How's that free market working out in Texas?

[TheDrake]

She knew spiking prices were a “risk” of using a variable rate service like Griddy, but normally she and her husband benefit from the model because they closely track their electricity usage, she said. The couple tried to transfer to TXU Energy as soon as possible, but the earliest date they could was this week, after the storm had blown over. While she was grateful to have power, she said “at this point, it almost feels like it would be better to not have any power at all because at least we wouldn’t be paying that much.”

“I feel torn because I realize that we have to accept responsibility for doing a service like this that is wholesale,” she said. “It still is really hard to cope with the fact that we have an infrastructure and a system overall that allows for something like that to happen. It feels like it’s evil.”

The couple is “fortunate” they could pay the cost if they need to. But it would decimate all the savings they’d hoped to put toward a down payment on a home or to replacing a car. Jakob described sobbing in bed thinking, ‘How is this our life? How did this happen?’ They thought they were doing everything right. They don’t have debt, she said.

Some Texans said they signed up for a fixed rate plan but were unknowingly bumped over to a variable plan when their contract was up.

That’s why Lisa Chumley, a teacher in Dallas, said she and her husband ultimately signed up for Griddy. They were stuck with a $1,500 bill for electricity one summer, and said TXU Energy had moved them from a fixed rate plan to a variable plan without their knowledge.

The low rates appealed to her. With Griddy, she’s paid about $80 a month for electricity for her three-bedroom home.

As the storm set in last week, the family didn’t lose power. But Chumley was shocked to see hundreds of dollars had been withdrawn from her bank account by Griddy. Her husband checked with the electric provider and saw they owed $1,000. The balance kept ballooning. It now tops $10,000.

Texans blindsided by massive electric bills await details of Gov. Greg Abbott's promised relief

Personally, I live outside of Austin and am served by an energy collective, so I don't fully understand how other consumers in Texas might make their choices. The Public Utility Commission in Texas approved the 7400% price increase in order to "entice power generators" to add more power to the Texas system. Some customers are getting directly hit now, while other customers will probably see their utilities spread the price spike out over more time.

Partly this might be a time for a caveat emptor, like the people gobbling up all those mortgages with adjustable rates or balloon payments. As stated in the article, she was loving her low rates in the good times. TNSTAAFL.

Partly, I'd wonder if the utility commission even understood that some of the providers were going to pass the approved hikes directly to consumers. I'm also curious about how they came up with the 7400% price hike. Did somebody do an analysis and determine that you'd get X capacity with a price ceiling of Y? Or maybe they just got commitments from suppliers based on a negotiated figure.

In more good news:

Beyond customers, the spike in wholesale electricity prices could spell trouble for smaller providers who bought the electricity at a sky-high cost but gave it to customers at their usual lower rate. Analysts and experts expect many will fold — bouncing their stranded customers to so-called “providers of last resort” in a process that’s “confusing for customers and costly,” Morstad, with the AARP, said.

“They don’t choose their provider of last resort, they’re just sent there. It’s never a great competitive rate,” though they can change companies after, he said.

I agree with most of the value of a free market. I'm not sure how great it is for a commodity that customers will literally die without. All this competition seems to have encouraged providers to cut corners on things like winterization, limited the amount of excess capacity, and created a windfall for the providers that were able to stay up. I will say there have been additional benefits, Texas has the most wind power of any state and that is largely attributed to the deregulated system.

[rightleft22]

What is a 'free market'?  A freedom from... or a freedom to... A healthy freedom is a balance between the two, a balance that requires healthy boundaries - regulations. (The exercising of freedom is a exercises of setting boundaries)

Currently to many leaders use 'Deregulation' as a general ideal without identifying what and why specific regulations should be dropped or changed. 
Trust by verify. Good regulations protect the company (often from themselves) and consumer.  History is clear, leave the door open for people to take advantage and eventually some will take advantage.

Healthy boundaries.

[cherrypoptart]

I'm happy with Amigo Energy in Texas and don't expect my bill will be much if any higher than usual. Of course I also was without any power for about two days so there's that. I wonder if any people in my area had Griddy and if it kept the lights on for them but I doubt it since even if they had it, it seems like power to whole swaths was cut with the flip of a switch and the only people with any power had generators. Griddy apparently warned customers to switch companies but of course that takes several days so wasn't very useful. One thing people with Griddy might have been able to do is just trip their own circuit breaker and go without like the rest of us. At least they had the option. I feel for them though and see what happened to them as something of a gouging situation and even if technically legal I expect they'll get some relief with those bills one way or another which is fine by me. They shouldn't have to pay astronomically high bills like that. Whatever contracts they signed, prices that high are hardly reasonable even under the circumstances.

[cherrypoptart]

From what I've heard the biggest mistake (well after not winterizing) was not counting the gas producers as essential. When their power was cut that eventually lead to a shortage of gas that the power plants used so the power plants had to shut down when they ran out.

I agree with not blaming wind power. Though it's true if the wind turbines had been winterized that would have been better but still from what people are saying even though some wind turbines froze the wind turbines that kept running were putting out plenty of juice and that brings up the main and most obvious point for those harping against wind power which is that without it this situation would have been even worse. The wind turbines are extra power as far as I see it. The solar panels too. Sure you can't always count on them for various reasons but if they didn't exist at all would we really have more nuclear, coal, and gas power plants? I mean I suppose maybe, but still not enough to meet all the demand. And as we've seen, those can go down too. The best solution for now is an "all of the above" approach. A diverse energy supply is a more reliable energy supply.

[msquared]

I would like to see some info on how people who owned personal solar did?  And if they had batteries.  I would think one of the advantages to having personal solar power (on your roof or on your property) would be in situations like this, especially if you have battery storage like the Powerwall.

I also wonder if any of the solar people who normally sell power back to the grid, if the grid was still working in their area, were paid the higher rates for the power they put into the grid?

[yossarian22c]

I feel for them though and see what happened to them as something of a gouging situation and even if technically legal I expect they'll get some relief with those bills one way or another which is fine by me. They shouldn't have to pay astronomically high bills like that. Whatever contracts they signed, prices that high are hardly reasonable even under the circumstances.

I agree with this. Signing those type of contracts you may expect that electricity rates could increase 2-3x in a high demand situation, maybe as high as 10x but rates at 740x the typical rate isn't a predictable outcome. Its complete government sanctioned price gouging.

[TheDrake]

Everything that happened was predictable but also perhaps non-obvious. There's a lot of fine print, potentially, but the key point is this one high up in their FAQ

"We connect you directly to the wholesale price of electricity and bypass costly middlemen and brokers."

Directly. As in no safeguards.

What did the historical price do? Well, in Aug-19 it jumped 6x. Jul-18, 2.5x

Then you got these guys:

Texas Electricity Prices Expected to Skyrocket in 2020 : Lock in a fixed contract before prices rise.

There were warning signs for sure. But again, I think the biggest failure I see is that the governing board approved the massive hike. All the Board had to do is say, "no you can't gouge like that, you may charge 15x, but no more". I'd like to see them get pressured to resign. I wonder how many of them have ties to electricity producers.

As for local solar, not too many installations have battery backup. Those that did were grinning from ear to ear, I imagine. Most of the panels were still operating at decent efficiency despite the snowfall. If you really want independence, that would be a good way to go.

Fun thing, I enter my zipcode into the site above, "You'll be the first to know when energy deregulation comes to your neighborhood." Thanks, but no thanks.

[LetterRip]

Price gouging is illegal in Texas during a state of emergency,

https://www.texasattorneygeneral.gov/consumer-protection/disaster-and-emergency-scams/how-spot-and-report-price-gouging

So I'm curious if those rates will be found to have been gouging.

[roseauthor]

It's working for me just fine.  We're making record profits this year.. but we have a business in security systems!   

[TheDrake]

Price gouging is illegal in Texas during a state of emergency,

https://www.texasattorneygeneral.gov/consumer-protection/disaster-and-emergency-scams/how-spot-and-report-price-gouging

So I'm curious if those rates will be found to have been gouging.

Pretty hard to call it gouging when the government signed off on the price hike, isn't it?

[Wayward Son]

Pretty hard to call it gouging when the government signed off on the price hike, isn't it?

I think the guy who got a $17,000 monthly bill for electricity just might disagree. 

[TheDrake]

I'm saying you can't hold the company responsible for gouging when it is sanctioned by the government. Seems like a pretty strong defense. And when the company in question is pegged to wholesale prices also entirely out of their control.

Also that guy was stupid. Never accept anything that is a variable rate with no ceiling. You can see the first hand accounts, "well I knew it could go up, but not THAT much!". When there were fixed rate plans available, and they got greedy trying to save 10%.

Witness people desperately trying to change plans knowing what was about to happen, after getting notification from the company they signed up with that it was about to happen.

Maybe people will wake up and demand regulation and hold Abbot accountable. More likely they'll get scared about a socialist takeover and demand less regulation while complaining about the result.

[yossarian22c]

I'm saying you can't hold the company responsible for gouging when it is sanctioned by the government. Seems like a pretty strong defense. And when the company in question is pegged to wholesale prices also entirely out of their control.

Everyone else is paying eventually too. Many of the local utilities that buy power and pass it onto their customers got just as blindsided. The only people coming out of that price hike in any way good are the producers who failed the state. I can't imagine why the regulatory board would have allowed a 740x price hike. A few people are going to get really rich off that, will be interesting to see what the conflicts of interest are and what money and stock are trading hands and greasing wheels behind the scenes.

[LetterRip]

Is it the same producers who failed to weatherize and thus had failures who received the benefit of the price hike?

[yossarian22c]

Is it the same producers who failed to weatherize and thus had failures who received the benefit of the price hike?

If they had 2 plants fail and 1 stay open they still made 200x the profit during the price hike.

[LetterRip]

Gouging is based on customary profits not price.  If they required the higher rates to get a similar customary profit - then it wouldn't be gouging.  If they increased their profit margin then it would be gouging.  An allowed rate increase could be legal if that higher rate were necessary for achieving customary profit by bringing some equipment online thst is horribly expensive to start and operate- but if it were a rate increase to increase profit per kWh - then it would be illegal price gouging.

So it is immaterial that the rate was allowed to be higher - it wouldn't excuse the from engaging in gouging.

[Fenring]

It seems to me that there is a difference between "the law did not say you couldn't do it" and "it was legal." These are not identical propositions, and many things are completely illegal even though they have never been attempted before and haven't been regulated. The ensuing lawsuits (or class action suits) may well determine that these procedures were never legal and that damages have to be paid out, even though technically the law did not specifically say the companies couldn't do it. The incomplete letter of the law is not the entirety of what would determine the legality, to say nothing of the ethics, of raising prices like this.

IMO this situation is also partially a result of the current established practices of automatic withdrawals for electric bills, which I assume are not required by the companies in Texas any more than they are where I live. The people involved could no doubt have signed up for manual bill payment each month, at which point if they received a bill to that extent they could contest it in court rather than pay. But taking an automatic withdrawal of such shocking amounts without permissions smells to me also of a legal infraction, because if I had to guess (and the lawyers here can chime in if my guess is dead wrong) there is probably a legal standard of expected usage of the automatic withdrawal agreement. That is, there's an implicit understanding between client and company that you are agreeing to automatic withdrawals to facilitate regular monthly payments, and not to withdraw any amount you see fit to bill for services rendered. Billing unusual amounts to an automatic payment contract should be considered as fraud IMO, whether or not it in fact is fraud. It's implicitly a breach of contract for the initial purpose of signing up for automatic payments, and possibly grand larceny if it is in fact the case that it's illegal to withdraw arbitrarily high amounts of funds from someone's bank account after having obtained access.

Whether or not my opinions match what the law actually states, I would be displeased to learn that none of the above is accurate...

[yossarian22c]

Whether or not my opinions match what the law actually states, I would be displeased to learn that none of the above is accurate...

Based on what is allowed in medical billing I'm going to say that these practices are all "legal" despite being misleading, immoral, and exploitive.

The only thing that could protect people are emergency price gauging laws. But the state regulators allowed natural gas and energy prices to inflate to hundreds of times the normal rate. Public pressure and the fear of future regulation may lead the companies to "review" the bills and scale them down by a factor of 10 or so.

[yossarian22c]

Some insight into what happened at ERCOT.

Separately, a Bloomberg report Thursday disclosed a $16 billion pricing error by ERCOT the week of the storm. ERCOT, which sets wholesale power prices, set the cost of electricity at the $9,000-a-megawatt-hour maximum, a normal step during an emergency.

But in a letter to the Public Utility Commission of Texas, which oversees ERCOT, Potomac Economics wrote that ERCOT kept market prices for power at that level for too long after the storm's widespread outages. Potomac Economics is the independent market monitor for the Texas PUC.

The letter states ERCOT should've reset those prices the following day. The decision to keep prices at such a high level resulted in $16 billion in additional costs to power companies.

The hefty costs following the storm has already forced at least one power company to file for bankruptcy protection.

Brazos Electric Power Cooperative, the largest power cooperative in Texas filed for bankruptcy this week, citing a massive bill from ERCOT. The company in court documents said it received an unpayable $1.8 billion bill from ERCOT.

https://www.npr.org/2021/03/05/973892887/ercot-ceo-refuses-800k-payout-following-firing

[Wayward Son]

And the Texas Public Utilities Commission has signaled it won't try to reverse the $16 billion in overcharges because it's just too darned hard.

Commission Chairman Arthur C. D’Andrea said it was too difficult to reprice the energy markets and involved too many uncertainties.

“It is impossible to unscramble this sort of egg,” he said.

Mr. D’Andrea said there were so many hedges and private transactions outside the view of the commission that taking a step designed to help consumers might have unintended consequences. “You think you’re protecting the consumer and it turns out you’re bankrupting a co-op or a city,” he said.

I guess the co-opts already bankrupted don't count.

Besides, just imagine how much it would cost to try to untangle that web, for a mere $16 billion. 

[DJQuag]

It's like there might be some people hoping to cash in on the broadband racket.

You know, where the company itself is undeniably sh*t but sadly there are no competitors.

I get high speed unlimited home broadband over here for $30 a month. How ya'll comparing under Comcast or Cox?

Edit - I'm in a place where the currency is worth more then the US dollar. No excuses there.

[TheDeamon]

I get high speed unlimited home broadband over here for $30 a month. How ya'll comparing under Comcast or Cox?

Edit - I'm in a place where the currency is worth more then the US dollar. No excuses there.

You also live in a place where more people live within 200 miles of you than do within 200 miles of any arbitrary point in the US which isn't also within 150 miles of a port capable of handling either barges or ships.

[TheDrake]

I get high speed unlimited home broadband over here for $30 a month. How ya'll comparing under Comcast or Cox?

Edit - I'm in a place where the currency is worth more then the US dollar. No excuses there.

You also live in a place where more people live within 200 miles of you than do within 200 miles of any arbitrary point in the US which isn't also within 150 miles of a port capable of handling either barges or ships.

That might be a good reason for why people in remote Montana have expensive internet, but not people in Austin Texas. That said, most urban areas have multiple choices and competion. They are all roughly $50/month, which isn't really some kind of terror.

[DJQuag]

I get high speed unlimited home broadband over here for $30 a month. How ya'll comparing under Comcast or Cox?

Edit - I'm in a place where the currency is worth more then the US dollar. No excuses there.

You also live in a place where more people live within 200 miles of you than do within 200 miles of any arbitrary point in the US which isn't also within 150 miles of a port capable of handling either barges or ships.

That might be a good reason for why people in remote Montana have expensive internet, but not people in Austin Texas. That said, most urban areas have multiple choices and competion. They are all roughly $50/month, which isn't really some kind of terror.

Hey, fair enough, if prices have improved since I moved that's a good thing.

Did they ever get rid of that bug in the system where Comcast or whoever was the only man in town, and therefore they didn't have to give a sh*t? Honest question.

Well, obviously they did in Austin. My memories of Phoenix and Cox Communications aren't so positive.

Just asking because living in socialist hell under our system everyone has cheap access to service and are able to not just switch supplier, but to play them off against each other. 

[DJQuag]

I will say though I'm wondering why someone would say they're paying 66 percent higher and shrug it off with a quip about how it ain't so bad.

The US, with all of its varied advantages in just about everything, *should,* by the metrics, be giving it's citizens a top notch service. Better then anywhere else.

It doesn't, and it won't, because the country holds corporations as being more important than people.

[DJQuag]

I get high speed unlimited home broadband over here for $30 a month. How ya'll comparing under Comcast or Cox?

Edit - I'm in a place where the currency is worth more then the US dollar. No excuses there.

You also live in a place where more people live within 200 miles of you than do within 200 miles of any arbitrary point in the US which isn't also within 150 miles of a port capable of handling either barges or ships.

That was a valid talking point right up until the companies received massive amounts of government funds to put infrastructure in for those rural communities and then they didn't.

[TheDeamon]

That was a valid talking point right up until the companies received massive amounts of government funds to put infrastructure in for those rural communities and then they didn't.

You're shocked by this? Government graft and corruption never went away, and the Democrats, who funded most of that, are some of the worst offenders. Rural areas are slowly getting brought up to speed, but it isn't the major telecoms doing it. It's local small/regional operations(at the stat level, not national) that are making it happen. And government regulations and subsidies on the matter complicate things nearly as much as they help at this point.

[DJQuag]

That was a valid talking point right up until the companies received massive amounts of government funds to put infrastructure in for those rural communities and then they didn't.

You're shocked by this? Government graft and corruption never went away, and the Democrats, who funded most of that, are some of the worst offenders. Rural areas are slowly getting brought up to speed, but it isn't the major telecoms doing it. It's local small/regional operations(at the stat level, not national) that are making it happen. And government regulations and subsidies on the matter complicate things nearly as much as they help at this point.

I'm calling BS here.

Yes, there was corruption and graft. It wasn't in the government.

Companies were given billions to expand rural infrastructure and they didn't. Oh, it was due to corruption, sorry, we'll try harder next time? F*ck that. The companies took the money and played it on the insurance company game and they came up short. I don't really care about the details.

The extended distance between communities was identified, it was analyzed, and then an answer was given in "socialist" money given to private companies to address the deficit.

They didn't deliver. They straight up robbed the every day taxpayer. They got away with it and now they have everyday friendly people like you defending them.

[DJQuag]

There are victories out there and, spoiler alert, they don't revolve around corrupt government spending being directed whereever.

There is some state which set up and maintained a socialist network that threw everything else into the tank. It was so much better. Want to say Kentucky but I might be wrong.

Kentucky, Kenmaybe, blah blah. Why aren't people looking on them for how to be successful?

[TheDrake]

Meanwhile, this

Private Providers Spent Nearly $1 Million to Fight Municipal Broadband in One Small Colorado City

Municipal broadband should be a no brainer.

[yossarian22c]

Meanwhile, this

Private Providers Spent Nearly $1 Million to Fight Municipal Broadband in One Small Colorado City

Municipal broadband should be a no brainer.

Private providers got it outlawed in NC. Municipalities are no longer allowed to offer it as a service, even in towns that broadband won't serve.

[msquared]

Private providers are trying that at the state level in several states. By buying state legislators.

[DJQuag]

Yeah, not surprised.

The technology and knowhow is right there. Various states have shown that given just a little bit of funding they'll set up something the private companies can't match. Of course, if you do that, the private companies get annoyed and complain to Daddy.

[Wayward Son]

Texas Public Utility Commission chairman Arthur D’Andrea was forced to resign after a tape of him reassuring investors that they would not lose their windfall profits became public.

During that call, which was hosted by Bank of America Securities and closed to the public and news media, D’Andrea took pains to ease investors’ concerns that electricity trades, transacted at the highest prices the market allows, might be reversed, potentially costing trading firms and publicly traded generating companies millions of dollars.

“I apologize for the uncertainty,” D’Andrea said, promising to put “the weight of the commission” behind efforts to keep billions of dollars from being returned to utilities that were forced—thanks to decisions by the PUC—to buy power at sky-high prices, even after the worst of the blackout had passed. ...

At one point, during a discussion about whether natural gas, which also saw huge price spikes during the crisis, would be “repriced,” D’Andrea said no, adding that most legislators understand that gas is priced by global markets and is out of their purview. “But I’ll let you know if I hear anything crazy on it,” D’Andrea said.

Isn't it amazing how the global price of natural gas responds so quickly to a regional crisis.

Much of D’Andrea’s discussion focused on the issue of repricing some of the most expensive electricity trades during the crisis. Wholesale power prices rose 10,000 percent during the third week of February, hitting the state-imposed maximum of $9,000 per megawatt-hour and staying at those levels for days.

The PUC mandated that the $9,000 prices stay in effect for 32 hours after the market had returned to normal, a move that has angered many municipal utilities and retail electricity providers. Those providers are now struggling with huge bills that they say are unjustified and could push them into bankruptcy, while potentially eventually driving up bills for millions of residential and commercial consumers in Texas. The independent market monitor for ERCOT, the grid operator overseen by the PUC, has called the prices artificially inflated and recommended that billions be returned to purchasers.

It's pretty clear who the Texas PUC is looking out for.

[msquared]

Let's see. PUC probably stands for Public Utilities Commission.  And he was not talking to the public was he.

[Wayward Son]

He wasn't standing with the public, either.