Tell me I’m wrong. Tell me I’m misreading. That I’ve misunderstood what was being said. That I misunderstood the intent. Because surely, surely, the Texas Public Utilities Commission cannot possibly be so stunningly, overwhelmingly incompetent, as they were during this week’s electricity crisis. Perhaps the biggest electricity crisis Texas has ever had.
Because I read the two orders that the PUC wrote to ERCOT (the Electric Reliability Council of Texas) at the depths of the crisis. No matter how many times I read and re-read the legalese, the first order seems to say that the PUC was shocked, absolutely shocked, that the electric generators were not gouging the customers in the midst of the crisis. And they ordered ERCOT to retroactively gouge on their behalf. The second order, a day later, said “Remember that first order? Never mind.” It was signed by only some of the commissioners. Apparently, Commissioner Shelly Botkin still thinks that her job is to tell the utilities to gouge the customer.
But maybe I am misreading the text. It is, after all, dense legalese 😀. Let me quote; you decide:
ERCOT has informed the Commission that energy prices across the system are clearing at less than $9,000, which is the current system-wide offer cap pursuant to 16 TAC §25.505(g)(6)(B). At various times today, energy prices across the system have been as low as approximately $1,200. The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market. Energy prices should reflect scarcity of the supply. If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest.
In other words, they are shocked, completely shocked, that the free market is not ripping off customers. To “fix” this situation, here is what they recommend:
Pursuant to this authority, the Commission determines that adjustments are needed to ERCOT prices to ensure they accurately reflect the scarcity conditions in the market. Accordingly, the Commission directs ERCOT to ensure that firm load that is being shed in EEA3 is accounted for in ERCOT’s scarcity pricing signals. The Commission further directs ERCOT to correct any past prices such that firm load that is being shed in EEA3 is accounted for in ERCOT’s scarcity pricing signals.
I read these paragraphs five or six times to make sure I understood them. They seem to say: “Free markets aren’t working. We order you to jack up the price to maximum.” Lets critique this.
- Free markets aren’t working. Many people agree with this. We live in the era of “late stage capitalism” where there is abundant evidence of the damage and outright evil caused by free markets.
- However, the GOP have been cheer-leaders for free markets — that is what they shout out to the voters. Behind closed doors, not so much: there is abundant evidence that the GOP leadership gerry-rig deals that are anti-competitive. They only say they want “free markets”; in practice, they interfere whenever they can.
- The PUC order is an example: ERCOT provides a more-or-less free market for electricity. It seems to mostly work. But the PUC decided that the free market is not good enough. They decided to order the utilities to raise their prices. To the maximum (and then some, in the second part of the order.)
- The maximum is ninety times the normal rate. Ninety. 90. Normally, you pay about 10 cents per kWh. Sometimes less, sometimes more. (Some parts of the US pay 20 cents, sometimes). The PUC order directs that prices be raised to $9 per kWh. Some perspective: when you sit in front to the computer all day, you might use up 10 cents of electricity. You might think twice if this cost you $9. Also, you might want to turn off the light in the kitchen.
- The PUC issued this order in the middle of the greatest crisis the Texas electrical grid has ever had. A catastrophe is unfolding. A total electrical blackout must be avoided. Every elected official, every appointed administrator should be working 16 hours a day to avert disaster. Electric linemen are thawing frozen equipment. Their bosses are manning the phones, coordinating relief efforts. Ted Cruz is flying to Cancun to sit in the warm sun. And the PUC figured out how to waste everyone’s time while also showing they are utterly ignorant of grade-school economics.
- Because this is rank ignorance. Yes, economics is complicated. Yes, the electrical grid is complicated. Yes, the order clearing system is complicated. Penn State offers online classes on these topics. This is not that. This is an order to gouge the victim, because they think that gouging the victim is the normal thing, right thing to do. Something that free markets should be doing. Like, when someone is choking on a piece of food, merket regulation means that each Heimlich maneuver should cost $9,000. Or whatever the mandated maximum for government-regulated Heimlich maneuvers.
Obviously, this is a gross misunderstanding of capitalism, of economics, of the way the world works, and of basic human decency. Apparently, the PUC realized this, because a day later, they wrote this:
However, the Commission determines that its directive to ERCOT in its order dated February 15 to also correct any past prices to account for load shed in EEA3 should be and is hereby rescinded and directs ERCOT to not correct any such past practices.
In other words, “never mind“. This time, only two of the three commissioners signed the order. The third, Commissioner Shelly Botkin, apparently is still confused.
In the wake of the gross incompetence demonstrated by the Texas Public Utilities Commission during the height of a historic utilities crisis, I hereby call for the commissioners to resign. If they do not have the common decency to recognize their mistakes, and remove themselves from a position of authority, the Governor of Texas should remove them. This is the purest form of bad governance that I have directly witnessed in the last few … umm, weeks.
The commissioners are:
- Deann T. Walker, Chairman
- Arthur C. D’Andrea, Commissioner
- Shelly Botkin, Commissioner
I’m old enough to know what happened in the Soviet Union. These three people are the American version of Soviet apparatchiks. America faces a disaster as long as people like this are in power. This is the kind of leadership that destroys countries.
To be clear, I think ERCOT did a commendable job. Gov. Abbott has got things exactly wrong. He needs to think very hard about why he appointed apparatchiks to the PUC.
If you think that I have made errors of fact, errors of exaggeration, distortion or sarcasm, let me know. Convince me that I’m wrong. Show me that these people are not the incompetent buffoons they appear to be.
Updates
March 2021: All three are gone; two resigned on their own, and Deann was forced to resign.
News stories
- How an obscure paperwork foulup left much of Texas in the cold during blackouts. (Fort Worth Star-Telegram) Bud Kennedy March 20, 2021. Basically, they shut off the electric power to the gas compressors that supply gas to electric power plants. Dohh! Choice quote: “Most West Texas gas compressor stations and pipelines were never listed as “critical” priority customers to keep power, the same way as hospitals or 911 centers. In a state with more than 1,000 public employees overseeing the energy industry, not a single one was assigned to double-check whether gas plants filled out their electricity paperwork. Absolutely nobody in Texas was checking to make sure energy facilities kept power.“
- “Minnesotans furious that they have to pay for Texas’ deep-freeze problems – Natural gas prices surged across the country during Texas’ February freeze.”
Tim De Chant Apr 23, 2021 – Minnesotans get to pay $500M to a Texas gas company. Everyone in the state gets a surprise $400 gas bill to pay for the Texas PUC screw-ups. Choice quote: “The ineptness and disregard for common-sense utility regulation in Texas makes my blood boil and keeps me up at night,” Katie Sieben, chairwoman of the Minnesota Public Utility Commission, told The Washington Post. “It is maddening and outrageous and completely inexcusable that Texas’s lack of sound utility regulation is having this impact on the rest of the country.”