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(USA Today)   And here comes the first bankruptcy thanks to jacked up ERCOT utility rates. FARK: it's the oldest and largest electricity cooperative in Texas   (usatoday.com) divider line
    More: Followup, Power outage, Electric power transmission, Bankruptcy, Brazos Electric Power Cooperative, Lightning, Electricity, Electrical engineering, bankruptcy protection  
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866 clicks; posted to Business » on 01 Mar 2021 at 11:25 PM (6 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



33 Comments     (+0 »)
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2021-03-01 11:52:00 PM  
Elections have consquences.
 
2021-03-02 12:04:37 AM  
The Waco, Texas-based Brazos said it was presented with a bill for more than $2.1 billion for seven days of what it called a "black swan winter event." It refused to pay, saying the winter storm legally eliminated its requirement to do so.

You can do that?
 
2021-03-02 12:14:24 AM  
Between bankruptcy protection and a illegal profiteering lawsuit, they have options.
 
2021-03-02 12:15:09 AM  
On that second point, it's generally illegal to raise prices during a natural disaster.
 
2021-03-02 12:18:09 AM  

ongbok: The Waco, Texas-based Brazos said it was presented with a bill for more than $2.1 billion for seven days of what it called a "black swan winter event." It refused to pay, saying the winter storm legally eliminated its requirement to do so.

You can do that?


If it's in the law or a contract then yes.  I didn't see their claim.  Since they are a co-op, they may be legally required to declare bankruptcy instead of pass on the increases.  If they cannot increase prices to the co-op membership to cover the cost, then they are bankrupt.
 
2021-03-02 12:25:39 AM  
That's a fault between the spot and contract market in Texas. Everyone buys contract supply, but when the contract supplies turned sour to mismanagement they had to buy spot. But the contract supplies didn't include penalties as high as what the spot might reach. It's not a free market, it's a dumb market. I'm pretty sure other commodities markets require you to make good on the supply you don't make, hence crop insurance.
 
2021-03-02 12:57:39 AM  

ongbok: The Waco, Texas-based Brazos said it was presented with a bill for more than $2.1 billion for seven days of what it called a "black swan winter event." It refused to pay, saying the winter storm legally eliminated its requirement to do so.

You can do that?


What's that saying? "When you owe someone a thousand bucks that your problem, when you owe billions that's their problem."
 
2021-03-02 1:04:35 AM  

TotallyHeadless: ongbok: The Waco, Texas-based Brazos said it was presented with a bill for more than $2.1 billion for seven days of what it called a "black swan winter event." It refused to pay, saying the winter storm legally eliminated its requirement to do so.

You can do that?

What's that saying? "When you owe someone a thousand bucks that your problem, when you owe billions that's their problem."


It will be passed along to the  consumers in Texas.  They will pick up that $2.1 billion in the coming years as a surcharge on their electricity bills.

And the other 40 companies that will go bankrupt.
 
2021-03-02 1:41:03 AM  

TedCruz'sCrazyDad: It will be passed along to the  consumers in Texas.  They will pick up that $2.1 billion in the coming years as a surcharge on their electricity bills.

And the other 40 companies that will go bankrupt.


Says they serve 1.5 million.  If they raised everyone's bill by $10 a month, which isn't bad, they could pay off $2.1 billion in a bit less than 12 years (not counting any potential interest).
 
2021-03-02 2:05:44 AM  
My own utility has a billion dollar bill. That's a single city entity that owes 800 million for natural gas for 7 days. This is going to happen everywhere within the state. The GOP better not take their time clawing back those natural gas windfall profits.
 
2021-03-02 2:16:16 AM  
And a lot of people that thought they had career jobs, suddenly don't. Hate it so much.
 
2021-03-02 2:18:34 AM  
cooperative? Sounds like a bunch of big gubbermint libruls to me!

/they'll still vote R during the next election
 
2021-03-02 3:21:58 AM  
Co-ops sound very anti-corporatist Texan.  Surprised they let that kind of communism fly down there in Muricaland
 
2021-03-02 4:34:21 AM  

bhcompy: Co-ops sound very anti-corporatist Texan.  Surprised they let that kind of communism fly down there in Muricaland


They had to.  "Gimme the profits!" type companies won't serve areas where the density is low enough that they won't make serious bank - pretty much how cooperatives tend to pop up.  Even in Texas, you really can't just say, "Well, y'all don't really need electricity anyway." and get away with it too well.  The backlash is going to be/already is pretty farking epic.
 
2021-03-02 4:45:59 AM  
Looks like they needed more deregulation.
 
2021-03-02 7:37:54 AM  

Grauenwolf: On that second point, it's generally illegal to raise prices during a natural disaster.


Without being able to charge their costs to consumers, the alternative is to turn their electricity off.
 
2021-03-02 7:59:52 AM  

Grauenwolf: On that second point, it's generally illegal to raise prices during a natural disaster.


Tell that to the state Public Utilities Commission.  They're the ones who jacked up the price ceiling.
 
2021-03-02 8:19:16 AM  

matthardingu: Elections have consquences.


In this case, electrons do as well.  $2.1 billion worth.
 
2021-03-02 8:24:26 AM  

Grauenwolf: On that second point, it's generally illegal to raise prices during a natural disaster.


This does not apply to commodities traded on a market, as is done for spot prices of electricity.
 
2021-03-02 8:37:29 AM  

scanman61: Grauenwolf: On that second point, it's generally illegal to raise prices during a natural disaster.

Tell that to the state Public Utilities Commission.  They're the ones who jacked up the price ceiling.


So I've looked at this this and this seems to be one those things that is both true and not true.  This is my understanding and admittedly I could be missing facts or details.

Details on raising from low to high cap here: https://www.puc.texas.gov/51617​WinterE​RCOTOrder.pdf

ERCOT usually has a low cap of $2 per MWh and a high cap of $9 per MWh.  The low cap is always in effect unless the PUCT instructs the move from low to high.  PUCT then has to instruct the move back from high to low cap.

The low cap is calculated at $2 OR some formula based on natural gas bulk price, which ever is the higher price.  When the PUCT moved to the high cap, it was allegedly to save money.  When using the formula, the spot price of gas at the time would have cause the low cap to exceed the $9 high cap.  So it was determined to leave it at the high cap.  This order was then left in place even after gas prices fell but the market price for power was still trading crazy high.

While wind and green new deal were blamed at the outset, to me it seem natural gas was the real culprit.  Some portion of the gas pipelines were not winterized.  This led to a supply shortage at some plants and even residential/commercial customers. Many gas power plants were offline due to not being winterized as well.  This led to a huge demand for both gas and power, but even more so for gas.  As one gas company CEO put it, 'it was like hitting the jackpot'.  So gas failed to power the State on a couple fronts.  Wind was off comparatively briefly (again due to lack of winterization).  One portion of a nuke plant was offline but the rest were operation normally.

Why was the high cap order left in place for so long?
Why should power prices be indexed to gas eg why do other producers get a windfall when their stock to produce power does not increase suddenly?
I thought these energy companies did not buy at the spot rate but rather bought and traded futures contracts for their expected demand.  Was that not happening or are we only seeing those that failed in their trading?
Does anyone not believe that Texas will continue to blame the green new deal and double down on gas fire plants?
When can I switch back to Griddy?
 
2021-03-02 9:33:34 AM  

wingnut396: scanman61:
When can I switch back to Griddy?


Griddy is dead.
 
2021-03-02 9:34:52 AM  

mrmaster: wingnut396: scanman61:
When can I switch back to Griddy?

Griddy is dead.


Yeah, Griddy is being sued for charging excessive rates. I don't know how that's going to work because my understanding is Griddy just passes on the wholesale cost to users, so it's not them charging what the cost is.
 
2021-03-02 9:48:37 AM  

mrmopar5287: mrmaster: wingnut396: scanman61:
When can I switch back to Griddy?

Griddy is dead.

Yeah, Griddy is being sued for charging excessive rates. I don't know how that's going to work because my understanding is Griddy just passes on the wholesale cost to users, so it's not them charging what the cost is.


Griddy was completely cut off and it's customers moved to other distributors.
 
2021-03-02 11:48:04 AM  

mrmopar5287: Grauenwolf: On that second point, it's generally illegal to raise prices during a natural disaster.

This does not apply to commodities traded on a market, as is done for spot prices of electricity.


Also, the spike in the electricity price was driven by a spike in the price of the natural gas they used as fuel. That spike was a result of supply and demand, with a large chunk of the supply frozen at a time of increased demand (with a requirement to prioritize home heating above electrical generation).

Once the shiat had hit the fan, the power companies had to choose between passing on their increased costs to their customers, shutting down their plant until the weather warmed up, or eating the financial loss themselves. None of those is a particularly good choice for a company. 

It is fair to blame those companies for not preparing better ahead of time, either in the decade since the last time this happened or in the few days when the forecasts told them that this specific lump of arctic air was on its way.
 
2021-03-02 12:57:46 PM  

ongbok: The Waco, Texas-based Brazos said it was presented with a bill for more than $2.1 billion for seven days of what it called a "black swan winter event." It refused to pay, saying the winter storm legally eliminated its requirement to do so.

You can do that?


You can refuse to pay any bill you like.

The best part is, if you are poor enough, you will actually win. If you have no assets they can't be awarded them. If you have no income, your wages can't be taken.

The key is to always show up to court though.
 
2021-03-02 1:10:40 PM  

Popsqueak: ongbok: The Waco, Texas-based Brazos said it was presented with a bill for more than $2.1 billion for seven days of what it called a "black swan winter event." It refused to pay, saying the winter storm legally eliminated its requirement to do so.

You can do that?

If it's in the law or a contract then yes.  I didn't see their claim.  Since they are a co-op, they may be legally required to declare bankruptcy instead of pass on the increases.  If they cannot increase prices to the co-op membership to cover the cost, then they are bankrupt.


Or because the Co-Op is owned by the members the members decided rather than pay $2.1 billion they would declare bankruptcy.
 
2021-03-02 1:20:59 PM  
Could someone explain this at a level even I could understand.

I understand that demand was high, and production was impacted...but like...I still don't understand what happened.

There is an energy commission in Texas that sets the wholesale price, right? That's a group of actual people, presumably intelligent, presumably experts in energy.

The goal is that, by controlling this rate, companies and people while change their behavior, right? The price goes up, demand should go down. The price goes up, companies are incentivized to make more power.

But in practice, how could this ever help anyone?

A typical price was $0.12 per Kwh

We didn't see a 2x increase. Or a 5x increase. Or even a 10x increase. We saw a 75x increase *and* the whole thing failed miserably. Consumers didn't voluntarily reduce consumption, and however motivated companies might have been, they didn't/couldn't produce enough electricity.

I guess what I don't understand is why the commission decided to increase the price 75x and not just stop at 2x or 3x?

Do companies that generate electricity have a cheap way to make electricity that works when the price is $.12kwh and some crazy other expensive way that costs then 10x a month?

Long term, sure. I get that. But in the immediate, how does it help?

And I thought only like 10% of consumers were tied to the wholesale rate. So raising price isn't going to impact demand much, in the immediate, right?

Basically, didn't they just pay 75x as much for the same electricity people were going to use anyway, to the same company that would have sold it to them anyway? How did the price increase help the situation?
 
2021-03-02 1:26:37 PM  

Fark_Guy_Rob: Consumers didn't voluntarily reduce consumption


They did. There are people who set their thermostat at 55 degrees because they could watch their bill roll up in real time.

Others had no choice. Power was cycling and a co-worker of mine had her heat pump running at 100% with emergency heat because the house would cool for 20 minutes and then she got 20 minutes of power to heat it back up again.
 
2021-03-02 1:30:40 PM  
Fark_Guy_Rob:


Basically, didn't they just pay 75x as much for the same electricity people were going to use anyway, to the same company that would have sold it to them anyway? How did the price increase help the situation?

At $9 it more like 300x the normal rate.

But my understanding is that the PUCT didn't set the rate, the allowed the cap to be raised from the low cap of $2 to the high of $9.  The market did the rest, mostly due to the also absurdly high price of natural gas.
 
2021-03-02 1:59:56 PM  

TedCruz'sCrazyDad: mrmopar5287: mrmaster: wingnut396: scanman61:
When can I switch back to Griddy?

Griddy is dead.

Yeah, Griddy is being sued for charging excessive rates. I don't know how that's going to work because my understanding is Griddy just passes on the wholesale cost to users, so it's not them charging what the cost is.

Griddy was completely cut off and it's customers moved to other distributors.


Yeah, I saw that. What I'm not understanding is the class action lawsuit for Griddy charging customers the absurd rates. Griddy doesn't charge anything other than the $9.99 monthly fee. They pass wholesale costs on to you without markup. So how can they be sued for this? Makes no sense.
 
2021-03-02 3:17:19 PM  

wingnut396: Fark_Guy_Rob:


Basically, didn't they just pay 75x as much for the same electricity people were going to use anyway, to the same company that would have sold it to them anyway? How did the price increase help the situation?

At $9 it more like 300x the normal rate.

But my understanding is that the PUCT didn't set the rate, the allowed the cap to be raised from the low cap of $2 to the high of $9.  The market did the rest, mostly due to the also absurdly high price of natural gas.


So some company had N millions of cubic feet of natural gas, and they are going to sell to the highest bidder...

Then why are we only hearing about Texas? Shouldn't this be seen as a huge success then, if Texas was able to outbid all the competition and got all the gas?
 
2021-03-02 3:18:50 PM  

mrmopar5287: Fark_Guy_Rob: Consumers didn't voluntarily reduce consumption

They did. There are people who set their thermostat at 55 degrees because they could watch their bill roll up in real time.

Others had no choice. Power was cycling and a co-worker of mine had her heat pump running at 100% with emergency heat because the house would cool for 20 minutes and then she got 20 minutes of power to heat it back up again.

These resellers include Texas' five electric utilities, which offer fixed and regulated prices in the areas of the state that they serve.


Maybe it was just bad info, but I thought something like 90% of Texas has fixed prices that don't immediate change. And only a small percentage of people using a service like Griddy would be impacted by the price at all?
 
2021-03-02 4:05:23 PM  

Fark_Guy_Rob: mrmopar5287: Fark_Guy_Rob: Consumers didn't voluntarily reduce consumption

They did. There are people who set their thermostat at 55 degrees because they could watch their bill roll up in real time.

Others had no choice. Power was cycling and a co-worker of mine had her heat pump running at 100% with emergency heat because the house would cool for 20 minutes and then she got 20 minutes of power to heat it back up again.

These resellers include Texas' five electric utilities, which offer fixed and regulated prices in the areas of the state that they serve.

Maybe it was just bad info, but I thought something like 90% of Texas has fixed prices that don't immediate change. And only a small percentage of people using a service like Griddy would be impacted by the price at all?


Yes, that is my understanding. Griffey was pay for what you use with prices set at the time of use from the spot market.

I have fixed pricing in Illinois. Municipal aggregation allows my city to seek bids and then one supplier is locked in for all residents unless you specifically opt out by choosing another supplier. I pay 4.9¢ per kWh.
 
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