This comment is part of a series published by The Dallas Morning News Opinion to explore ideas and guidelines for strengthening electrical reliability. The full series can be found here: Keeping the Lights On.
Your electricity and natural gas bills for the winter storm in February are conveniently due after the March primaries. That due date was set by the Texan legislature, and it’s a bill that could have been avoided entirely if lawmakers had acted in 2011 after an earlier major freeze devastated the grid.
Add those billions in additional fees to the $ 28 billion the Wall Street Journal calculated that private Texas customers paid too much before 2021.
It is only Texas’s own fault for failing to hold elected leaders accountable. They were warned by the 2011 report of this year’s grid outage, a report written with the assistance of the Public Utility Commission of Texas and the Electric Reliability Council of Texas, which manages most of the state’s power grid.
Other warnings about the fatally flawed design of the ERCOT market in 2013 and 2019 were ignored. The newly appointed PUC commissioners have now considered it appropriate to adopt the weathering recommendations from 2011 and 2012, but have not remedied the fundamental shortcomings. Texans will have unreliable electricity until they do.
It’s not just Texas, however. It’s not blue against red. The California power grid has been tumbling from crisis to crisis for more than 20 years. On hot afternoons, the state lacks electricity generation capacity. To solve the problem, the California grid manager received federal approval to hijack power purchased from and for Arizona that is being transported over cables in California. In addition, they are commissioning the construction of 5 gigawatts of natural gas-powered electricity generation plants.
In New York, the state has abolished nuclear power plants so aggressively that electricity warnings are common in the summer. California and New York are run by Democrats. Incompetence is non-partisan.
But the Texas case is illustrative. After initial attempts to blame wind and solar systems for the most recent power failure, the Texan leadership gave up on this idea. After all, the blame was on the utility regulators appointed by the last three (Republican) governments, former Governors George W. Bush and Rick Perry and current Governor Greg Abbott.
Then they tried to blame the incompetent leadership at ERCOT and the Public Utility Commission of Texas, which oversees ERCOT. But again, the money stops with laws and regulators approved by lawmakers and appointed by governors for the past 20 years.
Texas leaders get poetic about the benefits of a little “g” government and reagonomics. You should take into account the observations made by Reagonomics’ father, libertarian economist and Reagan advisor, William Niskanen. He observed that bureaucracies, once created, develop a life of their own. With every year that goes by, the bureaucracies are protecting their own futures by co-opting lawmakers and dependent private companies that make increasing campaign donations to protect their gravy trains.
It was the same with ERCOT and its relatives. The Texan leaders of both parties have extolled the virtues of free markets and limited regulation, but they have never recognized the beast they have as an obstetrician in ERCOT.
ERCOT is not a “free” or “competitive” market. In a free market, we could pick up the phone and call the power company directly and I would pay a delivery fee to the companies that own the lines. We do that with almost everything else: buy online from the manufacturer and pay for the delivery by post, UPS or FedEx. Not so with electricity in Texas. According to the law, we have to buy from a middleman.
Econ 101 teaches that ERCOT differs from competitive markets in many ways. Restricted access: no generator can enter the ERCOT market without its authorization. Restricted information: ERCOT restricts information on the grounds that it must protect the “competitive” businesses of market participants. As the market operator, ERCOT sets the price as the sole buyer for all producers. ERCOT is the only wholesaler to all consumers.
In a competitive market, participants can go bankrupt. ERCOT’s generators and electricity traders are now the beneficiaries of a government bailout commissioned by the Texas legislature. Laws and regulations passed by the Legislature and Governor last spring ensure fee payers make up for any losses, a decision that could dwarf the financial impact of the Enron implosion. So next spring consumers will see big bills for electricity, many of which were never used.
The value of energy lies in what it enables us to do every day: drink water, eat, get medical care, travel, work, communicate, and do stupid TikToks. The Texan leaders have only focused on the political fact that re-election is at risk if the price of electricity at the meter or the price of petrol at the pump go up. So be it.
If Texas voters fail to see through the legislature’s ruse now, they will be reminded with monthly utility bills for next year when it’s too late to act.
Ed Hirs is a lecturer in economics at the University of Houston and a University of Houston Energy Fellow. He wrote this column for the Dallas Morning News.
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