In Private Call, Texas Regulator Pledged to Protect Wall Street Blackout Profits
The Texas Legislature is in session right now, and a major topic of discussion is about who is going to end up with the short end of the high utility bill stick. While the media has played up bills of thousands or tens of thousands of dollars, that really only affected Griddy customers. Most consumers in Texas buy power at a fixed negotiated rate, and this rate functions somewhat like insurance. You pay a little bit more than market all of the time so you pay much, much less than market during these kinds of rare events.<p>Knowing that, it is easy to say that the power providers who signed these deals eat the costs, just like insurance companies. Again, the reality is more complicated. A large number of power &#x2F;generators&#x2F; had to pay very high rates to buy power on the open market when their generation capability went offline and they had contracts to provide power to the downstream providers. That is what happened to the Brazos cooperative. Should they be screwed?<p>What I do not hear anyone talking about is that the biggest reason for the spike in power was ERCOT adding cost to the market prices in order to entice generators to get more power on the grid quickly. ERCOT has the authority to supplement energy prices with &quot;adders&quot; up to the max allowed cost of $9000&#x2F;MWh. ERCOT did this for almost the entire duration, even when the market price for power was only at the astronomically high level of $250&#x2F;MWh. No one is really discussing whether ERCOT should retroactively unapply these adders as a means of clearing things up. Given that $9000&#x2F;MWh was not enticing &#x2F;anyone&#x2F; back on the grid (burning that money to unfreeze pipes and valves would have gotten capacity back online faster), ERCOT could easily justify pulling those back. Generators who were online would still make plenty of profit, and the rest of the power ecosystem in Texas would not struggle with a bankruptcy event.<p>What is likely to happen is that consumers will end up holding the bag. Griddy customers already feel this, but everyone else will see this in the form of higher negotiated rates over the next decade. This article shines a light on the true nature of the beast, though. Neither the PUC nor anyone else roaming the halls of the Texas legislature are going to support the consumer. The consumer is simply not represented by the lobbyists in downtown Austin.