street Journal is about as Trumpian as you can get short of being the Donald. From today:

“ Those deregulated Texas residential consumers paid $28 billion more for their power since 2004 than they would have paid at the rates charged to the customers of the state’s traditional utilities, according to the Journal’s analysis of data from the federal Energy Information Administration.”

Bill Broussard

I’m afraid you’re tight Bailey and for the sake of human suffering a wise person would declare this grand experiment over. Free market is a theory and has nothing to recommend it when the lights go out. GOP think themselves practical so try being practical instead of hitching our lives to theory

By the way, if Carlos paid up it might help with your power bills. Carlos, how about if Biden is still President on March 5th...the day after March 4th?

Carlos Ponce

Be patient, Bill! That worthless White House squatter will be out of there!

One fiasco after another. Now even Democrats are wary of his nominations.

Ted Gillis

Let there be an investigation, and if we don’t like the outcome we can investigate the investigators, so as to throw just enough doubt on the whole thing, mean while nothing gets fixed. That seems to be the republican M.O.

Carlos Ponce

And what would be the Democrat M.O.?

Carlos Ponce

Ted forgets the investigations were called for by mayors of Blue cities like Houston, Austin, Dallas, Fort Worth, San Antonio, etc.

Bill Broussard

Texas’s deregulated electricity market, which was supposed to provide reliable power at a lower price, left millions in the dark last week. For two decades, its customers have paid more for electricity than state residents who are served by traditional utilities, a Wall Street Journal analysis has found.

Dan Freeman

Another Ponce mis pounce. Betsy Price, a really red Republican is Mayor of Fort Worth.https://www.nbcdfw.com/news/local/fort-worth-mayor-betsy-price-to-deliver-final-state-of-the-city-address-thursday/2562072/

Chuck DiFalco

If, after the Ice Bowl – I mean, Super Bowl – in Dallas 10 years ago, the Public Utility Commission had required all power generators feeding the grid to winterize, there would have been no Texas sized disaster during winter storm Uri this year. All the while, ERCOT should have been jumping up and down yelling that winterizing was not getting done. Both the PUC and ERCOT failed the people of Texas as well as their missions.

Bill Broussard

Exactly. What remains to be see is if the generating companies actually reported being ready for winter like ercot said they did

Here is what I don’t understand yet after

Listening to the governor’s talk tonight

He said he was working with the congress to make sure winterizing is funded. In Texas we have a law that says public money cannot be used or spent on private property. Unless that law changes ( which means a whole different bag of worms) it can only suggest that a certain winterization cost can be passed in to the user (us) much like center point does

Along that same line, I do hope our city council remembers how centerpoint treated Galveston county when it shows up hat in hand asking for a rate increase

At least the governor admitted that all power generating sources failed. I appreciate his honesty even if it disappoints Carlos

Carlos Ponce

It was as expected.

Bill Broussard

What did you expect exactly. That our governor and our lieutenant governor would lie on national television rights after they failed their constituents or that he would later correct himself absent an apology. This whole thing is an embarrassment

Carlos Ponce

"What did you expect exactly. " Abbott just won the Tri-Global Energy Wind Leadership Award for being "green" on February 9, 2021. He's aiming for a shot at the presidency in 2024 and was trying to appease the Liberal media. He's just covering up for that fiasco wind energy push.

Bailey Jones

I think winterizing our grid qualifies as a legitimate project for President Biden's infrastructure initiative.

Bill Broussard

Bailey. I have an initial bad reaction to Biden’s infrastructure money being used to shore up private business like generation plants amid a huge problem Texas is trying to fix inside of the box they built. Currently it would fund private enterprise that already is charging 28 billion more to our cost than in other states and would only provide the incompetent one more angle to blame if something goes wrong

I’d much prefer to see how these folks dig their selves out inside of the free market box they built but I’m not very hopeful

My suggestion: buy a down Orvis coat...maybe two?

Bill Broussard

Referencing the above comment : Carlos you more than Abbott are so full of wind! We should just plug you in next freeze and let you blow our way to warm

Carlos Ponce

Plug me in? No thank you. The house never got less than 43 degrees during the freeze. With layering I survived. But I hear it got much colder in homes in other parts of the state. People with older family members or with health conditions should have checked on them.

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