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Comment by roenxi | Hacker News Reader

This appears to be a bad plan. The "Power, Profit, and Control" section outlines that:

1) The competitors who would profit from the interconnects don't think they are profitable to build.

2) The money is better spent building more power plants.

3) Smaller interconnects are less risky.

And the plan to combat this in "Help on the Hill" is to try and force companies to do things that they don't want to do. It'd be much more sensible to deregulate and let the people who profit build the interconnects.

I note that the people sponsoring the bills are US democrats. Is this a red-state blue-state thing where the blue states have a power problem? I've heard Texas has cheap energy and an independent grid. Or is it just general policy manoeuvring?

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>> It'd be much more sensible to deregulate and let the people who profit build the interconnects.

Firstly, it's worth saying that in markets with high barrier-to-entry costs, it's not easy for the "market" to protect against profiteering.

Or put another way, if the local utility decides to charge more, its not like you can just build a power station, and connect to the grid, to undercut and take a profit.

Equally, given the cost of starting up, concessions are made to protect monopolies (or semi monopolies) to avoid unnecessary duplication of infrastructure.

Regulations though can be good, or bad, depending on your point of view. They either work for the business (keeping out competition) or for the consumer (preventing price gouging.)

And it's not just today's profits that matter but tomorrow's as well. If I'm allowed to charge more during periods of high demand, that encourages me to increase scarcity. I'm incentived to provide less power, and get more profit.

So deregulation likely ends badly for the consumer. It likely leads to scarcity since that improves profits. On the other hand deregulation has allowed me to have residential solar, dropping my energy bill by 80%. And high prices make that financially attractive. So some deregulation good?

My point is that the balance between regulator, provider and consumer is a very fine one, and messing with that balance can have consequences.

> its not like you can just build a power station, and connect to the grid, to undercut and take a profit.

Technically it is pretty easy. Buy some solar panels or a diesel generator. Grid access is a harder but as far as I've seen the limiting factor is going to be government policy. You won't be cost competitive with state of the art .... but that implies that the grid prices are fair so you won't be able to drive prices down with any amount of capital.

People don't build new plants often, but that is because high prices are going to be caused by (1) that is the best anyone can do or (2) the government is enforcing regulation that makes competition impossible and in rare cases (3) someone else is already building new power plants faster and better than they can, so it is a waste of effort.

If none of those 3 conditions are present, things happen at the speed of capitalism (ie, faster than people think).

> If I'm allowed to charge more during periods of high demand, that encourages me to increase scarcity. I'm incentived to provide less power, and get more profit.

This logic is just not describing what happens in practice. If the government is giving someone monopoly power then yes, but under normal conditions someone trying to execute this strategy just goes bankrupt because competitors will undercut them in high demand periods and supply power in normal periods.

>This logic is just not describing what happens in practice. If the government is giving someone monopoly power then yes, but under normal conditions someone trying to execute this strategy just goes bankrupt because competitors will undercut them in high demand periods and supply power in normal periods.

That doesn't track with my experience (Northeastern US).

While I can choose from multiple companies to provide me with electricity (using the extant infrastructure as mandated by the public utilities regulator), the owner of that infrastructure (in my case Consolidated Edison) charges more for delivering that electricity than the cost of the electricity itself.

As such, it doesn't really matter who is providing my electricity -- I end up paying more for the "delivery infrastructure" regardless of my $/kwh costs.

> This logic is just not describing what happens in practice

It is though just not in a way that's obvious. It's not free reign capitalism, there's government oversight to prevent the obvious price gouging. The issue is when that 20 year mark hits and no one was ready but the automated systems were allowed to charge uncapped, 180x normal rate[0].

The power company cut corners where it could, on winterization because "what are the chances of that happening"? Were low, but not zero. They had happened before in Texas's history but they just chose not to because it's relatively expensive to protect against 50 yr time horizons.

[0] https://en.wikipedia.org/wiki/2021_Texas_power_crisis

> The issue is when that 20 year mark hits and no one was ready but the automated systems were allowed to charge uncapped, 180x normal rate[0].

That is actually relatively normal behaviour for an electricity market. In my area the price usually jumps 2 orders of magnitude at the height of summer. It isn't a concern (the grid is cooked, but not because of peak prices). The market is signalling that it is worth having capacity available just for the peak - the cost of that type of redundancy is high, so the prices need to be high to make it happen.

Also, if the price is capped then the grid blacks out at that point. Uncapped is the way to go.

Deregulation in high-capital, long-lead-time, must-serve markets like energy, telecom, and emergency medicine has generally ended badly.

Because eventually someone realizes profit can be maximized by (minimizing investment) + (maximizing risk) + (increasing prices) + (appealing for government bailouts whenever catastrophe strikes).

A utility commission that looks skeptically at rate increases, but in return provides a more stable rate that industry can use to plan long-term expansions against, works better.

Yes, you have to deal with regulatory capture and ambivalence towards increasing efficiency and modernizing business -- but those are still solvable problems in a regulated environment.

> has generally ended badly

For a good example, watch the documentary:

Enron: The Smartest Guys in the Room

> I've heard Texas has cheap energy and an independent grid. Or is it just general policy manoeuvring?

No, it's correct. It just lead to a LOT of problems[0].

To me something that is needed by everyone really should be fully regulated.

[0] https://en.wikipedia.org/wiki/2021_Texas_power_crisis

Texas energy is cheap, and it just so happens that the political game aligns "make the grid ok" with their best interests; but, if the interests ever diverge we will be proper fucked.

The TX legislature already socialized the losses due to extremely high spot-prices after that winter storm a few years ago.

Yeah, the power was cheap until it wasn't. A lot of morons blamed things like frozen wind turbines but a lot of the problems were from natural gas plants that were never properly winterized, because the Texas grid was deregulated and the was no incentive to winterize.

> To me something that is needed by everyone really should be fully regulated.

People say that, then when you look at migrants they tend to move to places where things are cheaper.

It is hard to make a convincing argument for cheap power because the benefits are so diffuse, but when people are making choices for where to live [0] vs power prices [1], there is a real bias towards places with cheaper energy, and away from places with expensive energy. That is a clue about what matters in practice.

So we're in this world where people do love to whinge about the Texas grid - and the reason they know about that grid is because Texas is really successful. In part (in large part) because of their energy policies and general attitude towards liberty.

[0] https://en.wikipedia.org/wiki/List_of_U.S._states_and_territ...

[1] https://www.eia.gov/electricity/monthly/epm_table_grapher.ph...

As individuals, humans are very good at optimising for the short term, while ignoring long-term risk. It seems to makes sense to pick a place based on low cost of living because that affects our life-style this month.

External factors can mess with the equilibrium, think winter storm or unexpected pregnancy, but those aren't important to us, so we happily ignore that for now. Focus on the immediate up-side, and just ignore the possible (but unlikely) downside.

Don't get me wrong, we kinda have to live like this, or we end up as preppers. We kinda have to ignore things like possible earthquakes on the West Coast or we'd be permanently terrified.

On the other hand we care enough to cater to some level of earthquakes in building codes. But no building code will guard against Cascadia.

So sure, lots of people move to Texas because of the weather, or cheaper housing, or cheap energy, or whatever. But as a general rule they're likely to be less resilient to unlikely events.

Part of the problem is that utilities are in many cases not incentivised to minimise their costs.

The electricity rates they charge are determined by government-appointed commissioners, and the basis of that calculation has historically been a fixed rate of return on capital.

So for a utility the normal rules of business don’t apply - the more you can increase your costs, the more money you make!

Wikipedia has a reasonable introduction to this here: https://en.wikipedia.org/wiki/Rate-of-return_regulation

Texas has so many issues with its grid due to deregulation that people die when it’s colder or hotter than usual there. Not a great example of the free market working out well for them.

California’s highly regulated energy industry doesn’t seem like much better alternative?

Why Texas vs California? Both are examples of corporate capture of regulators with unreliable and dangerous grids as a result. California has fires due to it, Texas gets outages, they both suck. It’s not fucking red v blue in here.

I mean there's 50 states and a handful of territories if we're sticking to the US.

If you don't like how Texas or California does things there's still plenty of options to choose from.

But yeah, California has problems because it's regulators get stingy. If you control how much maintenance a company can do and cut back how much it should do then don't be surprised when things are poorly maintained.

> When PG&E suggested inspecting 300,000 poles a year to ensure safety in 2012, CPUC cut the total to 235,000.¹¹ In 2011 and 2012, when PG&E spent almost $100 million more on replacing poles than allowed by CPUC, the regulator took that as a reason to deny future claims for pole replacement spending. It said “PG&E demonstrated the capacity and willingness to spend more than previously authorized…to meet service obligations,” thus they would not include extra required pole replacements in the “rate base.” These sorts of decisions created exactly the wrong incentives, penalizing PG&E for doing more than was required.¹²

https://ciceroinstitute.org/pge-failing-california/

California was the leader in deregulation of their electric utilities. AB1890 was passed in 1996 deregulating California's electricity sector.

The '90s deregulation directly led to an 800% increase in wholesale electricity prices in 2000, and rolling blackouts for customers of investor owned utilities like SDGE (San Diego) and PGE (Central/Northern California). The government owned utilities, like LADWP (serving the Los Angeles area) did not need to resort to rolling blackouts (zero blackouts), and currently have much lower rates* while being fully sustained by the rate payers (not having the parasitic "investors" demanding greater profits allows for proper long-term planning and significantly lower prices for the rate payers).

* Average $0.26/kWh LADWP. Average $0.45/kWh PGE

Wait Im confused, if PG&E is deregulated then how come the legislature can pass a law to require income-based billing? What exactly do you mean by deregulated?

The wholesale electrical energy markets in California are deregulated.

As a consumer, you might buy retail electrical energy, transmission and distribution from an investor owned utility like PG&E, which is regulated by the California Public Utilities Commission.

An appropriate analogy for this would be where wholesale beef markets were "deregulated", but the state government put in a program that allowed approximately half the state's population to get vouchers for a 35% discount on beef, driving up the price for everyone else (the CARE program). And the state government mandated grocers and restaurants buy certified organic regenerative beef for at least 50% of the beef they sell (the renewable requirement).

You are leaving out some very important things:

- Price stability itself has a value for electricity consumers. Insulating consumers from the price variations that come from the inherent variability in supply and demand is a major "feature" of retail electric service. While one could provide their own stability with enough personal batteries and generators, practically that's only really possible for the wealthy.

- Lack of regulation around planning, upkeep, maintenance, and backup planning results in short-term profit maximization among generators (and cost minimization among consumers who enjoy very low electric rates in the short term) leads to situations like the catastrophic Texas outages of 2021. Now that Texas has legislated price-caps (which is direct economic regulation) [1], typical rates will rise.

1. https://www.texastribune.org/2023/05/22/texas-electricity-po...

That isn't a "price-cap" on electricity, it's a limit to what is essentially a tax routed through electricity bills and given to utility companies, to the tune of about $30 per person per year. The intent of the tax is to improve the grid, although its efficacy is under question, as the article mentions.

California was one of the first to move to a wholesale electricity market. The only problem was they didn't have provisions to take care of gaming and market power and ENRON figured out how to make millions upon millions from it. Since then, all the wholesale electricity markets in the US have to have market monitors that look for these kinds of abuses and have authority to fix. There are certainly still major issues with the designs, but we shouldn't have another problem like what California had in the early 2000s.

Outside of unusually severe weather in 2022 and a subsequent outage, what is your evidence for this claim?

I've been living in Texas since 2022 and the grid has anecdotally been just as reliable as anywhere else I've lived. Unusually crazy winter weather knocks out grids all over - back in '98 the ice storm in the Northeast US & Canada knocked out power for millions of people for up to 2 weeks in some cases.

They’ve had major issues with weather preparedness even in the aftermath of those major events, where the grid nearly went black. Even the northeast outages I’ve recalled from my life haven’t gotten to the point that they were talking about the grid going black if things didn’t go well, but either way, these extreme weather events will only increase in the future.

What do you mean "going black"? That's not a technical term any grid operator uses.

They have various conservation strategies to manage peak demand if it exceeds capacity, like asking for voluntary conservation and/or rolling blackouts in extreme cases, but every grid operator does contingency planning like this. The Texas grid handled historic demand levels over the summer just fine.

Generally blackouts are controlled somewhat and can be caused by protective circuits to ensure generators stay online when the load becomes too great for the generation. In Texas, the blackouts were so vast and the generation sources were absolutely not prepped for cold weather, so there were questions as to whether they would have enough generation on certain circuits to bring the grid online in days rather than the horrible scenario of a black start for large swaths of the Texas grid, which could have taken weeks or months. Going black is the term I’ve heard used in my industry circles for the grid requiring a black start.

If your question starts out by disqualifying answers, you might be approaching confirmation bias.

That week or two of failures, even if it was the only one ever, is enough to prove the claim.

Let’s not totally make up news. The extreme cold event did happen, 246 people died, obviously failings on getting facilities prepared for an extreme winter event, how parts of the grid were shut down and ultimately the limited interconnects with the other national grids. I don’t believe there are prime examples for people dead from the heat because of their grid.

https://fortune.com/2023/09/07/texas-deregulated-power-grid-... just this last summer the grid came cost to failing. it hasn't yet killed anyone due to cold, but every year is a roll of the dice and peak temperatures are increasing pretty much every year.

Correct but as I said originally. The only deaths were during the major winter storm. I appreciate facts not made up narratives like the GP.

The red/blue split we see is because every blue state has overtly stated renewable energy goals [1] whereas some red states have them, others don’t.

Wyoming wind offers a solution to California’s strained energy system and a path forward for a reliable renewable energy grid because Wyoming wind is at its highest intensity when California demand is highest [2]. But you need to transmit that energy across four states to get it from where it’s produced, to where it’s needed.

[1] https://www.ncsl.org/energy/state-renewable-portfolio-standa...

[2] https://www.technologyreview.com/2017/12/28/146566/how-to-ge...

It's only cheap when they aren't in one of the many inclement weather events that happens during the year - Customers have had rates as high as $2.50/KWh[0] among other disastrous consequences, which is completely unconsciable and a result of the deregulated nature of their grid.

0: https://www.cbsnews.com/news/ercot-prices-texas-heat-wave-el...

You are just wrong. Why do people like yourself use the word deregulated like you actually know how the Texas market works? Customers have not had rates that high for years and even then, it was because they opted into a real time rate plan which meant the rest of the time they were paying very low amounts. Those plans were outlawed in the deregulated Texas energy market. I guess that’s a form of regulation. Now a days, like the article you linked, that references the wholesale market not the retail market.

I think this is a more accurate summary of what the article was saying, in the order they were presented.[1]

1) Incumbents don't want to compete with other profit seeking companies.

2) Incumbents make more money generating and delivering power, than buying and delivering power.

3) Margin is low on large transmission infrastructure projects.

Overall, I agree with your point though. It is better to remove the veto power of incumbents than try to force them to do what you want.

However, the fundamental problem isnt about interconnects, it is about captured markets. If you allow interconnects to be built, you still have to force power companies to buy the power. Customers cant pick power companies, and companies would rather generate their own power for 2X than buy it for 1X because they are usually regulated with a cost plus profit margin.

The higher their costs, the higher the profit. In fact, the ONLY way to increase profits is to drive up costs.

> I've heard Texas has cheap energy

Easy without regulation.

What is that supposed to mean?

Texas runs their own grid, precisely to avoid federal government regulation.

They're still regulated by NERC and have nearly all the same institutions. For example, ERCOT does the same fundamental job as CAISO. The only difference is they aren't under FERC, and that does matter...just not as much as folks think.

It's a separate grid that's managed privately but overseen by tex gov with a lot less strict regulation than the national grids.

It seemed great at first because the prices were really cheap, but the lack of good oversight meant the winterization didn't cover the 20 year horizon let alone a 50 or 100 year one. Temps got unusually cold in 2021 which led to huge power outages, deaths and incredible price problems, up to 180x[0].

[0] https://en.wikipedia.org/wiki/2021_Texas_power_crisis

It's hard to see how the price problems are meaningful. Electricity in Texas is about twice as high than California. The 180x spike last only a few hours in a few spots.

The consumer's total costs over the course of a year are lower in Texas than a California, by a large magnitude.

I realize some people just had a perfect storm of a large monthly bill, but seems like that could be solved by more regulation on the pricing cap side while still leaving the production to be a more open system. I believe Texas has already moved in that direction.

> I realize some people just had a perfect storm of a large monthly bill, but seems like that could be solved by more regulation on the pricing cap side while still leaving the production to be a more open system.

Adding price cap regulation will necessarily raise the average prices to pay for the occasions that the price goes 180x, or even 30x. There's no free lunch.

Electricity in Texas is twice as high than California?

I wrote that flipped.

Texas has tons of gas, wind, and solar. The wind and solar was overwhelmingly built due to subsidies.

Another point is that in the industry, most prefer to use "restructuring" instead of "deregulation" as power is just as regulated as ever, just in a different manner. The wholesale electricity markets are a bit more transparent, but are under tons of regulations still.

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