17/03/2021
What caused the great Texas Power Outage? Opinions from an engineer that worked for the power company, HL&P in the 80s before dereg took over. Dereg is responsible or indirectly responsible for the current state of the power biz in TX. There were tow problems that we saw from this outage during the storm. The loss of power production and the market response to the loss of supply when demand was at its peak. So let's look first at the loss of power. Most every plant that tripped, went off line, was due to frozen instruments. This sounds simple to fix but it's not. There are thousands of instruments in a complex plant like coal or nuclear or nat gas. Some are critical. Some are located in the weather. Some are in instrument cabinets. But here you gotta remember plants in Texas are built outdoors because of our weather. Because of a one time in 30 year event, you cannot justify the economics to build a plant indoors. Indoor plants start being built around the snow line in TX, Dallas and north. Weather justifies it. But indoor plants then need to be cooled in the summer and heated in the winter. More operating cost. So we build them outdoors in southern Texas. Now consider, it is not just the utility companies we are talking about. The grid consists of many many producers. Utilities, city owned, county owned, co-ops and IPPs. About 550+. I read somewhere it may be in the 650+ range. Each one of these entities put power onto the "grid". So what is the grid. The grid is nothing more than the wires used to bring power to you. The actual grid starts somewhere at the plants. The plant produces it, sends it to a substation, it is transformed and then it enters the grid. The grid is wires, substations, poles and everything used to get it to you. The grid is not the producers of power. Who owns the grid. The same people that built it and maintain it. Offshoots of the utilities. But deregulation forced the owners of the grid to allow anyone to use it that produces power. ERCOT owns nothing. ERCOT is a non-profit entity that operates the grid, very complex. It involves maintaining voltage and frequency on the grid. ERCOT can request more power and can cut users off the grid, that is all they do. They monitor all sections of the grid in Texas. When a section does not meet specs in operation, if the power cannot be maintained or is too much power supplied vs. what is needed, ERCOT cuts off users or request plants be shut down. ERCOT also manages the transactions for the competitive markets. And that is all ERCOT does. Now how do they do this and by what authority. The PUCT. Public Utility Council of Texas. A government agency. PUCT regulates ERCOT. PUCT oversees ERCOT. So ERCOT does nothing it is not allowed to do. The PUCT regulates all utilities on TX. Water gas, power and more. Probably sewage etc. Then the TCEQ is the govt body for compliance with environmental regs. But the PUCT does not set the market price for power. The market sets the price. Just like Nasdaq and DowJones. What will people pay for a stock or commodity. That is up to the people and driven by many things but mostly supply and demand. Value of any item. However, the PUC did set under reg that number you heard so much $9000 per MWH or $9 per kwh. That is the cap for the market. But no one expected it to get to that price. Thank goodness that price was there or computers may have driven it far beyond that. And yes, I think computer programs to trade in this power market may have caused these huge prices. If people had been there, I doubt anyone would pay that cap price.. So now who is responsible for the loss of power? The plants were. Who was responsible for the price problems, the traders were. But who provides you power. Do you get it directly from Centerpoint or a Utility? That pricing is still regulated by the PUC. but very complex. There is the price to beat and what end users pay. Like buying from Sam's Club or Wholesale. The more you buy, the cheaper it is. Simple. And you will find the answer to all your frustrated questions within this framework, but it will not be easy. Power providers, utilities, IPPs, City owned, county owned, Co-ops? WHo supplies you. And yes, you asked for it back in the 80s and 90s when people hated the utility companies. You thought you were getting a raw deal. So you wanted competition, and you got it. Also instrumental in dereg were the IPPs. Enron started it. Then people found out how much money there was to be made from taking advantage of a you ng deregulated market. And they did. And they still do. How do you think providers make money, they buy in bulk and sell it to you. But they also do fixed rates. So they day trade in the market. The cheaper they can buy it, while giving it to you a the fixed rate, the more money they make. Simple system for opportunists. They use you money to play the power market. They make the profits, you pay the same. It is the grand illusion of competition. The power producing utilities are still very healthy and good investments. Why? Because they still make great profits. How? You figure it out. It is all above in this discussion.
