Texas Electricity Generators Got Another Big Bailout from State Energy Regulators Yesterday

Categories: Biz

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Peter Ryan
Here we are, some 10 years into the deregulation of the Texas electricity grid, and a crisis approaches. Supply, it is predicted, will not keep pace with demand in the very near future. Generators say electricity prices are simply too low to justify the financing of new power plants. In fact, in at least one case, they've said prices are too low to justify even running existing power plants.

Back when Enron and others were peddling deregulation, we were told that introducing competition into the electricity market would drive prices down. But now those low prices are seen as a problem: Regulators raised the price cap for electricity by 50 percent on Thursday, hoping to entice investment in new power plants by allowing the companies that make the power to charge more.

Of course, in a truly free market there is no such thing as a cap. The price is simply what the market will bear. But electricity isn't just some commodity either, and the idea of prices rising endlessly must induce in state politicians a most generous flop sweat.

During periods of average demand, the price can be as low as $50 per megawatt hour. Prices are capped in times of peak demand, when the supply is strained by a heat wave or weather-related outages. The idea is to keep generators from gouging when nature delivers crisis to the grid. But over the course of this year, that price cap has tripled, to $9,000 per megawatt hour. In other words, the price can now soar to levels you can bet will be noticeable on your utility bill.

Lest there be any doubt, Texas Public Utility Commissioners can provide absolutely no guarantee that this will spur plant construction. There is nothing keeping generators from pocketing the extra dough. Because where is the incentive? If scarcity keeps prices high, then scarcity is good.

Question is, where do we go from here? My bet would be a capacity market, where instead of producers getting paid for the electricity they generate, we essentially pay them to build the new power plants. Most generators are apparently lobbying pretty hard for that. Especially Dallas-based Energy Future Holdings, which market analysts think is technically insolvent.

If the Public Utility Commission institutes a capacity market and we hold on to that $9,000 cap, bend over, consumer. The electricity companies got bailed out, and you got screwed.

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12 comments
gibbytown
gibbytown

You guys have no idea what you are talking about - the average price per mwh this year has been in the $25-30 range - That is $60 less than just a couple years ago.  The average price for a one year deal at your house in Dallas - $85 (all in) per mwh... a few years ago, that was $120.  Raising the caps is not a wall street bailout paid by taxpayers - if this was a fully regulated product, the prices would be a lot higher (both wholesale and retail) to support the building of plants.  The writer of this article needs to hang up and move on... irresponsible writing leads to irresponsible commentary from all the other bozos below.

Sotiredofitall
Sotiredofitall topcommenter

Someone explain to be again how a company that by definition is bankrupt has money to pay $528.3 million in fees but needs to be bailed out by Texas taxpayers.   Maybe an investigative journalist can publish a list of the state officeholders who approved this cluster.

TheCredibleHulk
TheCredibleHulk topcommenter

Cue the free-market goons with their: "Well, if you don't like it, just don't buy it." schtick.

Bremarks
Bremarks

The picture is all you needed.  And I could have sworn Rick Perry, Greg Abbott, et al., hate public bailouts of private corporations.  Well, not really.

roo_ster
roo_ster

A halfway market deregulation results in a full-on mess.  Go all the way or go back.  This 3rd way nonsense has left us in the middle of the dang road and that light ahead ain't our fairy godmother.

scottindallas
scottindallas topcommenter

 @oakclifftownie regulated means run as a utility.  Which means that profits are limited, capital funding set asides are ordered, and the consumers (not customers--those are free market denizens) are provided for.  "Utility" is a term that dates to Adam Smith and can be found in Common Law, the foundation of all our civil process that dates back to the Magna Carta.   Or, paid advocates are perhaps right, and professional markets, utilities markets are the same as the free market.  Fiduciary duties/law, regulation, the difference between customers, clients, and consumers is solely their spelling.  NOT

brantley.hargrove1
brantley.hargrove1

 @oakclifftownie I think you mean the Public Utility Commission of Texas? Deregulated in the sense that the market sets the price, and generators rely solely on those sales to pay the bills, build new plants, etc. For now, anyway.

scottindallas
scottindallas topcommenter

 @roo_ster simply insulates the monopoly, and gives the illusion of competition.  Every ad run by an electric company is a waste of funds and an inefficiency.  As the Hulk points out, there's no need to "sell" us on benefits of electricity, hell, you can be kicked out of your house for not having it. 

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