One Texas Resident Still Has Power, but His Bill Is Now over $8k
newsweek.com
newsweek.com
Turn enough large wholesale electricity purchases into consumer debt that's worth pennies on the dollar and these places are going to go under as well. It's probably worse than the places that actually planned for wholesale electricity price risk. When "risk-free" arbitrage isn't, it has an incredible tendency to absolutely blow people the fuck out.
Of course Texas is ground zero for climate denialism, even as they roast in 100 100 degree days in summer.
What amazes me is that Texas must need a lot of insulation to effectively air condition during those oppressive spells, and yet their residences seem to be very ineffectually insulated.
To prevent cold you need air tightness and thick insulation to prevent loosing hot air and radiating energy out.
To prevent hot the most cost effective thing is just reflect as much as you can and then worry about exchanging a bit less air with the outside.
But in the 100 days of 100 degrees, reflection of sunlight is obviously helpful, but if people are running A/C down to 70 degrees from ambient 100 degree air temperature then it's the same heat gradient and flow problem.
Griddy told all of its customers earlier this week that they should switch to another power supplier as electricity prices soared as high as $9,000 a megawatt-hour on Monday.
"We made the unprecedented decision to tell our customers—whom we worked really hard to get—that they are better off in the near term with another provider," Michael Fallquist, chief executive officer of Griddy, said in a statement.
"We want what's right by our consumers, so we are encouraging them to leave," Fallquist continued. "We believe that transparency and that honesty will bring them back."
Hats off to them for being so honest.
This was "get off our service, we've blown out our model and are hemorrhaging" in PR speak, because they couldn't say "we're turning off your power."
Which gets to me other point in: besides the seriously unlucky residential users, who is paying these extreme prices? Factories which can't go down? Critical infrastructure?
I don't know the specifics in Texas, but here the utility has to follow some process to change prices, with the price set so that the grid operator is likely to average some profit over time. When wholesale prices here spike, the grid operator is contractually obligated to continue providing residential customers power at the fixed price and has to spend reserves that they have built up when wholesale prices were lower than the fixed price. I think they aren't immediately on the hook for penalties if there is an outage, but they have reliability standards that they are supposed to meet.
I assume large industrial users have hedges in place to buffer price swings.
As for the scamminess, doesn't our current business culture revolve around doing whatever you can get away with? I know I'm contributing to the downfall of society writing this, but it seems like you're just harming yourself by holding back based on morals while businesses no longer function that way. In this framework, it's up to the businesses to prevent you from switching instantaneously - like open enrollment periods for health "insurance".
Would it be a scam to get two connections and use the cheapest? I don’t think so.
The residential consumers in this unlucky boat were ones that explicitly opted into it. Most residential plans don't directly expose the consumer to wholesale pricing fluctuations - the consumer pays a flat rate per kwh, and the electric provider takes on the risk of their wholesale costs going above the retail rates their customers are paying.
The "known flat rate" usually get adjusted on a periodic basis, so right now the electric companies are eating the loss themselves and will have to make up for it when they next adjust the flat rate consumers pay. But on the short term, the consumer is protected from the volatility of the wholesale rate spikes and the electric company ends up on the hook to carry that debt load.
... unless you opted into one of the providers in Texas that give you "access" to wholesale rates. Because fixed rate plans have to factor in wholesale pricing uncertainty (like this exact situation), they typically have higher rates than plans pegged to wholesale. So the people in this situation took a deliberate gamble - generally they had cheaper-than-retail rates due to direct access to wholesale pricing. But they also took on the risk of wholesale pricing volatility, so it's now coming back to bite them in the current situation.
It's still seriously unlucky. But it's also wholly avoidable, and those in it have been enjoying the benefit of generally lower rates by opting into this risk exposure.
America has been sapped of its ability to manage large things as its empire declines. The grid is a huge accomplishment of policy and governance, but I think decentralization is something that should be practically pursued now at a policy level for many reasons, even if it isn't the absolute cheapest source like grid scale solar and wind.
Certainly we need it if we go full-bore into hybrids and EVs for consumer transportation.
It is a roll of the dice, sometimes I am ahead on my TOU plan and sometimes I know I am behind.
I left them when we had the August crunch back in 2019. We hit the $9/kWh and even though I wasn't home my electric bill for the day was still $150. I switched back to my previous electric company that afternoon. I decided that risk wasn't worth the savings. It was like picking up pennies in front of a steam roller.
The current situation is pretty clearly a failure cascade where multiple things were not sufficient for the weather event.
That's another issue putting strain on the US power grid, the fact that housing size has steadily increased over the last few decades, consequently electric usage for heating and cooling also went up.
Definitely not a McMansion, but it could be made quite a bit tighter (the house is not awful, it just gets fairly cold here for 3 months).
I find the assumption of 10% of your sqft to equal the cost of your electric in the summer to be pretty accurate. Also mansions typically have zoned air systems which helps bring down costs