Texas electric firm files for bankruptcy citing $1.8B in claims • Hacker News Board

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#151

Post by cies » Mon, Mar 01, 2021, 1:07 PM UTC

refurb wrote: post #136

rocqua wrote: post #127

Earlier quoted context omitted.

If they invested $100 made decisions that cost $150 and now lost their entire $100 investment, they are shielded against the $50. Hence, anything that has real costs higher than their invested stake has effective costs for them at their invested stake. They are shielded to some extent. Especially for low probability high cost events. This is exactly the point of a limited liability company, but it comes with slightly…

When was the last time a shareholder made decisions like what led to this bankruptcy?

Some times smaller companies do stuff that makes them a lot of money but also creates debt or legal liabilities (transgressing some environmental laws or not paying taxes). When they go bankrupt later the "investors" already took the proceeds out by dividends. This certainly happened a lot.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#152

Post by blake1 » Mon, Mar 01, 2021, 1:08 PM UTC

jonplackett wrote: post #41

This is the side of privatisation that gets ignored. When private companies screw up, who gets left with the bill? Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay. Privatise the profit, socialise the losses.

For your first question: in the TX power market, power producing companies contribute to a fund which will cover for losses if any participant defaults.

Even with that little detail, the rest of your comment seems spot-on. These power producers did not have enough incentive to deal with big problems, because the short term profits mattered more than potential future losses. That’s explicitly at the philosophical core of the TX power market, which is opposed to mandates, and relied on desire for profits and pressure from peers (peers that don’t want to pay extra into that fund) to encourage good behavior.

It’s unclear if that fund will be sufficient to cover all the losses. May yet need a bailout, which is indeed socialization of the losses.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#153

Post by cies » Mon, Mar 01, 2021, 1:08 PM UTC

jeegsy wrote: post #125

cies wrote: post #65

Earlier quoted context omitted.

Nope. They file bankruptcy. And the bill is left on the table. Only profits (divident) go to investors. If a company becomes insolvable the investors are shielded. Similar to when a company operated against the law: profits were taken by investors, now they can sink the shop when the law suits start. > If it was a public utility it would be tax payers. That would be socializing losses. No-one is arguing against that!…

These private companies also pay taxes year after year

So does everyone else. The point here is: should ""investors" be shielded from liability, or is it a recipe for creating monsters?

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#154

Post by hinoki » Mon, Mar 01, 2021, 1:12 PM UTC

m4rtink wrote: post #144

eqvinox wrote: post #98

Earlier quoted context omitted.

Road networks are a great example. Just assume the hypothetical position of a competitor. Where are you gonna build a competing road in, say, NYC? Each block only has 4 sides, and each of them already has a street. You could maybe compete on interstate highways or other long-area bits. Maybe. That's stretching it. Build a competing water supply network to each house? Another set of sewers? Electricity distribution? H…

Seems to work fine in Japan for railways - there are three different rail connections from Tokyo to the Narita International Airport for example, each run by a different company (at the same time, we have 0 rail/subway connections to the Prague Airport:P). Same thing in many other places - in Kyoto there is big and nicely build station by JR and, Transport Tycon style 200 meters from it another big station by IIRC Ki…

I just found this [0] paper about the development of the Tsukuba Express, one of the more recent train lines into central Tokyo.

Land owners whose land is taken away are given new plots of land that are smaller, but closer to stations. These smaller plots are worth more than the original land because they are now near (future) train stations.

[0] http://www.wctrs-society.com/wp-content/uploads/abstracts/ri...

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#155

Post by tssva » Mon, Mar 01, 2021, 1:19 PM UTC

IgorPartola wrote: post #86

jonplackett wrote: post #68

Earlier quoted context omitted.

I think this is the reason politicians all around the world have been so ill-equipped to deal with Covid - they are used to their decisions having 10 / 20 year repercussions, by which time they're well out of the blame-zone.

The thing that I find surprising about the US government is that everything is a bill/law. Like instead of the transportation agency deciding to build a bridge, Congress has to pass a law to build a bridge. Does anyone know exactly why it’s set up this way?

The short answer is your idea of how things work in the US is incorrect. Building a bridge certainly doesn't require an act of Congress. Explaining transportation funding in the US is complicated because the responsibility for road building is mostly a state and local government issue and there is a variety of systems from state to state.

Federal funding to help states usually involves two methods. The first is transportation block grants where the federal government gives states money to use towards transportation at their discretion within certain constraints. The other is funding for specific projects. This funding generally involves the state applying to the federal department of transportation for funds toward a specific project. The department of transportation provides these funds out of a pool of money allocated by Congress each year. Congress plays no formal role in how these funds are disbursed. The department of transportation decides using defined set of criteria.

In the past Congress would sometimes earmark funds toward specific projects. This is rare these days as most earmarking of funds is against current congressional rules.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#156

Post by CydeWeys » Mon, Mar 01, 2021, 1:30 PM UTC

maxerickson wrote: post #119

madsbuch wrote: post #90

Earlier quoted context omitted.

I think I read somewhere that prices are capped at USD 9000 per MWh. That is still USD 9 per KWh which is insane pricing.

The regulator set prices at $9000 with the idea that the high price would reduce the shortage.

And it did. Plenty of Texans were reducing their power usage to the absolute bare minimum once they got word of how expensive power had just become.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#157

Post by refurb » Mon, Mar 01, 2021, 1:34 PM UTC

ceejayoz wrote: post #106

refurb wrote: post #25

Earlier quoted context omitted.

That’s a massive stretch for “socialize the losses”. By that logic any time a business fails and it impacts a lot of people the losses have “been socialized”. And CA is far from a free market. The PUC has PG&E on a short leash and the results have been a disaster. Edit: Replying - No, bankruptcy is actually the exact opposite of socializing losses.

California was the first state to try deregulation of the energy market. https://en.wikipedia.org/wiki/2000–01_California_electricity...

Yeah and the regulations put in place around the market were terrible.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#158

Post by bko » Mon, Mar 01, 2021, 1:38 PM UTC

adrianN wrote: post #132

bko wrote: post #112

Earlier quoted context omitted.

I don't know if NYC infrastructure is a good example. The second avenue subway was the most expensive subway in the world on a per mile basis. Considerably more expensive than Paris or Tokyo > The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world Similarly, t…

I don't understand why so many people assume that public transport needs to cover cost with fares. It provides immense public utility, even to the people who don't use it. It makes perfect sense to subsidize it. And it's not like taxes on cars pay for all their externalities.

I don't understand why so many people assume that others should pay for the services they consume.

Why should a relatively poor upstate new york taxpayer be paying 50% of the fare of some young finance bro going to work?

Also removing prices removes information. For instance the ferry costs something like $15 per rider to operate compared to around $5 for subway. With both trips at the same price to the consumer, you make the marginal rider indifferent to the two in terms of price where it would be beneficial to have that information to save money and divert resources to the more effective mode

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#159

Post by imtringued » Mon, Mar 01, 2021, 1:41 PM UTC

ethanbond wrote: post #100

eqvinox wrote: post #98

Earlier quoted context omitted.

Road networks are a great example. Just assume the hypothetical position of a competitor. Where are you gonna build a competing road in, say, NYC? Each block only has 4 sides, and each of them already has a street. You could maybe compete on interstate highways or other long-area bits. Maybe. That's stretching it. Build a competing water supply network to each house? Another set of sewers? Electricity distribution? H…

What about housing itself? There is only one building that can exist at 100 1st Ave, and its location is entirely unique/entirely monopolized.

Housing isn't the problem here but as you said correctly, it's the land ownership that is problematic. If we assume that house owners merely rent the land then it's perfectly fine to build a private housing market since housing needs can differ drastically between citizens. Some need a big house for a large family with lots of children, others only need a studio apartment. Some people want a home workshop or a home office. The market finds a satisfying solution for everyone.

Land ownership is problematic because neighborhood improvements can be extracted via land ownership. The most effective policy against this extraction is to simply tax the land itself and thus turn it into a liability if the value of the land grows. Ideally, property taxes would be replaced with land value taxes.

If land is a liability the only reason why people would purchase it is to improve the value of the land and make it available for productive uses like renting it out to a large number of people.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#160

Post by rayiner » Mon, Mar 01, 2021, 1:44 PM UTC

snidane wrote: post #94

jonplackett wrote: post #41

This is the side of privatisation that gets ignored. When private companies screw up, who gets left with the bill? Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay. Privatise the profit, socialise the losses.

It's actually well understood that privatisation for platform industries is bad, privatisation for businesses running on top of platforms is good. Networks and infrastructure = little to no competition. Eg. networks naturally settle in a optimal geographical location and utilize economy of scale then. Can't compete with that. So don't privatise platforms. Rather - make them monopolistic and make them share the revenu…

> It's actually well understood that privatisation for platform industries is bad, privatisation for businesses running on top of platforms is good

That’s not “well understood” at all. Folks don’t remember how dysfunctional and sclerotic nationalized industries were in the 1950s and 1960s. There is a reason nearly every developed country got rid of them.