Texas shows the limits of free markets in Energy

Texas – home of the Enron accounting scandal and energy deregulation shows the limits of letting free market theory drive electricity generation.

We are learning that there were terrible winter storms 10 years ago in 2011. El Paso, Texas was one place badly affected by that. It invested in winterization initiatives and as a result survived with this winter storm intact.

The rest of Texas, literally off the national grid, to avoid Federal regulation standards, did not mandate winterization efforts. Nor did it have any protocol to penalize producers who are unable to supply.

How did Texas think this should work. Answer the free market. In a situation where some producers are unable to supply then the price of electricity will go up. Demand exceeds supply. Those suppliers still in the market and producing will command higher prices and earn huge profits.

When the producers that fail see they missed out on the profit opportunity, they will make investments need to avoid that.

That’s how the theory was supposed to work. It FAILED!

With very limited capacity on line those few customers who were getting electricity were PRICE GOUGED. The variable rate price for electricity went through the roof.

See news article on price gouging : From $50 per megawatt hour to almost $9,000 per megawatt hour. Some customers faced bills of over $1,000 per day.

So really I ask you. Do you want this kind of ‘leave it to the market’ approach for life threatening essential services (like electricity)

Winterization must be mandated. Penalties for inadequate baseline production of power must be imposed. And Price Gouging in a crisis must be stopped.

Those 3 things will go a long way to bringing Texas into the 21st century. Most of Texas power generation failed to learn the lesson from 2011. El Paso did make the changes. It’s time for the rest of Texas to catch up.

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