Rural Missouri - November 2021 - 29

The deregulation
of the electricity
sector resulted in
a market in which
the buck doesn't
stop anywhere.
that fundamental changes are needed. Alas, the legislature
and Gov. Greg Abbott have largely kicked the electric can
down the road. That's a mistake.
The electric grid is the Mother Network. Our most
important networks, including food delivery and storage,
communications and GPS, depend on the electric grid
to deliver cheap, abundant and reliable flows of energy
24/7/365. A prolonged electricity outage due to extreme
weather, or malicious actors, would have dire effects on
Texas, and because the state provides much of the country's
food and fuel, it would also short-circuit much of the
American economy.
I've been obsessing about ERCOT and the causes of the
blackouts since February when my wife, Lorin, and I, who
live in central Austin, were blacked out for about 45 hours.
The government failed us, and there are three things government
needs to do to assure that the state has reliable
and affordable electricity.
Before going further, a caveat: The blackouts were the
result of several interconnected factors and failures. Thus,
there are no simple or quick solutions, particularly when
it comes to a system as complex as the electric grid. That
said, the blackouts were caused by flaws in the way the
state's electricity market was designed and how it has
evolved since it was deregulated two decades ago. And that
leads to my first point.
The blackouts were due to government failure of epic
proportions. The most obvious example of government
failure was the decision by the Public Utility Commission
to set the clearing price of electricity in ERCOT at $9,000
per megawatt-hour - and to leave it at that extremely high
level for several days despite the fact that it did not bring
more generation into the market.
The result of that blunder: Texas electricity consumers
were overcharged by roughly $26.3 billion. The burden
of paying for those costs will fall most heavily on regular
Texans, who will see surcharges on their utility bills for
years to come to pay down the bonds the state is issuing to
spread out the cost of those overcharges.
Second, deregulation wasn't a boon for consumers. That
conclusion is controversial, but studies have shown that
Texans paid more for the electricity they used than they
would have in a regulated market. A recent Wall Street
Journal analysis estimates that Texans paid $28 billion
more for home electricity in the 20 years of deregulation
than they would have, if they had only been charged the
average regulated rate for the rest of the country.
The deregulation of the Texas electricity sector opened
up the utility sector - an industry that is at root, a powerplant-poles-and-wires
business - to " retail electric providers. "
In a flash, entrepreneurs could get into the electricity
game, with no hard assets or knowledge of how the electric
grid works required.
One hundred and forty years ago we had Thomas Edison.
Deregulation gave us Griddy.
The deregulation of the electricity sector resulted in a
market in which the buck doesn't stop anywhere. Under
the old regulated utility model, when big companies owned
all of the components of the grid, there was accountability.
After the blackouts, all we've seen is finger-pointing. That's
not a bug; it's a feature of a market that's so complex that
no one understands how it really works. As Ed Hirs of the
University of Houston has noted, " The 1,876 pages of regulations
and rules contained in the ERCOT Nodal Protocols
apparently mean nothing. "
Deregulation distorted the type of generation that was
added to the ERCOT grid. Over the past two decades, the
generation capacity added to the grid wasn't built for reliability
or resilience, it was built to collect subsidies.
Since 2006, about $66 billion was spent building wind
NOVEMBER 2021 | RURALMISSOURI.COOP 29
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Rural Missouri - November 2021

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