Texas Has the Worst Electricty Grid in the Nation

satellite-photo-united-states-at-night.jpg
It doesn't look so bad from up here.
You might have already figured this out given the perennial threat of rolling blackouts and grid operator ERCOT's own admission that, come 2013, there won't be sufficient wattage to cover peak demand, but the state's electrical grid isn't the best. In fact, as the Texas Tribune reports today, it's the worst.

So says the North American Electric Reliability Corporation, which knows these things. The report notes things like "Insufficient reserves during peak hours could result in emergency operating conditions, including the possibility of curtailing interruptible loads and even rotating outages of Firm loads," but we already knew that. But look at Page 1 of the executive summary at the chart showing reserve margins. Notice how the bar for ERCOT is shorter than for everyone else. That means that Texas, more than even California, is on the precipice of outages.

Partly, that's a result of demand, which has increased here more than elsewhere. Partly, it's that power generators have been reluctant to invest in new capacity since the glut of natural gas has driven electricity prices down and because their Mack trucks weren't sufficiently full of cash, a problem that was remedied recently when the Public Utility Commission raised the cap on wholesale electricity prices by 50 percent.


By way of an alternative explanation, take a look at Elizabeth Souder's post on the Morning News' business blog summarizing a discussion at the Texas Conservative Coalition Research Institute's Energy Summit. The question was how some state legislators planned to keep the lights on in Texas.

"I don't think it's our role in the Legislature to keep the lights on," said Rep. Jason Isaac. "It's our role to let the free market itself to keep the lights on. What can we do to get out of the way."

And Rep. Kelly Hancock: "When there is supply and demand the free market tends to answer the call. It is truly the free market that has made Texas the leading free energy state in the U.S."

Which completely ignores the fact that the free market has failed to do precisely that, which is why we are scrambling so desperately to avoid widespread power outages. There are times, when electricity prices are soaring, when the free market does a fine job of satisfying demand. There are also, inevitably, times when prices drop and that doesn't happen. The thing is, electricity is a utility, something indispensable to modern life that just about everyone uses. To say that the government doesn't have a roll in making sure it is delivered reliably is absurd.

How to fix the problem? Throwing money at power companies is one way. Reducing demand is another. But allow me to put forward a modest proposal. Texas has an electrical grid problem, but it also has a Medicaid problem. State leaders are always bitching about how much it costs and how they just can't afford to ensure poor people get medical care. When demand peaks this summer and threatens to overload the grid, how about we selectively cut power to the state's charity hospitals? That would take some stress off the grid, and Medicaid patients would drop like flies. Two birds with one stone. The free market at work.


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54 comments
MisterMean
MisterMean

So what else is new?   The only ones who think that deregulation was a great idea was those in the legislature who brought this upon us.  They still believe it.  If you bring this to your Rep(ublican) Rep(resenative) (Your Rep Rep for short). They will send you a link to the electrical providers buyers guide.

 

We have bunches of coal fired plants but they are dirty and the owners are more concerned about their compensation than investing the monies to upgrade the pollution equipment on these old plants.   Natural gas is cheaper but again it is more expensive to build new gas fired plants verses those management compensation packages that are soooo important.

 

And I well recall back during the Enron California rolling blackouts how our Rep Rep’s kept telling us how lucky we were-despite the highest electric utility bills (aside from insurance) in the country.

 

The following observations:

1)      Our politicians are full of it.   They are responsible.

2)      Deregulation is a failure –unless you are a Rep Rep who was in on this con.

3)      The present management of the utility companies are inept and incompetent

4)      We are screwed by points 1 and 3

5)      They (1 and 3) need to be held accountable for this nonsense.

Michelle Collette Gerant
Michelle Collette Gerant

strange, I never have a problem in Texas (metroplex & Dallas), just South Florida.. You're right Jay...sloppy

1morereason2carry
1morereason2carry

One of the things I  like about living in Dallas over living in Austin-- is being able to choose an electrical provider. I can vote with my feet and choose another company if I am not satisfied with the way I am treated.

 

In Austin? You gatta do what dey tell u 2 doooo

 

And take it with a smile. That's how I am treated by the bureaucratic city water utility here. Never have problems with my electricity but any time I have to deal with the water co it's like being stuck in one of those "scared straight" prison programs.

 

I will gladly pay a bit more for that choice. Just like I will shop at Whole Foods over Walmart for the privilege of being treated like a human being rather than cattle. 

scottindallas
scottindallas topcommenter

Texas' electric deregulation cost is tallied in study Stay Connected Register | Log in Jack Z. Smith | The Fort Worth Star-Telegram

 

A report released Monday concludes that electric deregulation has cost Texas residential consumers more than $11 billion in higher rates and that the operator of the state's major power grid, the Electric Reliability Council of Texas, has been poorly managed and industry-dominated.

The 101-page report, "The Story of ERCOT," is the result of a research project of the Steering Committee of Cities Served by Oncor and the Texas Coalition for Affordable Power, which works with 158 cities and other governmental entities to buy electricity in bulk.

Deregulation, it said, has resulted in higher rates for Texas power consumers rather than the lower rates forecast by lawmakers who passed the state law in 1999.

Before deregulation, Texas had cheaper rates than most states. Between 1999 and the first six months of 2010, however, Texas residential consumers "suffered greater increases [in electric rates] than residents in all but six other states," the report said.

"Had electric prices remained at the national average -- not below it, just at it -- Texas residential consumers would have saved more than $11 billion since the implementation of deregulation," the report said, citing data compiled by the U.S. Energy Information Administration.

The entire deregulated Texas market, commercial, industrial and residential, "would have saved $15.5 billion had prices remained at the national average," the report said.

 

http://www.mcclatchydc.com/2011/02/15/108745/texas-electric-deregulation-cost.html

TexasCock
TexasCock

If you refer to exhibit 27-15 it clearly demonstrates that regulated markets usually have much lower rates than deregulated markets. Facts is facts

TexasCop
TexasCop

Texas is sitting on a huge quantity of lignite, but liberals fight the state to the bitter end over new clean coal-fired power plants.  This should come as no surprise to anyone in this state.

Dallasphotog
Dallasphotog

By deregulating the market and turning our power grid to private investors, you become beholding to the shareholder and the fatcat CEO's of those companies.  Instead of profits going back into the grid, they're going into other people's pockets.As long as this is the case, there will be little incentive to improve infrastructure and increase capacity.  Correct me if I'm wrong, but the PUC allowed this increased cap for peak power generation at times when power is in highest demand.  Why would you add new capacity when you can screw the customers during peak capacity?Electricity shouldn't be a business, but as it is meant to be, a utility...just like water, managed by the public interest.  Otherwise, you can expect to pay higher bills while the ceo's and shareholders go laughing all the way to the bank.

TheDarkSide
TheDarkSide

*So regulated markets have historically never experienced blackouts?

 

*So regulated market blackouts more "kindhearted" and thus less of a threat to medicaid patients?

 

*So Public Utility Commission raised the existing regulatory cap on wholesale electricity prices by 50 percent as a whole (as implied by the article's misinformation) or just as applicable on peak usage?

 

*So peak usage rate increases do not lower demand?:

 

The 2012 summer peak demand forecast is 23,409 MW, which is lower than the peak demand forecast for the summer of 2011. Peak demand is expected to be lower due to three main factors:

The economy remains stagnant with little growth in the industrial sector;

Residential and commercial load will increase due additional construction activity;

Underlying  load  growth will be more than offset by the increase in embedded generation, conservation and ***customers facing time-of-use rates***.

(from your NERC link)

 

*So consumers will not also face higher rates imposed by rate-based regulated markets?

(see 1980s when prices were inflated due to rate based regulatory overbuilding).

 

So government regulators are not susceptible corruption?

 

So the Texas grid will not remain isolated and thus more prone to blackouts even with new regulation imposed? (probably not after regulatory rates overall rise to the point where investors build new plants). 

 

So much misinformation, so little real analysis in the populist sentiments expressed in both the article and the users comments.

 

Lets all get together and stick it to the man.

 

Feel better now?

 

 

Jay Cox
Jay Cox

It's not "the worst grid". It's the worst in "reliability", which it would seem to be a new quality from the linked-to article. This is sloppy reporting; I shouldn't have to read through a linked-to article to get a decent summary.

ozonelarryb
ozonelarryb

E lectricity

R eally

C onfuses

O ur

T ecnicians

Sotiredofitall
Sotiredofitall topcommenter

And yet Gov Goodhair will run again and be re-elected again because the majority of the minority that vote are clueless.     

claytonauger
claytonauger

Glad LBJ didn't wait to let the market bring electricity to rural Central Texas. We'd still be waiting. Kelly Hancock is possibly the biggest SOB in the Lege.

scottindallas
scottindallas topcommenter

 @MisterMean really?  cause I've yet to hear a democrat campaign to re-regulate the elec. market.  The Dems supported it too

scottindallas
scottindallas topcommenter

 @1morereason2carry Electricity in Austin is cheaper.  The Dallas Water is great here, they beat me home while I had to wait days for electricity, and weeks for phone and cable.  What choice are you talking about?   The very same electrons, travel down the very same powerline, generated by the very same power plants, Green Mountain or not.  So, we've paid $11-15 billion more for this charade that so appeals to you.  Perhaps you like it, but it's bad economics.

TheDarkSide
TheDarkSide

 @scottindallas your link is 17 months old news. THe transition has evolved since then:

Using the rate of 10 cents per kilowatt-hour (c/kWh) in Austin, Texas as a benchmark of still-regulated pricing, Texans in deregulated markets were receiving a discount of 32% below the regulated rate in ***2011****, mostly due to higher rates from "old" large, monopolistic Austin Energy. Switching to a new provider is slow on the electric market, but in 2010 fixed long-term (one year) market rates from many retailers became lower than 10 c/kW, and less than 9 c/kWh for shorter terms even in "expensive" electric markets (large cities) in Texas.

 

http://en.wikipedia.org/wiki/Deregulation_of_the_Texas_electricity_market

TexasCock
TexasCock

 @TexasCop We are also sitting on a shitload of natural gas. It burns cleaner and is actually cheaper. But what does that have to do with the grid?

scottindallas
scottindallas topcommenter

 @TheDarkSide The dumb side is more like it.  When we deregulated, the forecast for Texas electricity was that we had ample supply, and were among the lowest cost providers in the nation.  We were look at FALLING rates. 

 

But, we deregulated.  We now face blackouts, among the highest rates in the nation.  Utilities are NOT free markets.  Free markets give customers all the power due to competition and alternatives.  Neither exists in the electric market.  No free market player can reduce out put and increase profits/rates. 

Sotiredofitall
Sotiredofitall topcommenter

 @claytonauger Yep - used to be Texas politicians understood you did what kept your business buds happy needed to also benefits the public (you know the Golden Goose story).  Now we have politicians who care more about their cronies and short term benefit

MisterMean
MisterMean

 @scottindallas You may be right on that but as Texas is one of the Redest states and has been controlled by the Republicans.........

scottindallas
scottindallas topcommenter

 @TheDarkSide look below, I have the current rates for Austin's electric co-op.  Austin's rates are lower than what you cite, though they have a graduated scale, so such flat rates are equivalent without knowing use.  The graduated scale make great sense, and encourages conservation.   

TexasCop
TexasCop

 @TexasCock I can't get your latest response to load, but I see it on email.  I agree with you on fracking.  The poisonous byproducts should concern people.  I get that it converts resources into reserves, but is there not a safer way to pull this off?  The earthquakes, which the natural gas industry says aren't related to fracking *ahem right*, should also be of concern.

TexasCop
TexasCop

 @TexasCock You're right, but I believe coal is much cheaper per kilowatt.  With current technology, coal fired plants are really not much "dirtier".

scottindallas
scottindallas topcommenter

 @1morereason2carry but, it's economically wasteful.  If free enterprise makes a big profit, good for them, when utilities make a big profit, it is a TAX on the economy.  The same is true of professional services, the more cheaply they provide their "efficiencies" (since professionals are not productive, but hopefully are "facilitators of efficiency")  the fewer outlays to these sectors is by definition a more efficient market.

TheDarkSide
TheDarkSide

 @scottindallas real analysis again in short supply. Which year prior to dereg in 2002 was Texas among the lowest in cost? Texas is currently among the highest in cost? Not as of 2010 anyway:

http://www.neo.ne.gov/statshtml/204_archive.htm

 

Regulation solves the phantom scenario you allude to?

 

There are merits to both approaches deregulation/regulation.

 

I choose to disregard your and the official V V Media viewpoint that constantly gets hammered on this site as the viewpoints of polemics. 

 

 

scottindallas
scottindallas topcommenter

 @MisterMean There was only one vote against it.  And, now that it's an unmitigated disaster, no one is running on it.  There are fecund issues for the democrats, but they have to challenge the GOP narrative.   They aren't doing that in the national level either. 

dallasdrilling
dallasdrilling

 @TexasCop The earthquakes are from the disposal wells that hold the contaminated water. How many years do you think it will be before some shifting allows that water to migrate around and then contaminate any other potential safe water sources?

GuitarPlayer
GuitarPlayer

 @TexasCop Coal is not cheaper right now. Check out the price of natural gas right now. Its super low. At one time however you were right. And coal is MUCH more "dirtiier" to burn. Clean burning coal is a joke.

icowrich
icowrich

 @dallasdrilling I understand, and it's a problem.  I'm just not convinced that it's a bigger problem than the one natural gas seems to be mitigating. 

dallasdrilling
dallasdrilling

 @icowrich They have not figured out a way to get the gas out of the ground without contaminating everything around it.

icowrich
icowrich

 @TexasCop Natural gas is way cheaper, and has been credited with the fact that the USA now leads the world in the reduction of greenhouse gas.  The markets favor gas, now, which is why coal is floundering.

scottindallas
scottindallas topcommenter

 @TexasCop It did no such thing.  Nukes create a terrible pollution problem, one that lasts for centuries.  Further, nukes are not cost effective.  I don't believe any private nuke plants have ever been built.

TexasCop
TexasCop

 @scottindallas I wonder why we don't exploit nuclear technology more than we do.  It's an infinite source of power.  When I lived on the east coast, it handled the grid without issues.

scottindallas
scottindallas topcommenter

 @TexasCock  @TexasCop Wind sucks,  According to ERCOT, wind power works 8% of the time.  That isn't enough to do anything, particularly since the wind doesn't blow when we're really hot, the "cap" means air is stagnant. 

scottindallas
scottindallas topcommenter

 @TexasCop  @TexasCock we don't have current tech coal plants, that's the point of the previous article about the upgrades to "big Brown" where they failed to upgrade emissions.

TexasCock
TexasCock

 @TexasCop I also question the long term contamination caused by fracking. It is a new technology. Time will tell.  Wind energy also has advantages, but requires a huge investment in grid infrastructure. Just ask T Boone

TexasCock
TexasCock

 @TexasCop Can you provide me with some links to support your point of view?

scottindallas
scottindallas topcommenter

 @1morereason2carry while I'm a fan of the Big Lebowski, I'm not making the occupy argument.   Just that utilities need to be heavily regulated or wholly socialized.   I don't extend that to the free market at all.   In fact, I would support zero gov't in the free market

scottindallas
scottindallas topcommenter

 @1morereason2carry The insane person is the one who comments on economics, but doesn't know the difference between utilities and free markets.

1morereason2carry
1morereason2carry

 @scottindallas Doesn't make any sense

 

If nefarious "shareholders" are receiving all this evil profit... 

 

Just buy shares. 

 

Nope. It's just insane cat lady ranting.

scottindallas
scottindallas topcommenter

 @TheDarkSide You need to get better sources of information, cause you're the one devoid of real analysis.   You need to stop listening to ideologues.

scottindallas
scottindallas topcommenter

 @TheDarkSide your figures are utter BS, if you knew the Austin rates, you'd know that too.  Here's their schedule:

summer rates

0-500kWh            3.3cent/kWh

501-1000kWh     8.0 cents/kWh

1001-1500kWh   9.1 cents/kWh

1501-2500kWh   11.0 cents.kWh

2501 and up        11.4 cents/kWh

 

Your flat rate assumption in no way reflects reality

oct-may rates are lower

1.8

5.6

7.2

8.4

9.6

 

Those are good rates.  I barely went over 1100 kWh that's about 6.5cents per kWh.  on Summer rates.  Outside of Summer, my rate would be 4cents/kWh.  Good luck beating that.

 

scottindallas
scottindallas topcommenter

 @TheDarkSide look at your chart, Texas was below the national average, before dereg. and are above the national average after. 

scottindallas
scottindallas topcommenter

 @TheDarkSide Free markets are efficient cause the customer enjoys alternatives and competition.  We have no such choices in utilities.  This makes the customer a sitting duck.  If you don't understand basic economics, if you're unwilling to discuss this, and the facts, then there's no wonder you're stuck in self imposed ignorance. 

 

What do you do for a living?  Can you do less of it, and get paid more?   Cause utilities can do that.  That's why they're not free markets.

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