OK, I'm lazily speculating here about Texas electricity...

[vision63]

So, I guess in Texas they have a choice of more than one electricity provider and they can choose one with a variable rate plan? If that's true, why would anyone choose that? Where I live we have the one provider and they have to go to the state Public Utilities Commission on ask for permission to raise their rates.

who the what the where the when the why the how the...?

[deckeda]

They have choices that are irrelevant when there's no supply.

The ars link posted here the other day outlines how the energy supply disappeared, with no way to either fix equipment or get supply out of state: https://arstechnica.com/science/2021/02/...heres-why/

[Sarcany]

I've been reading a lot about this. I think I have a basic understanding of it.

In Texas, there is little or no competition in power generation, but there is in power-reselling.

Power generating companies sell power to "retailers" at "wholesale" rates. (In many cases, they are both the monopoly suppliers and the retailers... There are also power-transmitters that sit between generators and retailers.)

Retailers sell power to consumers. Local governments can make exclusive deals with retailers to resell power in their communities, typically at fixed-rates or tied to both usage and peak-demand, but capped. (Usually the caps are pretty high because the power companies have a lot of political influence, but they try not to price it so high as to invite lawsuits or regulatory scrutiny from the feds.) But it's a bit of a wild West environment elsewhere. In several regions, reselling is open to anyone who files the right papers and has a few bucks to install power-meters.

Municipal power resellers controlled by local authorities do exist, but Texas law does not favor them because they introduce competition and usually result in higher quality service at lower rates, which is seen by the state legislature as "anti-competitive."

In some communities, "wholesalers" have come in, essentially the same as retailers, but they resell power at or near wholesale rates. These rates are highly variable and depend upon the state of the current market as well as metered demand. Often, using a wholesale energy provider will save money, but it comes at a risk of paying much more than your neighbors when the market turns. Even wholesalers are capped, but the caps are nonsensically high. Griddy's domestic service was capped between $9,000-$10,000 per megawatt hour. Before the storm, wholesale power was sitting around $30 per megawatt hour.

Wholesalers aren't popular. They're new. This model of selling energy came from California after decades of Enron-style abuse over there. (Remember the fake energy crisis they engineered just to raise prices?) In Texas, "Griddy" had something around 29,000 wholesale customers. Most of these customers probably had a choice between 2-3 retailers and might even have been able to use a high quality municipal power company, but they were sold on the wholesale model by a powerful ad campaign styled around "disrupting" culture. ("Disrupt" being a popular word in advertising meaning "we don't have a real business model.")

[Ted King]

My guess is that they chose the variable rate provider because most of the time it was cheaper. Some might have been lulled into thinking it wasn't that risky because Texas is such a huge producer of energy. And some of them probably thought that the state would have had enough sense to make sure that the production system wouldn't freeze up (an investment most other states have made).

[vision63]

Sarcany wrote:
I've been reading a lot about this. I think I have a basic understanding of it.

In Texas, there is little or no competition in power generation, but there is in power-reselling.

Power generating companies sell power to "retailers" at "wholesale" rates. (In many cases, they are both the monopoly suppliers and the retailers... There are also power-transmitters that sit between generators and retailers.)

Retailers sell power to consumers. Local governments can make exclusive deals with retailers to resell power in their communities, typically at fixed-rates or tied to both usage and peak-demand, but capped. (Usually the caps are pretty high because the power companies have a lot of political influence, but they try not to price it so high as to invite lawsuits or regulatory scrutiny from the feds.) But it's a bit of a wild West environment elsewhere. In several regions, reselling is open to anyone who files the right papers and has a few bucks to install power-meters.

Municipal power resellers controlled by local authorities do exist, but Texas law does not favor them because they introduce competition and usually result in higher quality service at lower rates, which is seen by the state legislature as "anti-competitive."

In some communities, "wholesalers" have come in, essentially the same as retailers, but they resell power at or near wholesale rates. These rates are highly variable and depend upon the state of the current market as well as metered demand. Often, using a wholesale energy provider will save money, but it comes at a risk of paying much more than your neighbors when the market turns. Even wholesalers are capped, but the caps are nonsensically high. Griddy's domestic service was capped between $9,000-$10,000 per megawatt hour. Before the storm, wholesale power was sitting around $30 per megawatt hour.

Wholesalers aren't popular. They're new. This model of selling energy came from California after decades of Enron-style abuse over there. (Remember the fake energy crisis they engineered just to raise prices?) In Texas, "Griddy" had something around 29,000 wholesale customers. Most of these customers probably had a choice between 2-3 retailers and might even have been able to use a high quality municipal power company, but they were sold on the wholesale model by a powerful ad campaign styled around "disrupting" culture. ("Disrupt" being a popular word in advertising meaning "we don't have a real business model.")

Whoever was sold by the "retailer" format and thought that was the way to go should be tarred and feathered.

[vision63]

Ted King wrote:
My guess is that they chose the variable rate provider because most of the time it was cheaper. Some might have been lulled into thinking it wasn't that risky because Texas is such a huge producer of energy. And some of them probably thought that the state would have had enough sense to make sure that the production system wouldn't freeze up (an investment most other states have made).

They just forgot about the whole subprime real estate fiasco that brought our country to its knees in 2008 with its variable rate loans. They chose a casino format.

[deckeda]

Utilities just are not services that make a lot of sense as retail offerings. They're commodities.

We had this in GA. You could sign up with whomever, but they all got their natural gas from the same place. And so you pretty much paid the same price, fixed or variable unless and until you guessed wrong on which way to go, which is probably how the margin existed that supported having so many redundant "providers."

There's no way a "free market" creates and sustains such nonsense without a politician hawking it as a consumer benefit.

[mattkime]

deckeda wrote: There's no way a "free market" creates and sustains such nonsense without a politician hawking it as a consumer benefit.

Yeah...whats the point in choosing between retailers who sell the same thing. You're basically choosing your biller assuming price competitiveness.

MARKET COMPETITON FIXES EVERYTHING

(and we're blind when it doesn't)

[vision63]

I feel badly for those people paying ridiculous amounts for power.

[Speedy]

Transmission and distribution are regulated by the Texas Public Utilities Commission. Generation isn’t. At least as far as I can tell.