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A very newsworthy follow-up to this event is the sky high bills that Texas electric consumers faced. Numerous new sources say as high as $17000, for 3 days. That is a very important issue.
[A second follow up would be the failures of numerous municipal water systems. Certainly, water is as vital to life as electricity, and that makes it a critical infrastructure. We could add water to the discussions in this thread, or start a new thread. GE or even GD might be better than EE for this thread.]
A caveat: Since 2015, I have been arguing on PF that energy can never be intelligently discussed as a technical & engineering problem without politics and social issues. Many prominent PF members disagree strongly. Since there is a PF rule about political topics, I cannot avoid skirting the boundary of what’s allowed on PF. The words regulated and deregulated are political hot buttons, but I can't avoid using them.
4 ways to structure the electric power industry.
Texas consumers are lured by advertisements such as this:
Proponents of model #3 argue that it keeps profits in the community rather than big nameless, faceless, corporate fat cats, and hated public utilities.
I favor model #2. In that model, only power companies and big industrials participate in the volatile wholesale market. Retail prices are set by negotiations between the PUC and the regulated utilities, and typically stay fixed for 1-2 years. I believe that retail customer can never be adequately educated about the risks of model #3, and the significance of price spikes that happen only 0.6% of the time. Therefore, IMO model #3 should never be used.
[A second follow up would be the failures of numerous municipal water systems. Certainly, water is as vital to life as electricity, and that makes it a critical infrastructure. We could add water to the discussions in this thread, or start a new thread. GE or even GD might be better than EE for this thread.]
A caveat: Since 2015, I have been arguing on PF that energy can never be intelligently discussed as a technical & engineering problem without politics and social issues. Many prominent PF members disagree strongly. Since there is a PF rule about political topics, I cannot avoid skirting the boundary of what’s allowed on PF. The words regulated and deregulated are political hot buttons, but I can't avoid using them.
4 ways to structure the electric power industry.
- Classical Regulated Utilities – A classical utility can be public or private, but it is vertically integrated. generation-transmission-distribution-retail are all provided by a single entity that is granted a monopoly over a specified territory. Some of them even did their own construction and mining. They are allowed to profit a negotiated percentage of their investment and costs.
- Half regulated – This is the model where generation is split off, leaving transmission-distribution-retail with a regulated classical monopoly.
- Deregulated down to the retail level. This is the model in Texas. Providers buy power wholesale and sell it retail to consumers. Providers don’t need much more than a PC, a domain name, and an Internet connection to start their business. There are 127 of them in Texas. The former regulated utilities still have monopolies, but their business model is to collect fees for transporting energy from point A to point B. They no longer participate in the purchase or sale of energy, wholesale or retail.
- Not regulated, no monopoly. The few places in the world that have that look like this:
- Regulators. In the USA, every state has a PUC (Public Utilities Commission). We also have FERC, the federal regulator with jurisdiction everywhere except Texas. The PUC that I'm most familiar with has 400 lawyers, but only one engineer in their staff.
- NERC (North America Electric Reliability Corporation). This is a voluntary group that sets standards for electric power companies. AFAIK, everyone in North America follows NERC standards, whether or not mandated by regulation. Compare NERC to UL for electric appliances, or NFPA for fire safety, or ISO for diverse standards.
- The grid operator. In most places, an independent organization such as ERCOT, PJM, MSIO, NYISO, NEPOOL, CAISO, ... sits above the utilities and generators to operate the grid.
One of the conclusions after the 1965 NE blackout (which started my engineering career) was that power companies were too small to operate the grid securely. Regional level control was needed. The first one was the New York Power Pool (today called NYISO).
Since 2000, the independent operators also took on the job of running the markets for electric energy and services, analogous to how the Chicago Board of Trade runs commodity markets. FERC regulations mandate independent grid operators, so they result from regulation, not deregulation.
Texas consumers are lured by advertisements such as this:
Proponents of model #3 argue that it keeps profits in the community rather than big nameless, faceless, corporate fat cats, and hated public utilities.
I favor model #2. In that model, only power companies and big industrials participate in the volatile wholesale market. Retail prices are set by negotiations between the PUC and the regulated utilities, and typically stay fixed for 1-2 years. I believe that retail customer can never be adequately educated about the risks of model #3, and the significance of price spikes that happen only 0.6% of the time. Therefore, IMO model #3 should never be used.
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