In a turn of events that stuns absolutely no one, the energy generators in the state of Texas are once again attempting to leverage more money from the customers and retail electricity providers to line their pockets. And naturally, they are using the alleged, worst case scenario of an “energy shortage” in Texas and the fears surrounding it as their vehicle to increased profits. From the DMN article:
At a Texas Public Utility Commission hearing Thursday, state consultant Sam Newell testified that a proposal to reconfigure the state electrical grid’s software to start raising “scarcity” rates for power companies earlier than is currently programmed would increase system stability.
As the system works now, even as electrical demand increases and power supplies shrink, prices stay relatively level. When a scarcity threshold is breached, the state’s grid operators intervene and raise rates quickly toward a state-set price cap — now 200 times the average daily price for electricity
So the answer to make the grid more stable is to charge more money for electricity earlier in the process? Basically, lets start charging more money for electricity before any emergencies happen 100% of the time, just to…what exactly? It’s unclear how this really makes things more stable.
“Any time you get these big cliffs, it creates all sorts of operational problems. The generators come online, but it may be too late. Or they worry it might not last very long and you get these blips and bangs,” said William Hogan, a professor of global energy at Harvard University, the author of the proposal.
How this makes the market more stable still isn’t exactly clear to me. If they’re attempting to imply that by charging more money for electricity, when it isn’t even necessary, to encourage the energy generators to turn their plants “on” earlier and prevent any gap overlaps between supply and demand…I fail to see how that makes sense. Why doesn’t ERCOT simply adjust the thresholds of when more power plants come online, WITHOUT the added financial incentive? After all, wasn’t that one of the major benefits of us TRIPLING the market cap just last summer? So generators could make money back during these blowouts? And now they want more money, and faster? I wish I could say I was shocked, but this is just business as usual. Of course, at least the energy generators had a logical well reasoned response that would support this proposal:
The reaction from the power industry officials who testified at the hearing was generally positive, with many commenting it was unlikely to make the current situation any worse.
Oh, well, if it can’t make things any worse, of course we should throw money at the electricity generators, right? The fact that it might not do anything except raise already skyrocketing electricity rates shouldn’t really concern anyone, right? Except the customers and REPs who will be footing the bill. But why would energy generators care about that?
Fortunately there were some people who were willing to speak out against this proposal:
Raising rates earlier in the day could be disastrous for retailers, testified Sandy Morris, senior manager of government affairs for Direct Energy. Some of that cost would be passed on to consumers, but Morris said that on hot days retailers could face large losses.
“In a worst-case scenario, that could result in bankruptcy,” she said.
And for those of you who think the idea of bankruptcy is dramatic or far fetched, you’d be mistaken. The price surges of 2008 bankrupted a number of electricity companies, and I’m still somewhat surprised that the summer of 2011 didn’t bankrupt several more. Except now with the raised market cap, the dollars and stakes the REPs are playing for are even higher.
And Dan Jones, the Independent Market Monitor for Texas, also raised the obvious point in defense of customers and REP’s:
Hanging over the proceedings was the question of whether shifting the point at which grid operators intervene to raise prices would simply create a windfall for the power plants at the expense of consumers.
“There’s a social consequence,” said Dan Jones, the independent market monitor for ERCOT. “Putting price signals out there when you don’t need them could be overdone.”
Hopefully the PUC listens to the REP’s and Dan Jones on this issue, because throwing even more money at the energy generators with yet again no guarantees on anything is moving from Comical territory into a classification as Theater of the Absurd.
There is no timetable on when the commissioners will decide on the proposal, but Anderson said he was eager to do so.
“I just hope we have a decision sooner rather than later,” he said. “I wasn’t that concerned about this summer until the last couple of days.”
Kenneth Anderson is normally the voice of reason in the PUC, but hopefully he too isn’t falling for the fear-mongering by the electricity generators that already seems to have infected Donna Nelson. To be clear, this summer doesn’t seem to be any point of concern based on predicted temperature, generation assets currently available, and increased consumer measures on conservation. Everyone should remember that the summer of 2011, with 30 days of over 100-degree weather, was the most devastating summer in more than 200 years…not something likely to be repeated every other year into perpetuity. Knee-jerk reactions to the worst case scenario is exactly how the energy generators are lining their pockets. Hopefully this won’t be another instance of poor decision making by the PUC at the expense of the customers and REPs.