Pay the True Price

What should happen to the energy costs associated with the winter event? There is much discussion about the electricity costs accumulated over the last week and what will be done to resolve them and reduce the pain to ratepayers. For most people in the deregulated market, they have fixed price power contracts and the only way they will see their electricity bill increase is through pass through charges, specifically ancillary services. Ancillary services are needed because power demand and capacity are not stagnant, they are always fluctuating. On the other hand, there are large companies, and a few Griddy customers, who were not on fixed price deals and were settling their power prices to an index called the Real Time Settlement Point Prices (Real-Time Settlement Point Prices Display (ercot.com), you can look at them yourselves. These are 15-minute interval prices for different delivery points and generating hubs. For many years index pricing has been really cheap. Many companies chose not to fix their power prices, through hedges, because they did not want to pay the extra 1/2 cent to a penny for fixed price, now they are paying much more. Nobody is really going to care, but one sector that will be harmed is the retail providers who sold power at index to very credit worthy customers, which most of retailers did, and once the prices blew out had to put up enormous amount of collateral with ERCOT to cover that exposure; they had no way to go back to their customers to get that collateral from them and this will cause some retail business to be harmed. The product they sold was a legitimate product but now the concern they have is if their customers, who have enjoyed the low index prices are going to step up and pay for the high ones. This could also roll over into coops and municipalities if they were unhedged. The point of me saying all this is there are costs that are going to have to be paid and some will suggest government bailouts, but the problem with government bailouts is we never learn out lesson and demand better when that happens. Almost all lessons in life comes from pain. We have had a market that has been kept artificially low through government subsidies which transitioned our focus from reliable to renewable; a bailout will allow that transition to continue. If the billions spent on renewables was spent on clean burning gas and clean burning coal technology and on maintaining fossil fuel plants rather than on causing these plants to become too unaffordable to maintain due to an artificially low market price, which all of us have enjoyed, this could have been prevented. We all need to pay the true price for what we have been buying. When we make risky decisions like buying index so that we can enjoy the low prices and then want a bailout when those risks go against us, it is like going to Vegas and leaving our money on the table until we lose and then wanting the casino to disregard the losses and allow us to only enjoy the winning; it is not real life. The goal of ERCOT is to balance our grid so that we keep the frequency as close to 60hz as possible. At one point on Monday morning the frequency dropped to 59.3hz and brought the grid extremely close to total blackout. There will be many complaints about ERCOT, but those shift working dispatchers were all of our unrecognized heroes. Remember, government bailouts are not meant for the people, but are meant to keep politicians who have made bad decisions in office. I left off some other heroes. When it was too icy for us to leave the house there were operators running around on boilers trying to get plants going again, gas workers were scrambling in plants trying to keep gas moving, and guys were climbing poles trying to get our lights on.