Editorial

Free-Market Freezer Burn

It took a catastrophic week of sub-freezing weather in Texas to distract public attention from the disgrace of 43 Senate Republicans who held out to let Donald Trump off on the charge he incited the failed insurrection on Jan. 6.

The Senate voted 57-43 on Feb. 13 to convict Trump for his role in promoting the rally of his supporters in D.C. that turned into a storming of the Capitol, and his refusal to send forces to rescue Congress from violent insurrectionists. But the 57 who voted to convict Trump were 10 short of the number of senators needed to bar him from holding public office again. Trump supporters called the vote an exoneration, but we call it a hung jury, and we expect Trump to be prosecuted in federal court in D.C. in due time, along with the many high crimes and felonies that various prosecutors are building cases against him in New York, Georgia and other jurisdictions.

However, the day after the Senate vote, an icy storm driven by a polar vortex caused temperatures to plunge far below freezing on Valentine’s Day from Canada to the Texas Gulf Coast. Demand for electricity to heat Texas homes shot up while gas wells and generators that were not designed to operate in freezing weather failed. The wholesale price of electricity skyrocketed from the usual $20 per megawatt-hour to $9,000 in the largely unregulated wholesale power market. That means a Texan who signed up for an electricity plan tied to the spot price of power on the Texas grid, such as Griddy offers, which usually costs from 2 to 7 cents per kilowatt-hour, would see the cost soar to $9 per kWh. A Griddy customer told the Dallas Morning News her electricity bill for her 2,700-square-foot house in Rockwall, a Dallas suburb, would be more than $5,000 for the five days of the freeze. Her monthly bill normally runs $125 to $150.

Karen Cosby told the News she flipped the breakers connected to her heating units and moved into a small bedroom with an air mattress and her two dogs, and shut off the rest of the house. Her energy use was limited to a space heater, making a cup of coffee in the morning and using the microwave for four or five minutes to heat her meals.

“It’s been 43 degrees in the house since Monday, and I still have a $5,000 bill,” she said. Bills as high as $17,000 were reported.

The Electric Reliability Council of Texas (ERCOT) operates the grid within Texas to avoid federal oversight, and it allows electricity suppliers to charge up to $9,000 per MWh as an incentive to add generating capacity, but the price has never stayed that high that long. The price per MWh reached the limit Sunday night, Feb. 14, and stayed at or near there through Thursday before it dropped to 85 cents the afternoon of Friday, Feb. 19, the News reported.

The extended freeze was a boon for natural gas producers, as the spot market price increased from less than $4 per million British thermal units a week before the deep freeze to more than $1,000 per million BTUs in East Texas and northern Louisiana and $1,250 per million BTUs in Oklahoma. Spot gas in Houston shot up as much as $400 during the week and averaged $201.

Texas has a generating capacity of 67,000 megawatts in the winter, compared with peak capacity of 86,000 megawatts in the summer, as many plants are taken offline for maintenance and declining demand during the colder months. But by Feb. 17, another 46,000 megawatts were offline, leaving only 21,000 megawatts in the grid while millions of Texas families shivered in frigid homes. What were supposed to be “rolling blackouts” lasted for hours or days. (Our office in Manchaca, Texas, was out of power for 22 hours and was out of water for six days.)

Texans on fixed-rate plans, such as those offered by most electric utilities, shouldn’t see the spectacular increases in bills, but they may have spent more time without power because their utilities were reluctant to pay that $9,000 per megawatt-hour from speculators at the peak spot market (at 450 times their normal operating cost) to reduce the numbers of their customers that were blacked out.

Gov. Greg Abbott at first blamed wind turbines, which were disabled by the sub-freezing temperatures. “This shows how the Green New Deal would be a deadly deal for the United States of America,” Abbott told Fox News host Sean Hannity on Feb. 15. “Our wind and our solar got shut down, and they were collectively more than 10% of our power grid, and that thrust Texas into a situation where it was lacking power on a statewide basis. ... It just shows that fossil fuel is necessary.” But wind turbines are used throughout the winter in northern states, where they are equipped to handle freezing weather. And Texas lost 28,000 megawatts from natural gas, coal and nuclear plants going offline because they were not winterized.

Until 1995, Texas regulated electric utilities, which were guaranteed a profit based upon the price of fuels (mostly coal or natural gas). At the urging of the Houston-based energy trading firm Enron, after the election of George W. Bush, the state Legislature deregulated the electric industry, starting with the wholesale power industry in 1995 and it expanded the deregulation in 1999.

ERCOT created a market where companies that own power plants, bid to provide electricity for the “day ahead” and in real time during the day. As demand increased, generators could charge more for their electricity. Ed Hirs, an energy fellow at the University of Houston, noted in a Washington Post column Feb. 18 the Texas system was not much different than what Enron did in the California electricity market in 2000-2001. Except that market manipulation was illegal in California — but not in Texas, thanks to ERCOT. It was destined to come crashing down, and the polar vortex of 2021 was the force that finally broke the Texas grid.

The Texas energy industry was urged to implement winterization guidelines after a similar freeze in 2011 led to power-plant shutdowns that knocked out power to 3.2 million Texans, but the Legislature rejected new regulations. Instead electricity generators were asked to adopt voluntary guidelines developed by an industry group. Few made the recommended investments in equipment and other measures, such as insulating generators, gas wells and pipelines.

Former Gov. Rick Perry, Trump’s former energy secretary, said, “Texans would be without electricity for longer than three days to keep the federal government out of their business.” But Dallas Mayor Eric Johnson said Texas should consider putting its grid under federal oversight. “We just have to be honest about the situation: The grid failed us,” Johnson said. As a Democratic state representative in 2015, Johnson authored a bill that would have required power plants to prepare for weather and climate change. The bill was rejected in a House vote.

Minnesota Sen. Tina Smith (D) called for federal regulators to investigate natural gas prices that spiked as high as 100 times typical levels, forcing utilities and other natural gas users to incur exorbitant costs, many of which were passed on to customers.

In a letter to federal regulators, the Associated Press reported, Smith said the price spikes will not just harm consumers, but could “threaten the financial stability of some utilities that do not have sufficient cash reserves to cover their short-term costs in this extraordinary event.”

Rep. Alexandria Ocasio-Cortez (D-N.Y.), a strong proponent of the Green New Deal proposal, slammed Texas Republicans for blaming renewable energy sources for the blackouts. “The infrastructure failures in Texas are quite literally what happens when you don’t pursue a Green New Deal,” she said in a tweet Feb. 16. — JMC

From The Progressive Populist, March 15, 2021

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