What can we learn from Texas' power grid failure?

[jim mcnamara]

https://www.nbcnews.com/science/env...energy-grid-unprepared-climate-change-rcna289

The link above is an opinion piece that discusses the possible lessons from the experience in Texas.

FYI: This was a textbook system wide grid failure, caused by off the charts low temperatures over an extended period. Our friend the Polar Vortex is the cause.

I do not think this recent disaster is blameless, Texas had a previous nasty experience with grid problems. Caused by another member of the Polar Vortex family.

This is not a new, totally unexpected event - in February 2011 NM Gas had an emergency shutdown because of a Texas rolling blackout due to low temps.

This is a complete report:
http://www.nmprc.state.nm.us/utilities/docs/2011-12-21_Final_Report_NMPRC.pdf

In short, what happened in 2011 in Texas, happened again there on a larger scale. And mostly to Texans with much greater impacts. New problems arose, like water system failures.

New Mexico did learn something from the first disaster. It was essentially unaffected. Not so, Texas.

Texas gets a zero score on this one, because it is a more dangerous repeat of 2011. With really worse results. Maybe Texas will get the message.
I hope so, the people there deserve better.

 

[Averagesupernova]

Maybe Texas will get the message.
I hope so, the people there deserve better.

That could be argued. The people of Texas have made Texas what it is. Who else would have? Not saying that every last resident of Texas deserves to suffer with it but sometimes people are only capable of learning the hard way.

 

[Astronuc]

I have friends and family living in Texas. Two people living in a metropolitan area 10 miles apart have had very different experience. One had no electricity for 24 hours while the other had only a momentary loss of power but otherwise had not experience a blackout. So even in the same metro area, the blackouts are not uniformly distributed. The experiencing a blackout has been warned of rolling blackouts (4 hours with power, 4 hours without), while the other has not.

 

[Leo Liu]

What are the causes of this massive-scale power outage? Is it because the grid in Texas is not prepared for the cold weather?

Edit: Just found the answer on a newly written wiki article.

Causes
Further information: Energy in Texas
The winter storm caused record low temperatures at Dallas-Fort Worth International Airport of −2 °F (−19 °C) on February 16, the coldest in North Texas in 72 years.[22] Power equipment in Texas was not winterized, leaving it vulnerable to extended periods of cold weather.[23][24] Texas Governor Greg Abbott and some other politicians initially blamed renewable energy sources for the power outages, citing frozen wind turbines as an example of their unreliability.[25] However, renewable energy accounts for only 23% of Texas power output;[26] moreover, equipment for other energy sources such as natural gas pipelines bursting from the cold were more responsible.[25] Viral images of a helicopter de-icing a Texas wind turbine were actually an image from Sweden taken in 2015.[26] Governor Abbott later acknowledged that every source of power, not just renewable ones, had failed.[25] Five times more natural gas than wind power had been lost.[27] When power was cut, it disabled some compressors that push gas through pipelines, knocking out further gas plants due to lack of supply.[28]

During the 2011 Groundhog Day blizzard, Texas had faced similar power outages due to frozen power equipment, after which the Federal Energy Regulatory Commission reported that more winterizing of power infrastructure was necessary.[24] ERCOT said that some generators since then implemented new winter "best practices," but these were on a voluntary basis and mandatory regulation had not been established

 

[Tom.G]

See also:
https://www.physicsforums.com/posts/6459947

 

[vela]

The Atlantic published an article on the failure.

 

[epenguin]

This is being discussed in detail on the engineering forum.

Consensus seems to be this is the price that Texas pays for being a Lone Star state.

As far as I could understand the rest of the US is much more networked electrically as it is Europe. But then neither of these are 100% secure either.Perhaps someone could tell us this I'm not sure I understood right, it seems to be said that there are no wide electrical power distribution grid systems that don't in extreme conditions shut down completely and are hard and take time (days) to get going again. This is rather hard to understand and accept (I mean one would have thought that in extreme conditions the available supply could still be maintained for some regions for some hours per day and switched to other regions for some hours until the reserve generators come online) and if it is true I think we should be told.

Apart from that I just happened to read very recently that apparently someone a bit famous said that if he owned Texas and Hell he would rent out Texas and reside in his other property.

 

[Astronuc]

The Electric Reliability Council of Texas on Friday cut Griddy Energy’s access to the state’s power network, according to a Reuters report.

The council, the operator of the state’s major power grid, ended, because of nonpayment, Griddy’s ability to operate in the Texas electricity market, according to a Bloomberg report that referred to a market notice. Griddy has been the recipient of complaints of high bills during last week’s period of low temperatures, ice and snow.

The council moved Griddy’s customers to other utilities.

Retail power providers who do not pay invoices within 72 hours can have customers reassigned to other companies, according to the Bloomberg report.

https://www.yahoo.com/news/texas-electric-grid-council-ends-044307250.html

I heard more discussions yesterday about the economic impact and ramifications. While some customers, e.g., Griddy's, received high bills ($1000s for February), most folks who have flat rate plans did not receive such high bills - yet. Apparently, power companies did have to pay high prices for power, so eventually, it is expected that rate payers will see electricity rates increase in order to recover the purchase of power during that week in February!

 

[Office_Shredder]

So if you used Griddy and you were able to pay your bill, you paid for the high electricity rates last week, then got force moved to a flat rate utility that will jack up the price and make you pay for the high rates again. Nice system.

 

[Astronuc]

flat rate utility that will jack up the price and make you pay for the high rates again.

The high rates are not like those that Griddy charged during the blackout period. I took a look at some rates from fixed plans and found that they are about the national average or slightly higher, but not significantly higher. The lower rates are usually part of a variable price plan, which is what Griddy was offering. One could pay below market price, some or much of the time, but then have a day or a few days paying 10s of time the low rate. One event, such as a blackout in the middle of winter, or an exceptionally hot day or days during the summer, could erase any savings, and in fact cost 10 to 100 times typical usage.

https://www.saveonenergy.com/electricity-rates/texas/
The average price for electricity in Texas in 2020 is 11.86 cents per kilowatt hour (¢/kWh). There are plans for Texas residents on SaveOnEnergy with rates as low as 5.5 ¢/kWh.

https://www.texaselectricityratings.com/texas-electricity
The average household's monthly electricity usage in Texas was 1,014 kWh in December, 2020.

https://www.puc.texas.gov/industry/electric/rates/RESrate.aspx

https://www.energybot.com/texas-energy.html
(Last updated February 2021)

The average Texas electricity rate is 8.91¢/kWh (22% lower than the national average)
The average Texas residential electricity rate is 11.79 ¢/kWh (7% lower than the national average).
The average Texas commercial electricity rate is 7.9 ¢/kWh (24% lower than the national average).
Texas leads the nation in electricity generation from wind.
Texas ranks fifth in the nation in electricity generation from solar.

I don't know if those numbers include the blackout period.

Meanwhile -

HOUSTON (Reuters) - Texas's largest and oldest electric power cooperative on Monday filed for bankruptcy protection in federal court in Houston, citing a disputed $1.8 billion bill from the state's grid operator.

Brazos Electric Power Cooperative Inc is one of dozens of electricity providers facing enormous charges stemming from a severe cold snap last month. The fallout threatens utilities and power marketers who collectively face billions of dollars in blackout-related charges, executives said.

. . . Brazos and others that committed to provide power to the grid and could not, were required to buy replacement power at high rates and cover other firms' unpaid fees.

The state's grid operator, Electric Reliability Council of Texas (ERCOT), on Friday said $2.1 billion in initial bills went unpaid, underscoring the financial stress on utilities and power marketers. More providers likely will reject the bills in coming days, executives said.
. . .
ERCOT triggered the squeeze when it pushed up spot-market rates to $9,000 per megawatt hour (mwh) over more than four days and levied huge fees for services. The service fees were 500 times the usual rate, according to industry executives.

https://finance.yahoo.com/news/texas-electricity-firm-files-bankruptcy-064724456.html

A relative informed me that a next door neighbor's home experienced ruptured pipes in the attack, which resulted in severe water damage to the interior (or their $3 million home). A lot of drywall (sheet rock, plaster board, gypsum board) has to be removed and replaced. The neighborhood was without power for more than a total of 40 hours (first about 24 hours followed by intermittent service e.g., 4 hours on, 4 hours off) - enough so that waterlines froze.

 

[Office_Shredder]

Astronuc, I think the point was more that flat rate utilities might have lost a bunch of money, so going forward will have to charge more to make it back up.

 

[Astronuc]

Astronuc, I think the point was more that flat rate utilities might have lost a bunch of money, so going forward will have to charge more to make it back up.

True, but consumers or their electricity providers also have to pay up, unless the courts, or state legislature, decides otherwise. Businesses normally don't operate to lose money, so someone has to pay for others poor decisions, or in the case of Brazos Electric Power Cooperative Inc, declare bankruptcy.

 

[Office_Shredder]

True, but consumers or their electricity providers also have to pay up, unless the courts, or state legislature, decides otherwise. Businesses normally don't operate to lose money, so someone has to pay for others poor decisions, or in the case of Brazos Electric Power Cooperative Inc, declare bankruptcy.

Yeah, but the point still stands. If you were using Griddy, you paid 8k dollars during the event. If you then get switched to a flat rate provider(by force), they are going to charge their customers more money to make up for their losses. That includes you, even though you already paid an 8k electric bill. So those customers are double paying for this

 

[Astronuc]

Yeah, but the point still stands. If you were using Griddy, you paid 8k dollars during the event. If you then get switched to a flat rate provider(by force), they are going to charge their customers more money to make up for their losses. That includes you, even though you already paid an 8k electric bill. So those customers are double paying for this

If one switches providers, one only pays from that date on. Griddy's customers do not pay new providers for Griddy's bills; no one is paying twice. Griddy is shutdown because they have not payed for the power they purchased. If Griddy customers want electricity, they have to get it from other suppliers.

Meanwhile, Texas attorney general sues electric company Griddy that sent huge bills during storm
https://www.cnn.com/2021/03/01/us/griddy-texas-lawsuit/index.html

Texas' attorney general filed a lawsuit against Griddy Energy and Griddy Holdings for "false, misleading, and deceptive advertising and marketing practices" after the company sent sky-high electricity bills to customers during February's devastating winter storm.

As the storm rattled Texas' power grid, Griddy, which connects customers directly to the wholesale electricity market for a monthly fee, "passed skyrocketing energy costs to customers with little to no warning, resulting in consumers paying hundreds or even thousands of dollars each day for electricity," Attorney General Ken Paxton, a Republican, said in a statement.

The lawsuit says Griddy misled customers and downplayed the incredible risk of its pricing scheme, which charges the most when customers are most vulnerable.

. . .

 

[Office_Shredder]

If one switches providers, one only pays from that date on. Griddy's customers do not pay new providers for Griddy's bills; no one is paying twice. Griddy is shutdown because they have not payed for the power they purchased. If Griddy customers want electricity, they have to get it from other suppliers.

Meanwhile, Texas attorney general sues electric company Griddy that sent huge bills during storm
https://www.cnn.com/2021/03/01/us/griddy-texas-lawsuit/index.html

I think you're still missing my point. If you are using a flat rate provider, they are going to charge more for electricity from now until, like, 2022 to make up their losses. If you used Griddy, and paid your bill of 8k dollars, you might have been force moved to the flat rate provider who is now charging more for electricity going forward, to make up for their losses in February 2020.

 

[gmax137]

So what you're saying is, the price of electric power delivered in March is different than the price in February. Welcome to deregulation.

IMO, the old regulated monopoly approach was not broken and should never have been "fixed."

 

[Astronuc]

If you used Griddy, and paid your bill of 8k dollars, you might have been force moved to the flat rate provider who is now charging more for electricity going forward, . . .

I understand one's point. But 'higher' should be qualified. How much higher?

I suspect many Griddy customers don't have $8000, or potentially ~$17,000 lying around to pay the February electric bill. For many that's probably ~100x what they normally pay in a month, and probably what they pay over 10 years; most probably pay a lesser multiplier. Some would probably have to pay off Griddy in installments over a year, or years. Anyway, Griddy is cutoff from purchasing electricity since they did not pay their bills. Many more electricity providers are faced with huge bills because of unprecedented rates (~$9000/MWh, or $9/kWh) + service fees, which should not have increased since systems were not delivering extraordinary amounts of electricity.

https://www.washingtonpost.com/nation/2021/02/21/texas-high-electric-bills/
https://www.wfaa.com/article/money/...torm/287-14a54a65-39cb-4d1c-931c-0d003002f529

Update: HOUSTON (Reuters) - https://finance.yahoo.com/news/texas-power-crisis-deepens-more-230801199.html

Texas energy companies failed to pay another $345 million for electricity and other services incurred during last month's cold snap, the operator of the state's grid said on Monday.

The state's deregulated electricity market was thrown into turmoil last month as 48% of its generating plants went offline, fueling up to $9,000 per megawatt hour (mwh) spot rates and $25,000 per mwh service fees. Those charges drove one provider into bankruptcy on Monday.

In all, electricity prices on the state's wholesale market soared by $47 billion for the about five-day period when cold weather drove up demand and generating plants failed, estimated Carrie Bivens, a vice president at Potomac Economics, which monitors the Texas power market.

Her figure does not include add-on fees or payment defaults, which are significant and are spread to all companies that use grid services under ERCOT rules, she said.

 

[Astronuc]

Texas Power Grid CEO Fired After Deadly February Blackouts
https://www.usnews.com/news/politics/articles/2021-03-03/texas-power-grid-ceo-fired-after-deadly-february-blackouts

Bill Magness, CEO of the Electric Reliability Council of Texas, was given a two-month termination notice by ERCOT's board in a meeting Wednesday night. Magness made more than $876,000 in salary and other compensation in 2019. PUC Chairwoman DeAnn Walker resigned earlier.

They failed in rolling blackouts leaving many without power for 24 hours or more.

 

[Vanadium 50]

First, the electric companies are in trouble because they built the capacity that their customers were willing to pay for, which is not (as it turned out) the capacity their customers needed. As gmax points out, regulation is one way to solve this. However, let's not fool ourselves into thinking regulation automatically ensures the tecrocratically perfect solution. (Favorite example: the city of Berkeley has banned radioactive decay within city limits)

(This is not the only solution - insurance could handle this - pooling risk in addition to pooling power; futures contracts could handle this - I pay you $x today for the right to buy power at $y for the next month. All these have pros and cons. Do we really want power prices set by a bunch of people on Reddit living in their parents' basement? Stonks!)

Second, Office Shredder is right. These are real costs, and someone has to bear them. Ultimately we need to pay people to build plants and buy fuel. The answer to underinvesting in the past is to pay more now. Wagging one's finger at the evil corporations might be emotionally satisfying, but doesn't actually fix anything.

Finally, $17000 is a huge amount of power. Rates are capped at $9/kwh. $17000 = 1900 kwh,over 5 days is 15.7 kW. 24/7 for five days. (Can it be 24/7 if it's only 5 days long?) Put another way, the average Texan's bill is 1200 kwh per month. So Mr. $17000 is using almost 10x the power of a typical house. And presumably that's after he's cut back.

No idea who this is, but it's not the "poor single mom about to be evicted and thrown onto the street" we are supposed to get all weepy-eyed over. I can't imagine how one would use that much electrical power without a Bitcoin mine or a fleet of Teslas. Or both.

When you put real numbers in, it's not even clear that deciding to go with variable rates is irrational. The average Texas electric bill is $131. Let's say on average market electrical rates save 20% - much below this and it's not worth doing. So they save $26/month, but once in a blue moon get hit with a $1700 bill. Payback period is 66 months. I would characterize this as long, but not irrationally long.

 

[russ_watters]

(Favorite example: the city of Berkeley has banned radioactive decay within city limits)

Oh, how precious! I wonder what the fire marshal thought of that?

First, the electric companies are in trouble because they built the capacity that their customers were willing to pay for, which is not (as it turned out) the capacity their customers needed.

Minor quibble: that's not a "need", it's a negotiable "want".

 

[Vanadium 50]

the city of Berkeley has banned radioactive decay within city limits

Oh, how precious! I wonder what the fire marshal thought of that?

I'm thinking the police: "Hands up, Ar-40! I see you're a K-40 decay!" "Hey man, I'm stable. Can't blame me for what my parent did."

Need/want is a matter of degree. Normally markets are the way we handle it, but we simultaneously want not to pay for unused capacity but to have it when we need it. Having markets sort this out will certainly not work if we try and insulate people from consequences of bad decisions.

 

[Astronuc]

ERCOT kept market prices for power too high for more than a day after widespread outages ended late on Feb. 17, Potomac Economics, the independent market monitor for the Public Utility Commission of Texas, which oversees ERCOT, said in a filing.

In order to comply with the Commission Order, the pricing intervention that raised prices to VOLL (value of lost load) should have ended immediately at that time (late on Feb. 17)," Potomac Economics said.

"However, ERCOT continued to hold prices at VOLL by inflating the Real-Time On-Line Reliability Deployment Price Adder for an additional 32 hours through the morning of February 19," it said, adding the decision resulted in $16 billion in additional costs to ERCOT's markets.

https://www.reuters.com/article/us-...ring-winter-storm-watchdog-says-idUSKBN2AX0SV

Apparently the state or PUC is considering adjusting (downward) prices of electricity during the critical period.

 

[Astronuc]

The Texas winter storm could cost insurers over $20 billion (for fires and flooding due to burst water pipes).
https://www.businessinsider.com/the-texas-winter-storm-could-cost-insurers-over-20-billion-2021-3

One estimate of flood/water damage due to burst pipes in Houston - ~$560 M

City (Houston), county (Harris) say tens of thousands of buildings have burst pipes; true toll won't be known for weeks
https://www.houstonchronicle.com/ne...0-reports-of-burst-pipes-but-the-15963642.php

Apparently the state or PUC is considering adjusting (downward) prices of electricity during the critical period.

I read a headline last night saying Texas was not going to adjust prices or reduce the $16 billion charge.

 

[Vanadium 50]

I read a headline last night saying Texas was not going to adjust prices or reduce the $16 billion charge.

How would that work exactly? A buys something (power in this case) from B who bought it from C who bought it from D who bought it from E... Who is left holding the bag? If it's unfair (however you define "unfairness") that A is left holding the bag, who should? B? C? D? The taxpayers of Texas? The taxpayers of the US?

Here is an example of a Griddy bill that's supposed to outrage us:

I am shocked (no pun intended) by the total energy use - 4.5x the average Texan's. I think I use a lot of electricity: 1100 kwh/mo. which includes the extra usage because of the lockdown and includes the fact I have an EV.

As far as the "social justice" aspect of "let's take down greedy Griddy", OK, now the person who used to be a secretary in Griddy's HR department is out of a job. How has this helped?

 

[Vanadium 50]

After some thought, I am going to defend price-gouging.

Texas did not have enough (robust) capacity. How do I know? There were rolling blackouts. That's practically the definition of "not enough capacity".

Imagine I'm an investor. I've got some money burning a hole in my pocket, deciding whether to put it in nice, safe Treasuries, or maybe GameStonk, or...I know...maybe I'll build a power plant in Texas. The conversation might go something like this:

I'd like to build a nice robust and reliable power plant here.
Great! Typical wholesale prices are x cents/kwh.
Oh dear, I can't recover my investment at that rate. Why so cheap?
The plants you are competing with are fragile. They don't work in unusually cold winters.
Well then, I'll be able to provide a service then that nobody else can, charge a higher rate, and recover my investment that way.
No, that would be price-gouging. We cap prices to keep that from happening, and in the future, we're likely to cap them even lower.

In this environment, don't Treasuries look pretty good?

 

[Office_Shredder]

Electricity generators made something like 40 billion dollars in windfall profits. That's probably enough to justify some weather proofing? How much are they supposed to make?

A random Google search suggests texas uses 1 TWh of electricity per day. It also suggests natural gas plants cost about 800 dollars per kW of power they can produce (I picked natural gas because I believe it can turn on and off quickly, exactly what you want to respond to this type of crisis).

If I did my math right (questionable, double check me!) I think you could spend that 40 billion dollars building enough natural gas plants to produce electricity for all of Texas.

 

[Vanadium 50]

I'm not sure what the difference is between "profit" and "windfall profit". but let's run some numbers. The US produces something like 1 TW of electricity. Over a year, at 5 cents per kwh, that's just under $450B in sales. So the profit is 9%.

Is 9% too much? Does it apply to other industries? Can GM not make 9% on a car? Can Pizza Hut not make 9% on a pizza? How does one tell?

In any event, you are making a decision that the costs should be passed on to the investors. I think I pointed out that there are limits to your ability to do this before your investor says "forget this - I'm buying Treasuries." And now no new plant gets built.

 

[Vanadium 50]

And while we've been talking about the decisions of "macroactors" there are relevant decisions that individuals made. For example, a $3K propane backup generator is cheaper than a $5K electric bill. If you have net metering, you have an incentive to cut power as much as you can and feed your power onto the grid - a 10 kW system would be making or saving you $2000/day. Same argument for solar, although the day/night effect might cut into net metering's benefit.

 

[Office_Shredder]

Vanadium, windfall profit means profit in excess of normal profits. They made 40 billion dollars in profit in one week, not one year.

Edit to add: that said, I'm not unsympathetic to your point. The power companies just did what their regulator implicitly told them to do. But when thinking about price gouging or what is a reasonable maximum price, I think the question is at what price does nobody's behavior change. If the maximum electricity price was cut by 5x, would there be any power plants that were on that week that would have decided to not be on, because the cost of staying functional was too high? It's not obvious to me what the answer to this question is.

 

[russ_watters]

Vanadium, windfall profit means profit in excess of normal profits. They made 40 billion dollars in [windfall] profit in one week, not one year.

That seems unlikely. Do you have a source?

 

[Office_Shredder]

That seems unlikely. Do you have a source?

https://www.reuters.com/article/us-usa-weather-texas-power-idUSKBN2AQ2ZM

Wholesale prices, which last year averaged $26 a megawatt hour, soared to $9,000 per MWh for days as grid operators tried to quench a severe shortage that left up to 4.3 million residents shivering in the dark last week. The state’s total bill for electricity over seven days rose by $45 billion from the prior week, lawmakers said on Thursday.

Prices increased by more than 100x, I assume most of the 45 billion dollar increase is pure profit.

 

[StatGuy2000]

I have some questions for @Vanadium 50, @russ_watters and @Office_Shredder :

1. If the issue with Texas (as opposed to other states in the US) is that the electric grid does not have sufficient capacity to provide electricity to its citizens, for whatever reason (my own suspicion is major population growth over the past many years without sufficient investment in building greater capacity), then how much needs to be invested now to increase capacity and winterize the grid (among other required changes)?

2. Depending on what the cost is, who do you think should bear the cost? The state of Texas (through their existing operating budget, or through new taxes)? The (private) energy companies (out of their profits, or through levies applied by them by the state government)? Or the private citizens through their electricity bills? [My own leanings are to Texas sate or the energy companies, because the poor or middle-class are not unduly burdened with additional costs and the responsibilities should fall on both the state and their energy companies, but I have a feeling that each of you may have differing opinions on this]

 

[Office_Shredder]

The answer to #2 is easy, the private citizens are going to pay no matter how you pretend to do the accounting.

 

[StatGuy2000]

The answer to #2 is easy, the private citizens are going to pay no matter how you pretend to do the accounting.

The question is not if the private citizens will ultimately pay. The question is HOW it will be paid.

The fairest and the most sensible way to do so would be to increase state income taxes, or for the state of Texas to charge a special levy on the energy companies, to spread the cost out so that the the poor or middle-class are not unduly burdened.

The more relevant question is #1 -- how much would this cost? And how long should this cost be spread out?

For example, if someone is paying $130 monthly in their electricity bills now, but their bill is increased to, say, $140 over, say, 10 years, then the impact on the average citizen shouldn't be that severe, while ensuring that ($10 x 12 x 10 x 6 million) = $7 billion dollars is available over that period of time (the 6 million is a guess on the number of households exists in the state of Texas, given that the state has a population of ~29 million).

 

[russ_watters]

https://www.reuters.com/article/us-usa-weather-texas-power-idUSKBN2AQ2ZM

Prices increased by more than 100x, I assume most of the 45 billion dollar increase is pure profit.

Wow. It's not clear to me who is paying who for what there, or if those charges will ultimately stand, but fair enough.

[edit]
And @Vanadium 50 and @anorlunda IMO part of the problem with variable-pricing for electricity is that it requires the buyer to be paying attention to the spot price and have the ability to reduce consumption if the price rises. That's a level of sophistication and flexibility most consumers and even commercial users don't have. I'm in agreement with the sentiment I've heard here before that on the retail side the prices should be fixed. I wouldn't quite go so far to advocate for the "regulated monopoly" model pre-1990s, just that we should probably make the consumer choice a little more user friendly.

 

[russ_watters]

The question is not if the private citizens will ultimately pay. The question is HOW it will be paid.

The fairest and the most sensible way to do so would be to increase state income taxes...

I don't think electricity works that way anywhere in the US. It's a privately-provided consumer product, not a government service.

...or for the state of Texas to charge a special levy on the energy companies, to spread the cost out so that the the poor or middle-class are not unduly burdened.

"A special levy" doesn't make sense to me, as the government isn't providing the service, but whatever you charge an electric company gets spread out amongst the customers on pretty much a per kWh basis. It doesn't do what you're hoping to see; using this as an opportunity for wealth re-distribution.

1. If the issue with Texas (as opposed to other states in the US) is that the electric grid does not have sufficient capacity to provide electricity to its citizens, for whatever reason (my own suspicion is major population growth over the past many years without sufficient investment in building greater capacity), then how much needs to be invested now to increase capacity and winterize the grid (among other required changes)?

It seems like in Texas the primary culprit here was winterization, and if any grid lacked capacity it was probably the natural gas grid, not the electric grid.

I don't have specifics, but I would think on an ongoing/moving forward basis the added cost of providing a more robust generating capacity (like buying winterized wind turbines) is not very significant. Going back and retrofitting a lot of equipment as a one-time charge would be expensive though. But here's the thing: we're in the midst of a massive energy transition already. If this is a once a decade problem, maybe making new equipment more robust moving forward would be good enough to avoid a repeat in 10 years.

 

[Office_Shredder]

Statguy, if you make the electric companies pay for it it's going to be passed through by higher electric bills no matter how you try to spin it. Texas doesn't even have a state income tax, so that's a non starter. It looks like the bulk of the state income is from sales tax (actually the single biggest income source is federal grants, which holds no small amount of irony in my mind), which is probably just as regressive as raising electric rates.

https://courses.lumenlearning.com/odessa-texasgovernment/chapter/budget-revenue/

 

[StatGuy2000]

I don't think electricity works that way anywhere in the US. It's a privately-provided consumer product, not a government service.

This shows my bias from living in Canada. In my home province of Ontario, all electricity services are provided by a Crown corporation (i.e. a corporation wholly owned by the provincial or federal government -- in this case provincial). So electricity in Canada is a publically provided good, not a private-provided consumer product (but which is still paid for through electricity bills).

"A special levy" doesn't make sense to me, as the government isn't providing the service, but whatever you charge an electric company gets spread out amongst the customers on pretty much a per kWh basis. It doesn't do what you're hoping to see; using this as an opportunity for wealth re-distribution.

Again, since electricity is a crucial public good for all citizens of a given US state, then I would have thought that there would be legislation at the state (or possibly federal) level which strictly regulates under what condition that these private producers can operate in that state. So the state could (at least in theory) charge a levy or otherwise tax these firms as a pre-condition to operate, with the funds being potentially used to strengthen the grid (if the companies either cannot or will not do so).

But then again, perhaps my living in Canada (and lack of familiarity with how Texas, or other US states regulate the electricity market) skews my own perspective on these matters.

It seems like in Texas the primary culprit here was winterization, and if any grid lacked capacity it was probably the natural gas grid, not the electric grid.

I don't have specifics, but I would think on an ongoing/moving forward basis the added cost of providing a more robust generating capacity (like buying winterized wind turbines) is not very significant. Going back and retrofitting a lot of equipment as a one-time charge would be expensive though. But here's the thing: we're in the midst of a massive energy transition already. If this is a once a decade problem, maybe making new equipment more robust moving forward would be good enough to avoid a repeat in 10 years.

You may well be right that with the energy transition already occurring, this could serve as an opportunity to fully upgrade all equipment to prevent future problems of the kind we have seen with the Texas power grid failure. And for the sake of the residents of Texas, I hope this does occur.

I suppose we'll just have to wait and see.

 

[StatGuy2000]

Statguy, if you make the electric companies pay for it it's going to be passed through by higher electric bills no matter how you try to spin it. Texas doesn't even have a state income tax, so that's a non starter. It looks like the bulk of the state income is from sales tax (actually the single biggest income source is federal grants, which holds no small amount of irony in my mind), which is probably just as regressive as raising electric rates.

https://courses.lumenlearning.com/odessa-texasgovernment/chapter/budget-revenue/

Out of curiosity, is Texas unique for not having a state income tax, or are there other states that are in a similar situation? I was under the impression that all states had their own form of an income tax.

 

[vela]

Statguy, if you make the electric companies pay for it it's going to be passed through by higher electric bills no matter how you try to spin it.

This notion almost always strikes me as simplistic. It's like answering the question "what happens to the energy released when an engine burns gas?" by saying "it all eventually turns to heat." Sure, that's technically correct, but it ignores important details like producing useful work along the way.

Also, I don't think it's necessarily true. What if the government were to cap rates at the pre-storm values yet require the companies to modernize their infrastructure? The company will have to go with lower profit margins or even operate at a loss for a while to pay for the upgrades, employees don't get as big of a raise as they otherwise might have, etc. The end user isn't paying more, but the shareholders and employees are bearing the brunt of the cost.

 

[Office_Shredder]

This notion almost always strikes me as simplistic. It's like answering the question "what happens to the energy released when an engine burns gas?" by saying "it all eventually turns to heat." Sure, that's technically correct, but it ignores important details like producing useful work along the way.

Also, I don't think it's necessarily true. What if the government were to cap rates at the pre-storm values yet require the companies to modernize their infrastructure? The company will have to go with lower profit margins or even operate at a loss for a while to pay for the upgrades, employees don't get as big of a raise as they otherwise might have, etc. The end user isn't paying more, but the shareholders and employees are bearing the brunt of the cost.

And some of them will just go out of business. I don't even know what capping rates at pre storm prices mean. The most important input to electricity prices is like, the price of natural gas. Texas doesn't get to pick that globally. If natural gas prices go up, then every natural gas plants shuts down and you get another 50% blackout? That seems suboptimal.

 

[vela]

My point was that there are scenarios where your claim that the end user always pays for it all is wrong.

 

[Office_Shredder]

My point was that there are scenarios where your claim that the end user always pays for it all is wrong.

I think your scenario where they don't pay for it is wrong. At best forcing companies to lose money now is just going to make them charge more later to make up for it, and any attempt to ban that is going to result in some worse service some other way.

 

[vela]

I think your scenario where they don't pay for it is wrong. At best forcing companies to lose money now is just going to make them charge more later to make up for it, and any attempt to ban that is going to result in some worse service some other way.

Companies can only charge what the market will bear. If they lose money in year X, they can't just willy nilly raise prices in year X+1 to make up for the loss as you seem to think.

 

[russ_watters]

My point was that there are scenarios where your claim that the end user always pays for it all is wrong.

IMO you're splitting hairs here. The maximum over time that you can squeeze from the providers is the profit margin*. If it's 10%, then that's still 90% that the consumers have to pay for.

*And while the profit margin can vary, it can't vary by all that much otherwise investors will start going elsewhere and the scales have to find another way to level-out.

 

[Office_Shredder]

Companies can only charge what the market will bear. If they lose money in year X, they can't just willy nilly raise prices in year X+1 to make up for the loss as you seem to think.

The market just paid 9,000 dollars per megawatt hour for a full week, this is an odd argument to make at this point.

 

[russ_watters]

This shows my bias from living in Canada. In my home province of Ontario, all electricity services are provided by a Crown corporation (i.e. a corporation wholly owned by the provincial or federal government -- in this case provincial). So electricity in Canada is a publically provided good, not a private-provided consumer product (but which is still paid for through electricity bills).

I'm not sure that's a real difference. Is electricity paid for via taxes or from the end user purchasing kWhs?

This isn't to say that any government, including the Canadian/US federal and state governments couldn't build their own plants or otherwise subsidize the grids via taxes. Do you know if Canada actually does that? I don't see anything in the wikipedia article on Canada's electricity about it. Just being a government-owned corporation doesn't fundamentally change the business environment as far as I know (and the US has them too; see, the Hoover Dam).

Again, since electricity is a crucial public good for all citizens of a given US state, then I would have thought that there be legislation at the state (or possibly federal) level which strictly regulates under what condition that these private producers can operate in that state.

There is.

So the state could (at least in theory) charge a levy or otherwise tax these firms as a pre-condition to operate, with the funds being potentially used to strengthen the grid (if the companies either cannot or will not do so).

You're still describing what you want backwards. You'd need to tax the public and give the money to the electric companies (earmarked for whatever purpose), not the other way around. Taxing the company's income/profit just means they have to raise their rates, and they don't charge people different rates depending on their income in the US. And my suspicion is they don't do that in Canada either.

Out of curiosity, is Texas unique for not having a state income tax, or are there other states that are in a similar situation? I was under the impression that all states had their own form of an income tax.

It's not the only one, but it's somewhat rare. Another is Alaska. The abundance of oil in both has something to do with that...

 

[vela]

IMO you're splitting hairs here. The maximum over time that you can squeeze from the providers is the profit margin*. If it's 10%, then that's still 90% that the consumers have to pay for.

I don't think so. There are other parties involved, and many will bear some of the costs, like employees not earning as much as they might have otherwise. I'm not saying customers will not bear any of the cost; I'm saying customers are not the only ones that will bear the cost.

And why stop at the customers? Where do they get their money? When the cost of living goes up and their employers find they have to raise wages to keep people around, why ignore the increased cost to these companies? Or maybe they get help from the state and federal governments. I guess we're all paying for it through our taxes.

So again, my point is that the notion that the end user always pays for it in the end is simplistic and useless.

 

[russ_watters]

I don't think so. There are other parties involved, and many will bear some of the costs, like employees not earning as much as they might have otherwise.

Labor is a market too. If you pay people less, the quality of work will go down and/or people will start quitting.

I'm not saying customers will not bear any of the cost; I'm saying customers are not the only ones that will bear the cost.

You've created a wide gulf between the various positions. "Any" isn't a position on the table; it's about the difference between "almost all" and "all" that I consider a hairsplit. Yes, it's not zero and yes there are a variety of ways to squeeze more efficiency out of government regulated companies. But often times the result is the opposite of what you're after; higher prices, poorer service and bankruptcies are features of California's grid, for example.

And why stop at the customers? Where do they get their money? When the cost of living goes up and their employers find they have to raise wages to keep people around, why ignore the increased cost to these companies? Or maybe they get help from the state and federal governments. I guess we're all paying for it through our taxes.

Huh? I get a monthly electric bill and pay for kWhs with cents and dollars. My employer knows nothing about how much I pay. If you're trying to link that to inflation you are adding something meaningless. Inflation is just a multiplier on the value of a dollar that doesn't change the actual value of goods and services and labor. (Except insofar as they change with respect to each other).

Putting a finer point on it; when someone's electric bill goes up, they don't think "yay, I'm getting a pay raise!"

So again, my point is that the notion that the end user always pays for it in the end is simplistic and useless.

Like the "it all goes to heat" point, it is so close to being 100% accurate that it shouldn't be worth the effort to argue against is and doing so creates a falsehood instead of clarifying an oversimplification.

 

[jim mcnamara]

@russ_watters :

IMO part of the problem with variable-pricing for electricity is that it requires the buyer to be paying attention to the spot price and have the ability to reduce consumption if the price rises. That's a level of sophistication and flexibility most consumers and even commercial users don't have. I'm in agreement with the sentiment I've heard here before that on the retail side the prices should be fixed. I wouldn't quite go so far to advocate for the "regulated monopoly" model pre-1990s, just that we should probably make the consumer choice a little more user friendly.

Just to answer your point about customers varying usage to control costs - it is done widely
Using pretend numbers:
1.charge for peak demand. Large customers do this routinely because they would trash the grid if they turned on a bank of several dozen 10000 kWH kilns. Example: companies that manufacture ceramic toilets. They schedule kiln warmups (off/on) to minimize kVar. Homeowners in warm climates with air conditioning have other ways to reduce charge

There are several ways to perform a KVAR Calculation if you need to calculate the reactive power of a given load. If you want to go with a practical approach, use a voltmeter along with an ammeter or amp meter to get it done. The product of the readings will give you the apparent power of the load in volt-amperes. The resulting figure will also help you work out the true power in watts of the given load. Given those numbers, finding the vectorial difference shouldn’t present any problems. When you determine what the reactive power is, you can find the right capacitors necessary to lower apparent power components in your systems. That’s how you can cut down on the power factor if you want to save on costs. For instance, if you install a 30 KVAR of capacitors, these will go on to reduce the reactive power provided by the utility company to 30 KVAR. The apparent power supplied by the utility, on the other hand, will drop to about 85.4 kVA.

2. Some utilities (ex: Navopache Electric in Showlow AZ) use interruptible rates. When loads go up the company sends out a turn off signal to certain types of high demand appliances. Or a device like a hot water heater has timer that turns off between 7am and 9am - peak usage times

3. Seasonal rates - most electric utiltities characterize rates as winter peak or summer peak loads. So customers get free energy audits to help them get what they need at lower costs. Could be fixing leaky windows. Or adding some insulation to pipes. The utiltity charges more during peak seasons which are displayed prominently on bills. Many companies use special inserts as well as extreme customization features. Ex: Navajo Tribal Utility Authority prints bills to all customers in two languages: Navajo and English. Public Service Co of NM uses English and Spanish. Energy audit people are all bilingual, sometimes multilingual because there are multiple non-Western languages commonly used in New Mexico. Ex: Santana Rosetta from Kewa (Santo Domingo Pueblo) - my kid's "grandma" - spoke 6 languages.