Texas Electric Bills Were $28B Higher Under Deregulation
I&#x27;ve seen a lot of news reports talking about people receiving $16,000 bills. Yes, that&#x27;s because they&#x27;re with a power company that charges the market rate for electricity. When there&#x27;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.<p>All of that in itself isn&#x27;t evil. But the retailer could have been more proactive to say &quot;During terrible winter storms, paying the market rate is a bad idea. Switch companies now.&quot; 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 &quot;Pay $10 extra a month, and we&#x27;ll make sure that in an adverse event, your bill for your normally consumed 1000 kWh would be $1000&quot;.<p>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 &#x27;green generators&#x27;. Some allow you to buy &#x27;packs of electricity&#x27; in advance, a bit like buying a hedge. Imagine having 1000 kWh in your bank to spend during this peak event. Some don&#x27;t charge daily rates for your holiday home. I like the innovation in the retail market.<p>But that doesn&#x27;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&#x27;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&#x27;s case might not be such a bad thing.<p>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.<p>If all of this is interesting, check out the real time market pricing at <a href="https:&#x2F;&#x2F;www.em6live.co.nz&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.em6live.co.nz&#x2F;</a>