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On power markets, snow storms, and $16k power bills

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Re: On power markets, snow storms, and $16k power bills

#211

Post by makomk »

cameronh90 wrote: post #207
paulgb wrote: post #84

Earlier quoted context omitted.

Unfortunately energy deregulation seems to disproportionately attract hucksters. I had never heard of Griddy until recently but in NY we have our share of pushy firms with questionable sales. Question for those in TX: was your perception of Griddy that they were sketchy, or just a get-what-you-pay-for sort of basic service? Did they aggressively sell door-to-door?

We have energy privatisation in the UK and I've never experienced any hucksters. Indeed, I've had a very good experience with the small start-up energy providers compared to the big pre-privatisation firms. I would guess there are different types of deregulation. We still have a regulatory body that ensures the market and new private entrants are operating effectively.

I'm guessing you're not the target market. The UK energy market has a huge huckster problem - sleazy door-to-door salesmen and cold callers tricking people who don't know better into switching their energy plans without realizing that's what they're signing up for, even outright faking signatures in some cases.

Re: On power markets, snow storms, and $16k power bills

#212

Post by the_real_sparky »

There are a couple of important things to note here that I haven’t seen get much discussion.

First, assuming that residential customers can understand the pricing dynamics that are going on is a really bad assumption. It is very complex because there is an interplay between their natural gas service and their electric service, both of which are buying gas from the market on the customer’s behalf. The agents for each company are contractually obligated to supply energy to their customers at any cost - and this is a real problem in this type of situation. In effect, the customer is bidding against themselves via the gas & electric companies. Even in some ideal world where the consumers have full real-time price transparency, it would be extremely difficult for the customer to understand the costs of their actions and the best balance between the two services.

Second, it should be noted that the astronomical gas and electric prices in those markets did not really accomplish anything. They brought on very marginal amounts of additional energy (beyond about 10x average prices there is almost no meaningful additional capacity that can come online because nobody in their right mind would invest in infrastructure that could only operate at those prices). Those prices also did not provide useful information that residential customers could evaluate and act on on the demand side (price sensitive industrial and large commercial customers would shut down at far lower prices than was seen).

Ultimately, what occurred was an emergency situation and disaster. Pricing and consumption controls should have been initiated when energy emergency alerts were declared in the gas and electric markets, as the market structure is not setup to operate effectively during these situations. It was a total failure. The only things that worked were the reliability plans that grid operators have in place to disconnect customers in order to prevent complete failure of the electric grid.

Ultimately, in an emergency/disaster situation there should be a different set of rules that determines who gets the energy and caps the cost.

Note that the winterization discussions going on elsewhere are also extremely important, but those problems are already being covered well.

Re: On power markets, snow storms, and $16k power bills

#213

Post by bluGill »

zbrozek wrote: post #206
bluGill wrote: post #67

Earlier quoted context omitted.

Companies that do just in time in fact are careful to manage their supply chain for this. I know my company orders steel 3-6 months in advance, in part because this eventually reaches all the way back to the miners digging the ore. They now can plan their work to ensure they don't have to pay overtime to meet our orders (compare to when we figured out the best price of the year and ordered a 1 year supply for deliver…

Let's say you're a cloud operator placing long-lead just-in-time orders for hard drives with three different suppliers. Thailand floods and your carefully planned-in-advance delivery schedule is hosed. Your competitor with some inventory runway now has an advantage. In many ways inventory is better than insurance because you're going to use it and so the cost is limited to storage.

No matter how much inventory you have on hand it can eventually run out so you haven't actually prevented any problems, just delayed them a little longer.

Don't forget that we still have the 3-4 month pipeline to do something. That means we have time to put effort into the Thailand recovery plans into place. We often encourage recovery efforts to focus on the parts that we can only get from Thailand, while other parts that can be gotten elsewhere get sourced elsewhere. Our supply management systems have a check for is this a single source component because those are riskier. It isn't hard to read the news and look into our database and figure out where we need to put pressure. (We are a fortunate 100 company so there is some weight to throw around, plus we have several peer companies that are doing the same thing and will put their pressure on the same bottlenecks)

We have our supply chain mapped 6 levels down (this is mostly because we want to ensure the mines our ores come from down use child/slave labor, but there are side benefits) so when a disaster happens anywhere in the world we know how we could be affected and have months to prepare.

Inventory isn't better. Did you miss my comment about avoiding rust? Parts in storage degrade, can be stolen, cost rent to store, go obsolete, and otherwise have issues. Also it is better for the whole world if they have consistent work for their employees instead of nothing some weeks and overtime others, and the inventory systems tend to make that worse. Some inventory is useful anyway (and we have some), but it comes with costs as well.

Re: On power markets, snow storms, and $16k power bills

#214

Post by bluGill »

ivalm wrote: post #127
RHSeeger wrote: post #109

Earlier quoted context omitted.

There are laws in place to prevent the utility companies from cutting off heat in situations like this. From: https://www.needhelppayingbills.com/html/utility_and_heating... > Texas - State law requires that utility and gas companies are required to offer a deferred payment plan to families and individuals in the state. No disconnect can occur if customer agrees and adheres to payment plan for past utility or heating…

Right, but I guess many of the people who died chose to risk rather than be stuck with a bill they cannot afford. Being allowed deferred payment is not enough.

Most, probably all, of the people who died didn't have a choice, their power was cut off for the entire neighborhood. The bill they can't afford for the most part hasn't even been mailed yet (bills are generally monthly, this event wasn't that long ago).

Re: On power markets, snow storms, and $16k power bills

#215

Post by the_real_sparky »

uadnils wrote: post #45

1. The statement "it’s clear that those high prices weren’t doing their job" and subsequent disagreement with raising the price cap does not make sense to me. Any artificial price cap seems to limit the effectiveness of a market. From the producer's side, it limits the incentive to model and capture these tail events (e.g. winterize). From the consumer's side, it limits the incentive to reduce consumption. Is my pers…

For #1, you simply mandate it as a requirement. Many things are mandated to generator owners by regulatory bodies that the generator owners would never opt for otherwise. This is no different. The regulatory body should make the decision about what is necessary to deal with low-probability events, not market participants.

Re: On power markets, snow storms, and $16k power bills

#216

Post by greedo »

emteycz wrote: post #101
greedo wrote: post #96

Earlier quoted context omitted.

Nice victim blaming.

Stop using this term for people who were not victims of anyone other than themselves, it hurts actual victims.

There's a reason that we term things like power and water "public" utilities, and that decent, well run governments regulate them. One, it's to ensure safe, reliable supplies. And two, to make sure that they're fairly priced. What happened in Texas shows the complete and utter failure in this regard. Sure the citizens of Texas voted for this complete clusterfsck, but not everyone, and those who end up with the short end of the stick shouldn't be blamed because the majority were a bunch of idiots fed lies for decades.

Re: On power markets, snow storms, and $16k power bills

#217

Post by curryst »

bradleyjg wrote: post #141
tunesmith wrote: post #125

Earlier quoted context omitted.

Phrased that way, it sounds like it is exactly the opposite of insurance. Pay a little less when times are normal, in favor of a spectacular lack of protection when times are hard.

The phrase I’ve heard for this style of bet is “picking up nickels in front of a steamroller.”

My mental image of a steamroller is slow, so they're dodgeable. I don't think I've ever seen one in real life, come to think of it, so maybe that's just me.

I would have called it "Russian roulette". High reward, high chance of an unavoidable catastrophic loss.

Re: On power markets, snow storms, and $16k power bills

#218

Post by curryst »

rowland66 wrote: post #162
GCA10 wrote: post #104

Earlier quoted context omitted.

I'm not sure we can really say "smart consumers aware of the risk." Isn't it more like "Opportunistic customers who hoped the risks were immaterial beat a path . . . " Out of morbid curiosity, during a long drive this weekend, I listened to 20 minutes of an AM radio guy's pitch for some retirement annuity system that sounded quite sweet at first. As he kept talking, though, I realized that he was being very evasive a…

I think that it is called an immediate annuity. It is a standard insurance product that offers protection against outliving your assets. You pay a lump sum in return for a guaranteed income as long as you live. Yes, if you die early, the insurance company wins, if you live longer than expected, the insurance company looses. I think these are more common in Europe where people will often take a lump sum pension payout…

Isnt a pension already designed to be a payout until you die? What's the advantage?

Re: On power markets, snow storms, and $16k power bills

#219

Post by curryst »

cwkoss wrote: post #78
jonas21 wrote: post #58

Earlier quoted context omitted.

I understand that -- but it seems like the main point of the article is: > I believe we ultimately need some degree of real time price exposure for consumers if we are to induce these kinds of widespread energy efficiency investments, because it can and does encourage significant reductions in individual electricity consumption during times of peak grid demand, which is good for the grid and good for the planet. And…

This is an important point, because the author of the post is essentially trying to argue that letting Texans either freeze to death or be price gouged is somehow necessary to fight climate change. Regulations would have solved this. Why does the word "regulation" only appear in this article once? Make winterization standards a requirement of participating in the market.

Their point is that Texans have no exposure to the spot price of electricity. If demand exceeds supply, we get rolling blackouts. We could reduce demand if people shut off appliances not critical to life (the fridge for one, everything will spoil during blackouts anyways).

Some part of electricity demand is inelastic, and required to live. Much of the electricity demand is elastic, and will respond to price signals. TVs, computers, clothes washers and dryers.

We do need winterization regulation as well, but once we're up the creek, price signals can be useful. Smaller price signals with more reasonable caps though. Just enough to convince you to turn your PC off so we can avoid blackouts.

Re: On power markets, snow storms, and $16k power bills

#220

Post by curryst »

mortenjorck wrote: post #4

Is there a reason why time-of-use systems can’t have a customer-defined price limit, beyond which they opt into a blackout? The sense I got from the stories of people suddenly facing five-figure power bills is that most would have gladly spent a night or two with propane and candles rather than cleaning out their savings.

They can always pull the main at the breaker.

Unfortunately, that's a terrible option too. The cold is survivable with some gear, but your pipes will freeze and burst unless you drain them (which I have no idea how to do, if it can be done).

We also had several deaths due to people using gas heaters indoors. I think it releases carbon monoxide? Not entirely sure, but those outdoor heaters are meant to be outdoors.

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