These broadband subsidies might be too good, or at least too well captured by too few players. They may be a good idea generally, but it looks like it's time to revisit the details.
The Texas grid is a massive failure in terms of both cost and reliability. Somewhere between 246 and 702 people were killed in 2021 when operators had already seen similar issues in 2011. Similarly people received bills that more than wiped out any long term savings they had received from hourly rate charging.
Consumers can select from maybe 50 "retail providers". They all have some kind of marketing deal, like "all green" or "free weekends" or "0.14 a kwh fixed for 3 years".
You pick your deal and deal with this 'company'. All of the electricity comes from the same place. All of the wiring is maintained by one company.
Your "choice" is deciding who sends your bill and collects the money.
Seems like a monopoly would be a lot cheaper. Less employees, less infrastructure, less advertising.
A corporation that is a monopoly has no motivation to keep pricing "fair" and, in fact, has an interest in making prices as high as possible. It is never cheaper this way.
We, as a society, seek to work around the problems that naturally-occur with monopolies by regulating them.
In Ohio, most of our residents have one provider (AEP). AEP owns the local infrastructure, and they also own the transmission infrastructure, and they are pretty tightly regulated.
To help keep pricing in check, it is required by regulation that the rate at which AEP buys their electricity at is set periodically by a competitive bid process. (This is, in theory, a process that works well for consumers and provides a reasonably low price: If a supplier can buy and sell (or otherwise produce) electricity cheaper, then they can put their bid in and have an opportunity to do so.)
The problem with regulation is that it is regulates. It is inflexible.
And sometimes, this bid process goes wrong: Early in 2023, for instance, it resulted in a generation price that was set to approximately double in six months[1].
The solution to both monopolies and regulation is consumer choice in a competitive marketplace.
Obviously, we in Ohio can't usually decide whose lines and infrastructure we use -- they're monopoly-owned. There's some exceptions to this like [2][3], but broadly speaking: Of course AEP is involved, because they have to be involved.
But we do get to choose our generation supplier[4], which is probably similar in function to how folks in Texas can pick their "retail provider" (except we don't get time-dependent metering).
And that very limited aspect of consumer choice does work for me, the consumer. I was able to completely bypass the 2023 price hike by selecting a different generation supplier. In fact, my total billed price per kWh of electricity used (inclusive of distribution, transmission, and fees) was actually slightly reduced compared to what I had been paying previously.
It's not a perfect system, as there are no perfect systems. But this little sliver of competition is better than being completely beholden to either an unregulated absolute monopoly or an inflexibly-regulated absolute monopoly.
[1]: https://puco.ohio.gov/utilities/electricity/resources/histor...
[2]: https://clydeohio.org/159/Clyde-Light-Power
[3]: https://www.columbus.gov/utilities/about/The-Division-of-Pow...
It’s just an illusion of choice and I would rather not deal with the constant door to door utility MVNO salesmen.
https://www.businessinsider.com/why-texas-residents-hit-with...
ERCOT is not a model that anyone should strive to emulate.
One company offered a plan where all of the electricity was purchased on the spot market. All of it.
Spot market purchases of electricity are very cheap. Except when they aren't.
Most months my electricity bill was 1/2 of current.
Like you said, most of the time you save a good amount of money. The salespeople and marketing pamphlets emphasize that. Do you really believe that the executives at these utilities are ignorant to the fact that most of their customers don’t fully understand the implications? I think they sell the plans specifically because customers don’t understand them.
Worse for Texas, their system’s market pricing setup incentivizes power utilities to minimize their overhead capacity. The closer their supply is to demand, the higher the price they can get. But it leaves very little wiggle room for emergency situations (99% Invisible has a good episode about this). Therefore, their grid is more prone to spikes in variable rate pricing than other states.
Like financial instruments such as options trading, financial games like this make sense for the wealthy who have a cushion of risk tolerance. I can make more money faster with options trading compared to an index fund!
But for the median and below wage earner, sudden bill surprises shouldn’t be something that the government enables for basic necessities like utilities.
i paid my $2,300.00 monthly electrical bill without complaint. (usual about $75)
the upside and downside were understood.
1. Fully understanding the potential of the downside.
and
2. Being able to financially cover the downside.
The median transaction account balance in America is $5,300, which includes money in the accounts for things like paying mortgage and rent.
https://www.bankrate.com/banking/savings/savings-account-ave...
So the median person signing up for that plan has to be ready to liquidate half their cash on an electric bill. If you’re below the median you’re even more screwed.
And I'm sure to all this you'll say "I made an informed choice and I should have that choice," but I think that's a highly debatable concept that depends a lot on the details – one of those critical details is the maximum rate.
But of course that option isn’t realistic for the vast majority of people.
The piece of data I’m missing is how often a huge spike in costs like the one described happens. It’s unpredictable, it could happen any day for any reason.
Like I’ve said a couple of times, I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible. If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.
And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.
That’s another good analogy because everywhere else in our society, price gouging due to emergencies is illegal.
Your own numbers had it as doable but unpleasant. Should I not use those?
> I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible.
That's a problem but it's a separate issue from whether they're better off financially.
> If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.
That would be pretty surprising, yeah, but if it was only affecting the payment for one month then it could still be a better deal overall.
> And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.
That's not true at all. It's not gouging.
The underlying principle of the Texas grid is that power plants that are almost never used get 0 dollars for months or years on end, and then they make all their money in a short window. The reason wholesale prices are allowed to go that high is to encourage those power plants to exist, because otherwise those power plants would not be built. That huge price is paying for years of maintenance and deprecation.
I'm going to assume, based on this statement, that you have an education that allows you to forecast and do cost-benefit analysis. Most people do not, and just hear "you will pay less". When you knowingly do this to people, it's a swindle.
Yes, we do need to protect some people from bad choices, and yes, that will limit the economic freedom of the very well-educated to some small degree. That's society, baby.