Off the Kuff Rotating Header Image

deregulation

Another upward revision of the freeze death count

Buzzfeed News takes a deep dive.

The true number of people killed by the disastrous winter storm and power outages that devastated Texas in February is likely four or five times what the state has acknowledged so far. A BuzzFeed News data analysis reveals the hidden scale of a catastrophe that trapped millions of people in freezing darkness, cut off access to running water, and overwhelmed emergency services for days.

The state’s tally currently stands at 151 deaths. But by looking at how many more people died during and immediately after the storm than would have been expected — an established method that has been used to count the full toll of other disasters — we estimate that 700 people were killed by the storm during the week with the worst power outages. This astonishing toll exposes the full consequence of officials’ neglect in preventing the power grid’s collapse despite repeated warnings of its vulnerability to cold weather, as well as the state’s failure to reckon with the magnitude of the crisis that followed.

Many of the uncounted victims of the storm and power outages were already medically vulnerable — with chronic conditions including cardiovascular disease, diabetes, and kidney problems. But without the intense cold and stress they experienced during the crisis, many of these people could still be alive today.

[…]

The BuzzFeed News analysis of deaths during the storm is based on mortality data from the CDC. It relies on a method called “excess deaths” analysis, recently used to estimate the full toll of the COVID-19 pandemic.

Our analysis, reviewed by three independent experts, suggests that between 426 and 978 more people than expected died in Texas in the week ending February 20 alone. Our best estimate is that 702 people were killed by the storm that week. Even the lowest end of the range is almost three times the number officials have acknowledged. Neighboring states that were hit hard by the winter storm but did not experience the widespread power outages seen in Texas did not show a spike in deaths.

BuzzFeed News reached out to relatives of people who died during the power outages, identified from dozens of wrongful death lawsuits as well as death reports obtained from public records requests to medical examiners in eight of the biggest counties in Texas. Interviews revealed stories of anguish and confusion, as families struggled to find out exactly how their relatives died.

This confusion also poses real economic challenges for survivors. For Mary Gonzales, the delay in obtaining a cause of death for her husband meant she was unable to claim an income from his pension for almost three months. And without an official acknowledgment tying their loved ones’ deaths to the storm, families will be unable to claim federal assistance for funeral costs.

The high death toll adds pressure on state legislators, energy regulators, and Texas Gov. Greg Abbott to harden the state’s infrastructure to avert another deadly disaster.

Abbott’s press secretary, Renae Eze, did not respond to questions about the significantly higher death toll or whether the state would investigate further, but said Abbott was “working collaboratively with the House and Senate to find meaningful and lasting solutions to ensure these tragic events are never repeated.”

“The Governor joins all Texans in mourning every single life lost during the winter storm, and we pray for the families who are suffering from the loss of a loved one,” she said.

But with the state’s legislative session ending on May 31, lawmakers only have a week left to finalize a proposal to address some of the vulnerabilities that made the February storm so horrific.

“As it stands, nothing has happened,” said Michael Webber, a professor of mechanical engineering focused on energy infrastructure at the University of Texas at Austin.

As of the end of March, the official death count was at 111, and a Houston Chronicle analysis in early April estimated it at 194. As this story among others notes, there are only so many medical examiners in the state, and only so many deaths result in an autopsy. As was the case with COVID, some deaths are attributed to chronic conditions like heart disease despite the obvious external cause. Similar statistical methods that estimate “excess deaths” have been used for COVID as well, and you can read how they arrived at these figures in the story. We’ll never know an exact number, but we do know that the official number will always be too low. Daily Kos has more.

Are we headed for a June special session or not?

Too soon to tell. Right now this is just the usual end-of-session venting and frustration.

With the future of the power grid and voting laws in Texas hanging in the balance, tensions among the top political leaders in the Legislature are fueling a round of political gamesmanship that has even the future of the Texas Holocaust & Genocide Commission caught in the crossfire, one of many pawns in a larger battle over GOP priorities.

There are just four days left in the legislative session, which must end by midnight Monday. Yet with so much still unresolved, top Republican leaders in the Texas House and Senate are publicly accusing one another of torpedoing important legislation.

[…]

Gov. Greg Abbott addressed the Republican infighting during a news conference in Fort Worth on Thursday.

“If the leaders in the Legislature will stop fighting with each other and start working together, we can get all of this across the finish line,” Abbott said.

End-of-session drama is almost a given in Texas, where top leaders often clash in the closing days. But this year it is different as the Senate appears ready to take important political hostages in an attempt to force Abbott to call a special session in June, whether he wants to or not.

Just past midnight Thursday morning, the Senate appeared to try to force Abbott’s hand by refusing to take up House Bill 1600, which, if passed, would have assured the continued operation of 18 state agencies — including the Holocaust & Genocide Commission, the Texas Commission on Law Enforcement and the Racing Commission. There are other bills to keep those agencies operating, but HB 1600 is considered a backup to make sure those agencies are not placed in jeopardy unintentionally.

In Fort Worth, Abbott sent a public message back to Austin that he will not be pushed around.

“Not only am I the only one with the authority to call a special session, I get to decide when, and I get to decide what will be on that special session,” Abbott said. “And here’s what I would do if, if anybody tries to force this: It’s not going to be like it has been in the past, where we’ll have 40 items on a special session.”

Abbott said that if there is a special session, “the only thing that we’ll be putting on there are things that I want to see passed.”

Patrick, a Republican from Montgomery County, went on Spectrum News 1 on Thursday afternoon to deny he’s threatening state agencies to pressure Abbott or the House.

“I’m not holding anything hostage,” Patrick told host Karina Kling.

Instead, Patrick says the special session is necessary after the House refused to advance a bill to ban transgender girls from playing on girls scholastic sports teams.

Patrick has a long history of fighting for measures to restrict or regulate transgender Texans. In 2017, a similar bill to stop transgender children from using the bathrooms they are most comfortable with also triggered calls for a special session after the House refused to take it up. Abbott did call a special session, and the so-called bathroom bill still didn’t pass.

Patrick on social media listed other failed bills — a ban on taxpayer-funded lobbyists by city governments and legislation to stop social media companies from “censorship” — as important measures the House has blocked.

See here for the background. As the Trib notes, Abbott supports the things that Patrick is whining about, so this may be just a little show of dominance, or it may be Abbott’s usual fecklessness, or it may be that he had indigestion after ordering the burrito supreme platter for lunch on Thursday. As I said, he’s gonna do what he’s gonna do, and he may telegraph it or he may not. He’s the guy with the power, and he wants to make sure we know that.

One more thing:

All of this is happening as lawmakers still have not reached a final deal on a plan to require electricity grid suppliers and operators to winterize their facilities to prevent a repeat of the mass power outages that left millions of Texas freezing in the dark in February.

The House and Senate passed different bills, but despite that legislation being listed as a priority of nearly every elected official, lawmakers still have not announced a compromise on it.

Eh, who cares about the grid.

The Republican leaders and majorities in both chambers, though, did exactly what I feared they would do. None of the bills heading for Gov. Greg Abbott’s signature address core problems, such as the wholesale market design or the $9,000 price cap. Nothing they did will prevent another blackout of equal scale.

They did agree on more than $9 billion in bailouts for the electric utility industry that Texans will pay off over the next 20 or 30 years through mandatory charges on their utility bills. The goal is to spread the cost of the disaster to all Texans and make the monthly fee so low we do not complain.

This will bail out electricity providers who guarantee customers a set monthly rate, even though electricity is sold on a wholesale market where the price changes every 15 minutes between free and $9,000 a megawatt-hour.

When the February freeze hit and prices maxed out, many retail providers went bankrupt and left behind $2.5 billion in unpaid bills. House Bill 4492 allows the state to issue bonds to pay off those bills and charge customers a monthly fee to repay them.

Electricity co-ops also ran up huge bills for electricity used to power critical facilities. Senate Bill 1580 allows them to issue bonds estimated to total $2 billion. Again, the co-op’s customers will repay those bonds through their monthly bills.

Winter Storm Uri also triggered a 700 percent spike in natural gas prices, creating all kinds of financial pain for another sector that typically guarantees a set price. To help natural gas utilities, the Legislature authorized them to issue $4.5 billion in bonds. We will repay these on our gas bills.

“Considering the extraordinary costs incurred in the recent winter storm, customers could see a dramatic increase in their monthly bills,” Rep. Chris Paddie, R-Marshall, wrote as his intent for the bond authorizations. “This financing mechanism will provide rate relief to customers by extending the time frame over which the extraordinary costs are recovered.”

Magic of the free market, baby. Socialize that debt, and focus on the important things. It’s what they do. Reform Austin and the Trib have more.

How many times will we fail to fix our power grid?

By “we”, I mean our Legislature, and the PUC, and the Governor, and the Railroad Commission, and pretty much everyone else in charge of this state.

Ten years ago, Texas power plants froze during a fast-moving winter storm, causing rolling electricity blackouts across the state. Outraged Texas regulators and lawmakers, vowing to crack down, debated requiring energy companies to protect their equipment against extreme weather to ensure reliability.

But they didn’t.

Nine years ago, two state agencies that regulate utilities and the oil and gas industry warned that natural gas facilities that lost power during outages couldn’t feed electricity generation plants, creating a spiral of power loss. The agencies jointly recommended that lawmakers compel gas suppliers and power plants to fix the problem.

But they didn’t.

Eight years ago, economists warned that the state’s free-market grid left companies with little incentive to build enough plants to provide backup power during emergencies. With the support of then-Gov. Rick Perry, legislators and regulators considered increasing power rates to encourage the construction of more power plants, so that Texas, like other states, would have sufficient reserves.

But they didn’t.

In the wake of each power failure, or near-failure, over the past decade, Texas lawmakers have repeatedly stood at a fork in the road. In one direction lay government-mandated solutions that experts said would strengthen the state’s power system by making it less fragile under stress. The other direction continued Texas’ hands-off regulatory approach, leaving it to the for-profit energy companies to decide how to protect the power grid.

In each instance, lawmakers left the state’s lightly regulated energy markets alone, choosing cheap electricity over a more stable system. As a result, experts say, the power grid that Texans depend on to heat and cool their homes and run their businesses has become less and less reliable — and more susceptible to weather-related emergencies.

“Everyone has been in denial,” said Alison Silverstein, a consultant who works with the U.S. Department of Energy and formerly served as a senior adviser at the Federal Energy Regulatory Commission. “They treat each individual extreme event as a one-off, a high-impact, low-frequency event, which means, ‘I hope it doesn’t happen again.’”

With each passing year, the grid has steadily become less reliable. In 1989, Texas suffered a cold snap considered worse if not equal to the winter storm earlier this year yet managed to keep the grid functioning, with only a few hours of rotating outages.

By comparison, February’s Winter Storm Uri brought the Texas power grid to within five minutes of complete collapse, officials acknowledged. Millions of residents were left without power for days in subfreezing temperatures; nearly 200 died.

“Our system now is more vulnerable than it was 30 years ago,” said Woody Rickerson, vice president of grid planning and operations at the Electric Reliability Council of Texas. “With the generation mix we have now, the weather has the ability to affect wind and solar and (the gas supply). Those are things we can’t anticipate.”

It’s the first of a three-part series, and it’s a long read that will make you mad. The simple fact is that the system we have now works very well for some wealthy interests, and they are very good at defending their turf. Throw in an unwavering belief in the invisible hand of the free market and the general incentive towards doing nothing, and voila. Even the incremental steps forward have turned out to be meaningless:

As a result, the only legislation to come out of the 2011 storm was a minor bill from then-state Sen. Glenn Hegar, a Katy Republican, which required power companies to file weatherization plans with the PUC each year.

Two months after that bill was signed into law, the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation put out a report of more than 350 pages, urging Texas to enact stricter weatherization standards for power plants and natural gas operators.

And they did to a degree, with ERCOT putting out best practices, conducting annual workshops and inspecting plants every three to four years.

But there were two problems. First, despite FERC’s recommendation, the state Legislature never gave the PUC authority to penalize power plants that did not comply, making weatherization voluntary. While progress was made, some companies opted not to bring their plants up to code, said Rickerson, the ERCOT vice president.

“Ultimately those were financial decisions that had to be made,” he said. “How much is someone willing to invest in a power plant that’s 50 years old and going to retire in a few years?”

More significantly, the best practices ERCOT was sharing were designed for a cold snap like that seen in 2011. While cold, with temperatures in Dallas dropping as low as 14 degrees, it was nothing compared to the 1989 winter storm, when temperatures dropped to 7 degrees in Houston and minus-7 in Abilene, let alone 1899, when the state’s all-time low temperature of minus-23 degrees was set in the Panhandle town of Tulia.

So when temperatures dipped into the single digits for days on end this February, most Texas power plants were simply not prepared. Exterior control equipment and fuel lines froze, not to mention coal piles and wind turbine blades.

“One power plant under freezing for 200-plus hours. That’s not a thing, right?” said Chris Moser, executive vice president of operations for NRG Energy, of expectations going into the winter. “If you look at the math ERCOT did prior to the seasonal assessment, it looked like (there was plenty of power). But then you have 80 to 85 plants not showing up. It was a failure of imagination.”

As for Hegar’s legislation, it has proved even more toothless than it appeared at the time.

According to a recent report from ERCOT, the agency was never given authority to judge the weatherization plans but only to check that they were being implemented. And a requirement in Hegar’s bill that the PUC produce a one-time Weather Emergency Preparedness Report, which was quietly published in 2012 and found that many power companies were still doing a poor job implementing reforms, drew little attention from state officials.

“When you’re on the commission, you’re dealing with what’s immediately in front of you,” said Ken Anderson, a former public utility commissioner. “I’m not sure how much follow-up occurred.”

Seems like this is a pretty good campaign issue for next year, especially given what is being prioritized over making the grid more robust. I’m just saying.

So we bail out the electricity providers

I guess I don’t know enough about our weird electricity market to suggest a viable alternative to this, but it sure doesn’t speak well of our system.

An approximately $2.5 billion plan to bail out Texas’ distressed electricity market from the financial crisis caused by Winter Storm Uri in February was approved by the Texas House Thursday.

The legislation would impose a fee — likely for the next decade or longer — on electricity companies, which would then get passed on to residential and business customers in their power bills. Lawmakers on Wednesday said they could not yet estimate how much it would impact Texans’ electricity bills.

House lawmakers sent House Bill 4492 to the Senate on Thursday after a 129-15 vote. A similar bill is advancing in the Senate.

Some of the state’s electricity providers and generators are financially underwater in the aftermath of the February power outages, which left millions without power and killed more than 100 people. Electricity companies had to buy whatever power was available at the maximum rate allowed by Texas regulations — $9,000 per megawatt hour — during the week of the storm (the average price for power in 2020 was $22 per megawatt hour). Natural gas fuel prices also spiked more than 700% during the storm.

Several companies are nearing default on their bills to the Electric Reliability Council of Texas, which manages the grid that covers most of the state and facilitates financial transactions in it.

Rural electric cooperatives were especially hard hit; Brazos Electric Power Cooperative, which supplies electricity to 1.5 million customers, filed for bankruptcy citing a $1.8 billion debt to ERCOT.

State Rep. Chris Paddie, R-Marshall, the bill’s author, said a second bailout bill will be necessary during the current legislative session for severely distressed electric cooperatives.

“This is a financial crisis, and it’s a big one,” James Schaefer, a senior managing director at Guggenheim Partners, an investment bank, told lawmakers at a House State Affairs Committee hearing in early April. He warned that more bankruptcies would cause higher costs to customers and hurt the state’s image in the eyes of investors.

“You’ve got to free the system,” Schaefer said. “It’s horrible that a bunch of folks have to pay, but it’s a system-wide failure. If you let a bunch of folks crash, it’s not a good look for your state.”

If approved by the Senate and Gov. Greg Abbott, a newly-created Texas Electric Securitization Corp. would use the money raised from the fees for bonds to help pay the companies’ debts, including costs for ancillary services, a financial product that helps ensure power is continuously generated. The aid would only be allowed for the debt that would otherwise be defaulted.

Hard to say how much this will increase the average monthly electric bill, but I’m sure someone will study that. Having a bunch of bankruptcies would be bad for a variety of reasons, so this is what we’re doing, but let’s take a moment to review the bidding on our deregulated electricity market. Massive statewide blackouts (and water failures) during the freeze because there was no requirement to weatherize the systems (even though we had experienced similar, though smaller scale, blackouts before, in recent memory), which led to a huge financial crisis in the industry that is now requiring a state bailout as well as a large state investment in weatherization, because otherwise that was never going to happen. All this, and we have higher consumer prices than other states. Is this a great system or what?

Meanwhile, in other ERCOT news:

During February’s deadly winter storm, Gov. Greg Abbott and many state lawmakers quickly criticized the Electric Reliability Council of Texas because several members of its large governing board reside outside Texas.

Many of the out-of-state board members are experts in the electricity field, but resigned following criticism of the agency’s oversight of the state’s main power grid during the storm that left millions of Texans without electricity for days in freezing temperatures.

State lawmakers are now trying to change the way ERCOT is governed by requiring members to live in Texas and giving more board seats to political appointees — changes that experts say may do little to improve the power grid.

One former board member who resigned after the storm, Peter Cramton, criticized legislation for politicizing the grid operator’s board.

“These people would be political types without electricity expertise,” he told The Texas Tribune.

The Texas House has already approved House Bill 10, which would remove independent outside voices on the ERCOT board and replace them with five political appointees. The governor would appoint three of those people, while the lieutenant governor and speaker of the House would each appoint one. None of the appointees would be required to be electricity experts. The only requirement is that appointees live in Texas.

Senate Bill 2, which has cleared the upper chamber, would give the governor five ERCOT board member appointments.

[…]

The political appointees replace what are now called “unaffiliated members,” who mostly served as outside expert voices. The other board members currently represent regions across the state that make up the ERCOT grid, as well as non-voting members such as the chair of the Public Utility Commission, which oversees ERCOT.

Some power grid experts have said in legislative testimony, at industry events and in interviews that they don’t see how giving more power to the political class — and making minor tweaks like requiring all board members reside in Texas — could improve the grid operator.

“From the consumer standpoint, we really depend on those unaffiliated directors to make decisions that are in customers’ interest and in the interest of the overall health of the ERCOT market,” Katie Coleman, who represents Texas Industrial Energy Consumers, said at a recent industry conference.

Seriously, WTF are we even doing here?

SCoTX punts on ERCOT lawsuit question

Wimpy.

The Texas Supreme Court punted Friday on a question dogging millions of Texans affected by last month’s catastrophic power failure: Can ERCOT, the state’s grid manager, be sued?

The state’s highest court ruled 5-4 that it won’t decide — at least not now — on closely-watched case between Dallas electricity generator Panda Power and the Electric Reliability Council of Texas. The $2.2 billion case filed by Panda Power in 2016 raised the question whether ERCOT is a governmental agency that has sovereign immunity protecting them from lawsuits. ERCOT, a private, nonprofit corporation overseen by the Texas Legislature and the Public Utility Commission, is the only grid manager in the country that has received such protection.

Five justices led by Justice Jeff Boyd said the Texas Constitution prohibits them from ruling on the case after the trial court issued a final judgment dismissing the case. Based on a finding of sovereign immunity by an appeals court, the Supreme Court narrowly ruled that the dismissal by the lower court made the case moot and that it no longer had the authority to rule in the case.

“Because the trial court’s interlocutory order merged into the final judgment and no longer exists, we cannot grant the relief the parties seek,” the majority opinion written by Boyd stated. “As a result, any decision we might render would constitute an impermissible advisory opinion, and these consolidated causes are moot.”

Four dissenting justices led by Chief Justice Nathan Hecht, argued they should rule on the case because the public has an interest whether ERCOT can be sued in the aftermath of last month’s storm. Several lawsuits have been filed against the state grid manager, including over the deaths of an 11-year-old boy and a 95-year-old man, who were both found dead in their freezing Houston-area homes.

“The answer to the immunity issue in this case has become perhaps more important to the public than even to the parties,” the minority opinion, written by Hecht stated. “The parties want to know. The public wants to know. The court refuses to answer.”

The ruling by the high court has widespread implications in the wake of last month’s deadly and devastating blackouts, which contributed to more than 50 deaths and billions of dollars of property damage.

David Coale, an appellate partner with Dallas-based law firm Lynn Pinker Hurst & Schwegmann, said the Supreme Court could still decide on ERCOT’s immunity as appeals from the Panda Power case come up through the legal system. In the meantime, ERCOT’s immunity — upheld by a Texas appeals court in 2018 — remains intact, but the state grid manage faces an onslaught of legal cases without any guidance from the Supreme Court.

“The court may have punted, but it didn’t walk away,” Coale said. “It acknowledged that another appeal involving the same parties is on its way up to them, and it can revisit these issues then.”

See here and here for some background. I guess I can understand the “let’s do this all in the correct order” idea, but as the story notes the question about whether ERCOT has sovereign immunity or not is very pertinent right now. Maybe if the ultimate decision is that ERCOT cannot be sued it would be nice to let all those folks who are now suing them know, so they won’t waste a bunch of time and money pursuing their cases. I’m not a lawyer, what do I know? You can find all the relevant opinions and concurrences and dissents here if you need a little light reading for the weekend.

UPDATE: Forgot to mention that Harris, Fort Bend, and Travis Counties submitted amicus briefs urging SCOTUS to find in favor of ERCOT not having sovereign immunity. This Bloomberg article, which is behind their paywall but which you might be able to see if you haven’t exceeded your monthly allowance, details those filings.

The opening bid on power outage response

Not bad, but there’s a long way to go and not a lot of detail just yet.

Texas House Speaker Dade Phelan on Monday announced seven priority bills responding to the winter weather crisis last month that left millions of Texans without power.

The proposals include overhauling the governance of the state’s electric grid operator, the Electric Reliability Council of Texas; mandating “weatherization” of power facilities and establishing a statewide disaster alert system. There is also legislation to ban variable-rate electricity pricing plans such as were offered by the company Griddy, which was recently effectively shut down in the state after customers were hit with bills in the thousands of dollars.

Phelan’s office called the proposals the “first phase” of the House’s proposed reforms in the wake of the winter storm. Not all the bills have been filed yet, so the specifics of some proposals have not yet been made public.

“We must take accountability, close critical gaps in our system, and prevent these breakdowns from ever happening again,” Phelan, a Republican, said in a statement.

[…]

House Bill 10, for instance, aims to reform ERCOT by restructuring its board. The legislation would replace the board’s “unaffiliated” members with members appointed by the governor, lieutenant governor and speaker. The bill would also mandate that all board members live in Texas. And it would add a new board member to “represent consumer interests,” according to Phelan’s office.

Some other ideas could prove challenging. House Bill 11, for instance, would order the Public Utilities Commission to require power generators to implement measures to avoid service outages during extreme weather events, including winter storms and heat waves. But retroactively equipping power plants and the state’s energy system to withstand cold temperatures is likely to be difficult and costly, energy experts have said. Building energy infrastructure that from the start is designed to perform in winter conditions is easier and cheaper, they have said.

Phelan’s office described another bill, House Bill 14, which hasn’t yet been filed, that would require the Railroad Commission of Texas to require pipeline operators to update their equipment to ensure reliability during extreme weather. It’s unclear how much either bill would cost the state or the power generators. Abbott has indicated in the past that he is interested in funding at least some of the weatherization.

These fall under the emergency items declared by Abbott, so they can be taken up ahead of other legislation. Once they’re written and filed, of course. I don’t have any immediate complaints – the general direction is good, and they seem to have hit the high points – but it’s very early in the process, and there will be plenty of opportunity for shenanigans and just plan resistance, so as always we will have to keep an eye on it. The pushback from the energy industry seems to be that the power outages themselves were the main driver of the natural gas shortage, not the wells and pipes freezing up. There’s probably something to that, but I’m sure you’ll understand if I decline to take their word for it. At least three of the bills will be carried by Democrats – Reps. Richard Raymond, Ana Hernandez, and Joe Deshotel. We’ll see what we get, and we should very much remember that a lot of this is about undoing or at least mitigating the effects of Republican deregulation, but this is a decent start.

ERCOT’s overcharges

Oops.

The Electric Reliability Council of Texas made a $16 billion error in pricing during the week of the winter storm that caused power outages across the state, according to a filing by its market monitor.

Potomac Economics, the independent market monitor for the Public Utility Commission of Texas, which oversees ERCOT, wrote in a letter to the Public Utility Commission that ERCOT kept market prices for power too high for nearly two days after widespread outages ended late the night of Feb. 17. It should have reset the prices the following day.

That decision to keep prices high, the market monitor claimed, resulted in $16 billion in additional costs to Texas power companies. The news of the overcharging was first reported by Bloomberg.

Some of the providers that were charged during the high price period could pass the costs to customers, depending on the type of contract they have, according to Detlef Hallermann, director of the Reliant Energy Trade Center at Texas A&M University.

In Texas, wholesale power prices are determined by supply and demand: When demand is high, ERCOT allows prices to go up. During the storm, PUC directed the grid operator to set wholesale power prices at $9,000 per megawatt hour — the maximum price. Raising prices is intended to incentivize power generators in the state to add more power to the grid. Companies then buy power from the wholesale market to deliver to consumers, which they are contractually obligated to do.

Because ERCOT failed to bring prices back down on time, companies had to buy power in the market at inflated prices.

The error will likely result in higher levels of defaults, wrote Carrie Bivens, a vice president of Potomac Economics, the firm that monitors the grid operator. She said the PUC should direct ERCOT to remove the pricing interventions that occurred after outages ended, and allowing them to remain would result in “substantial and unjustified” economic harm.

At least $1.5 billion could be passed on to retail electric providers and their customers. Some retail providers have already begun to file for bankruptcy.

[…]

“The ERCOT market was not designed to deal with an emergency of this scale,” wrote Patrick Woodson, CEO of ATG Clean Energy Holdings, a retail power provider based in Austin, to the Public Utility Commission. The pricing failure, he wrote, “has pushed the entire market to the brink of collapse.”

Bivens wrote that while she recognizes that retroactively revising the prices is “not ideal,” correcting the error will reflect the accurate supply and demand for power during the period after the outages.

First and foremost, most if not all of that $16 billion in overcharges needs to be refunded to the customers and retail providers. This isn’t a matter of reading the fine print, it’s a matter of the market failing. No one should have to pay those extortionate rates, and no one should have their credit ratings dinged because they were charged those extortionate rates.

Second, the PUC cannot be allowed to authorize such rates again in the future. I don’t know if this was a process problem or a judgment problem, but either way the effect was extremely damaging. That needs to be a high priority.

But in some sense, these are just details. The big picture problem is that the system we have in place failed completely during the freeze week. The bright idea behind this deregulated, market-driven system of power delivery is that it’s supposed to provide incentives to power companies to ensure there’s a sufficient supply of power, while lowering prices for the customers. The latter has long been a massive failure, but we see now how the former failed as well. All it did was serve as incentive for the system to be gamed. We can tinker around the edges and maybe put in some guard rails, but the underlying problem won’t be solved.

Of course, the Republicans in charge aren’t interested in systemic reform, because they think everything was just fine outside of that one unfortunate week. The real first step in solving this problem is getting people into office that want to solve it. The Chron has more.

UPDATE: That’s not how you fix it.

Texas’ utility regulator had an opportunity Friday to eliminate some of the $16 billion that the state’s grid operator erroneously overcharged power companies during last month’s deadly winter storm — but the board of the Public Utility Commission chose not to do so.

Some Texas electricity customers could have benefited from a decision to readjust the electricity market prices for the week of the storm, according to PUC Chair Arthur D’Andrea and some independent analysts. But other customers could have been harmed by such a move, D’Andrea said.

“I totally get how it looks like you’re protecting consumers [by readjusting electric prices],” D’Andrea said Friday during a PUC meeting. “But I promise you you’re not.”

D’Andrea added that a retroactive decision would have winners and losers: “You don’t know who you’re hurting. And you think you’re protecting the consumer and it turns out you’re bankrupting [someone else].”

[…]

State Sen. Drew Springer, R-Muenster, was hoping for a different decision by the PUC on Friday.

“Keeping the market at an artificial $9,000 for 32 hrs cost $16B,” Springer tweeted, adding that the Potomac Economics report “says those hours should be repriced, I agree.”

You have the power to do something about that, Sen. Springer. What are you going to do?

Paxton sues Griddy

Bandwagon time.

Texas Attorney General Ken Paxton filed a lawsuit Monday against electricity retailer Griddy, claiming it misled customers using deceptive business practices after some customers reported bills costing tens of thousands of dollars.

These charges were incurred during Texas’ devastating winter storm that nearly shut down Texas’ electrical grid and sent energy demand skyrocketing. The lawsuit targets Griddy’s auto-billing system, which began drafting money out of customer’s accounts as the bills rolled in.

“Griddy misled Texans and signed them up for services which, in a time of crisis, resulted in individual Texans each losing thousands of dollars,” Paxton said in a statement. “As Texans struggled to survive this winter storm, Griddy made the suffering even worse as it debited outrageous amounts each day.”

Paxton noted this is the first lawsuit his office has filed against power companies after the widespread outages two weeks ago. A Houston-based law firm accused the company of price gouging and filed a separate class-action lawsuit last week.

[…]

Griddy customers paid a $10 monthly membership and in turn were passed wholesale power prices. These prices fluctuate but usually are cheaper than retail prices. However, unlike fixed-rate electricity plan users, Griddy customers are susceptible to market changes due to increased demand or reduced supply.

Paxton’s lawsuit claims the company understood the risk this posed to customers but misled them through its marketing.

Some customers have reported bills costing thousands of dollars, some surpassing $15,000. The retailer places the blame for the exorbitant prices on Texas’ Public Utility Commission, saying they were due to the commission jacking up wholesale prices.

See here for more on the previous lawsuit. I think that actin has some merit, but Paxton jumping in at this point has definite Claude Rains being shocked to discover gambling at the casino vibes to it. I mean, it’s not as if that risk hasn’t been there for customers since Griddy’s inception. It’s well within the power of the AG to sue over false or misleading advertising even before any actual harm is inflicted. This is what I meant when I said that the real problem here was that the system worked as designed.

Also, too: How do you think the cross-examination will go after Griddy’s lawyers call Dan Patrick to the stand to testify about his assertion that people should have read the fine print in their contracts?

Not sure what effect this will have on the proceedings, but we technically don’t have Griddy to kick around any more.

The state’s grid manager effectively shut Griddy down after the retail power company failed to make a required payment.

Griddy, which offers customers access to wholesale prices, gained notoriety for billing customers in the thousands of dollars when wholesale prices skyrocketed during the recent weather-driven power crisis. The Electric Reliability Council of Texas, or ERCOT, barred the company, headquartered in California, from participating in the state’s power markets.

Griddy said Monday that it asked the Electric Reliability Council of Texas, or ERCOT, for emergency help on Feb. 16 after the Public Utility Commission mandated that wholesale prices rise to the state maximum of $9,000 per kilowatt hour, where they stayed for days.

That cost, which passed through to Griddy customers, is equivalent to $9 per kilowatt hour on residential bills, compared to a typical 9 cents to 10 cents per kilowatt hour in fixed retail plans.

Griddy said ERCOT did respond to its plea for help. ERCOT “ decided to take this action against only one company that represents a tiny fraction of the market,” Griddy said.

A spokeswoman for ERCOT said the grid manager did work with Griddy, but could not discuss details because of confidentiality rules.

What do you suppose are the odds that Griddy will file its own lawsuit against ERCOT?

Suing Griddy

This is going to be interesting.

A Chambers County resident filed a class-action lawsuit against electricity retailer Griddy on Monday, accusing the provider of price gouging customers during last week’s freeze. She is seeking $1 billion in relief for affected customers.

Attorneys for Lisa Khoury said in the lawsuit that her bill spiked to $9,340 the week of the storm, compared to her average monthly bills that range from $200 to $250. Griddy drafted payments from Khoury’s bank account several times, according to the lawsuit, pulling $1,200 before she blocked further charges from her bank. She still owes thousands.

Griddy passes wholesale electricity rates directly to customers, who in turn pay the company $10 a month. This differs from fixed-rate electricity plans which offer a consistent rate regardless of market conditions.

But because of a price hike fueled by a shortage of supply and skyrocketing demand, some customers were faced with bills charging tens of thousands of dollars. While electricity bills are likely to rise across the board, Texans on variable rate plans faced immediate and alarmingly high prices.

Texas’ Public Utility Commission, appointed by Abbott, raised the wholesale market price of electricity to $9 per kilo-watt hour — a 7,400% increase over the average 12 cents per kilo-watt hour — in response to rising demand. The hope was power generators would be enticed to produce more electricity.

“Energy prices should reflect scarcity of the supply,” the order stated.

Representatives for Griddy could not immediately be reached for comment. The electricity retailer addressed concerns of price gouging on its website and firmly placed the blame on the Public Utility Commission. The company states that it did not profit from raised prices.

A quick perusal of Griddy’s Twitter shows that they are blaming the PUC, and that they did suggest alternate electricity providers for their customers to switch to during freeze days; there are several news stories, including this one that ran in the Chron, about that as well.

This is one of those situations where the system is working exactly as designed – here are a couple of stories that explain the mechanics of this. I guess the courts could rule that what the PUC did violated the state’s laws on price gouging, but that seems like a stretch to me. I Am Not A Lawyer, so if you know better than me, please speak up.

More likely, there will be some kind of legislative solution to this. This Trib story goes into that option.

Gov. Greg Abbott and Texas lawmakers are promising relief for Texans hit with massive electric bills after a winter storm bludgeoned the state’s power grid, leaving millions of residents freezing without electricity.

But how they’ll accomplish that remains unclear. The state’s deregulated electricity market not only allows for staggering price spikes, but effectively compels them for some customers.

While many Texans are on “fixed rate” electricity plans that insulate them from market swings, others pay rates tied to the spot price of wholesale electricity, which skyrocketed during the storm.

As the bad weather bore down, it froze natural gas production and wind turbines, choking off the supply of electricity as demand skyrocketed. In response, the Public Utility Commission, appointed by Abbott, let the wholesale market price of electricity rise to $9 per kilo-watt hour, a 7,400% increase over the average 12 cents per kilo-watt hour.

The rate hike was supposed to entice power generators to get more juice into the grid, but the astounding costs were also passed directly on to some customers, who were suddenly being billed more for electricity each day than they normally pay in a month.

[…]

Kaiba White, an energy policy specialist with consumer advocacy group Public Citizen, said the costs would be passed on to customers one way or another.

“If they [the electric provider] don’t have a mechanism that allows them to do that in the immediate — like on the next bill or the next several bills — it’ll end up getting rolled into the overall cost of service,” she said. “It’s just a matter of whether it’s going to get passed on in an immediate way, in a shocking way … or spread out over time.”

Tim Morstad, associate state director with the Texas AARP, said “prices are going to rise” but with a delay for those not on variable rate plans.

“Forgive me for stepping back to say — this system is truly designed to have high prices and huge fluctuations. And putting consumers through that by design is a bad process. It’s setting people up for pain,” he said.

Texas has an unusually deregulated electricity market that’s touted for offering customers the ability to pick from hundreds of plans offered by dozens of electric providers. Parts of the state are carved out, including cities like Austin, that get energy from a municipally owned utility, or people served by cooperatives. Those too could see cost increases down the line.

Lawmakers and Abbott have pledged to protect consumers from the big bills, and excoriated the Electric Reliability Council of Texas for the outages last week. The reliability council, which operates the power grid that covers most of the state, is overseen by a Public Utility Commission.

Abbott’s office did not respond to a question about what options were on the table.

Lawmakers have demanded that the utility commission roll back its decision to allow the huge rate increases, or suggested cobbling together some package of emergency waivers or relief money to buffer Texans’ from the high bills.

“We cannot allow someone to exploit a market when they were the ones responsible for the dire consequences in the first place,” said state Rep. Brooks Landgraf, R-Odessa.

I have no idea what Abbott will suggest. He’s nobody’s picture of a creative thinker, and “solving problems” is not in his skill set. I’m hardly an expert either, but it seems to me that the first order of business is to prevent people from getting multi-thousand-dollar electric bills, and the simplest way to do that is probably just to order everyone’s bill capped at some value that relates to their usual experience, and have the state pick up the difference since the providers do in fact have the legal right to charge these amounts. That’s the easy part. The much harder question, at least for the leadership we are stuck with, is what to do about it for the future. That either involves some form of re-regulation that puts limits on how “free” the electricity market is, or ignoring it and hoping you survive electorally. I know what I’d do, but I’m not a Republican. Good luck with that.

One more thing, as long as we are talking about freeze/blackout-related lawsuits:

The family of an 11-year-old boy who died last week in Conroe during power outages while Texas endured a freezing winter storm is suing Entergy Texas and operator of the state’s power grid for a total of $100 million.

In the lawsuit filed Saturday, the family said Cristian Pineda died of hypothermia after the temperature in his house plunged due to the forced blackouts. Pineda’s family of five shared a single room for warmth, and Cristian shared a bed with his younger brother, the lawsuit states.

His family found Cristian unresponsive in the morning. The Houston Chronicle first reported news of the lawsuit.

The family is suing the Electric Reliability Council of Texas, which operates the decentralized electrical grid system. The Texas grid is not governed by federal regulations.

As the story notes, our old buddy Tony Buzbee is filing this lawsuit, along with at least seven others, against ERCOT. Whether or not he can do that is an open question.

ERCOT has sovereign immunity, a well-established legal principle that protects governmental agencies from lawsuits. ERCOT, a private nonprofit corporation overseen by the Texas Legislature and the Public Utility Commission, is the only grid manager in the country with such protections.

A pending decision by the Texas Supreme Court, however, could change that. Justices on the state’s highest court are expected to rule this year on a case between Dallas utility Panda Power and ERCOT that could strip the Texas grid operator of its sovereign immunity, leaving it open to lawsuits that ERCOT has said could cripple the agency.

The ruling by the high court will have widespread implications in the wake of last week’s blackouts. It would not only determine whether Texans can use the legal system to hold ERCOT accountable for power outages that led to more than 48 deaths and billions of dollars of property damage, but also the future of ERCOT and the state’s power markets if the court opens the door to the likely flood of lawsuits.

[…]

“The political rhetoric around ERCOT and the weather emergency has embraced transparency and accountability,” Rottinghaus said. “A ruling that holds ERCOT immune from such lawsuits may run against that. It could be a political liability.”

Panda Power filed suit in 2016 against ERCOT, alleging the grid operator issued “seriously flawed or rigged” energy demand projections that prompted the Dallas power company to invest $2.2 billion to build three power plants early last decade. The plants ended up losing billions of dollars, with one forced into bankruptcy.

ERCOT’s reports calling for more power generators came in the aftermath of a major ice storm in February 2011, which crippled Texas power plants and forced rolling blackouts across the state.

Panda Power’s case was halted in 2018 when an appeals court in Dallas asserted ERCOT was protected from lawsuits by sovereign immunity. The Texas Supreme Court in June 2020 said it would review the appellate court decision, heard the case in September 2020 and is expected to render a decision before it recesses in June.

We’ll see about that. There’s definitely some pressure, on the courts and on the Lege and on Greg Abbott, to Do Something about all this – and again, I remind you, that the “all this” in question is what was supposed to happen based on existing laws. How long that pressure lasts, and what happens if there are no legal or legislative outlets for it, that’s the big political question.

UPDATE: Multiple ERCOT board members have resigned. All are folks who did not live in Texas, which yes is one of the weirder things about ERCOT. Not directly related to this story, but this is as good a place as any to note it.

Republicans are determined to learn the wrong lessons from the blackouts

It’s kind of amazing, and yet completely on brand.

With millions of Texans having lost power during the winter storms, key players in the Legislature say one of the most immediate reforms they will push for is recalibrating the state’s electricity grid to ensure more fossil fuels are in that mix and fewer renewables.

While all energy sources were disrupted during the historic freeze, Republican lawmakers who control the Legislature say renewables have been given all the attention over the years, yet proved to be unhelpful during the state’s crisis.

“It’s cool to be into wind and solar these days, but the problem is it leaves us frigid in the winter,” said State Sen. Paul Bettencourt, a Houston Republican who leads the GOP caucus in the Texas Senate.

Officials with the Electric Reliability Council of Texas said most of the generating plants that went offline this week were natural gas, coal or nuclear facilities. But still, Republicans have singled out wind and solar as targets over the objections of Democrats and renewable energy advocates.

Texas utilities ratepayers have funded more than $7 billion over the last eight years building transmission lines to take wind power from West Texas to the big cities. It’s made Texas the biggest wind producer in the nation.

But Bettencourt and other Republicans say advantages like federal subsidies for wind and solar have to be evened out.

“We need a baseload energy generation strategy in Texas that is reliable and not based upon renewables so strongly,” he said.

Jared Patterson, R-Frisco, this week reupped a bill he filed last session that would require ERCOT and the Public Utility Commission to write rules that would “eliminate or compensate for market distortion caused by certain federal tax credits.”

“It’s not just the frozen wind turbines; it’s the fact that they even exist that is creating the problem,” said Patterson, who works as an energy consultant. “Their existence, their heavily subsidized existence on our grid is creating a shortage of energy supply because no one else can compete against them.”

[…]

Blaming renewables is misguided and politically motivated, said Adrian Shelley, director of the Texas office of Public Citizen, a consumer advocacy group.

“There is no energy source that doesn’t receive subsidies,” Shelley said. “There have been energy tax credits for fossil fuel sources for a hundred years, so to target the renewable tax credit … it’s pretty disingenuous.”

[…]

But while there may be reforms to ERCOT, not many Republicans are talking about the prospect of ordering the state’s nearly 700 power plants to invest in weatherization and what that would cost.

ERCOT officials said earlier this week in a statewide press conference that while it was recommended power plants weatherize after winter storms in 2011 knocked out power, those were voluntary requests and not mandatory.

Jon Rosenthal, a Houston Democrat and senior mechanical engineer in the oil and gas industry, said he is working on legislation that would build in more reserve energy supply for Texas, such as by hooking up the state to the nationally interconnected system, or offering financial incentives for providers to increase back-up power.

Rosenthal would also like to see reliability standards introduced that require generators to weatherize their systems. He said he knows that adding more regulations will be an uphill battle in the Republican-majority Legislature but believes there is a “happy medium” that can be struck.

“While the common argument ‘we don’t want regulation so we can provide electricity as cheaply as possible’ does provide cheap energy a lot of the time, these disasters are horrendously expensive,” Rosenthal said. “I’ve heard insurance folks saying this could be the costliest ever natural disaster in Texas. So you make a little bit of an investment in your infrastructure to ensure that you don’t have these disastrous consequences.”

He added: “And it’s not just the cost of it. It’s the human suffering.”

How it is that they could have missed the voluminous reporting about how the same freeze we all just endured also caused problems for gas and coal plants since they both involve water and that water was frozen solid is an eternal mystery, but here we are. We’ve literally had thirty years’ of warnings about the need to weatherize our power plants and wind turbines, and this is the response we get from Paul Bettencourt and his cronies. It would cost money – I forget where I read this now, but I saw one back-of-the-envelope estimate of about $2 billion for the whole system – but that can be paid in part by the power generators and in part by the state, with cash from the Rainy Day Fund or a bond issuance if need be.

Doing that might require changing the financial incentives for the operators, and it might require shudder regulating the energy market – certainly, ERCOT or some other governing body will need enforcement power, because simply asking the operators nicely to invest in weatherizing hasn’t worked so far – and it even might require rejoining the national power grid, which has its own pros and cons but would come with federal enforcement of weatherization standards. There are many viable options. We don’t have to choose the stupid, head-in-the-frozen-tundra option that Bettencourt et al seem hellbent on doing.

One more thing, which I find equal parts amusing and puzzling: All this antagonism towards wind energy seems to overlook the fact that a large number of wind farms and turbines are in the Panhandle and West Texas, easily two of the most Republican parts of the state. Do these Republican legislators and other currently trashing wind energy – the Observer quotes a Facebook post by Sid Miller that says “We should never build another wind turbine in Texas”, for instance – not realize that they’re kicking sand on their own people? I don’t even know what to make of that, but I do know that part of the 2022 Democratic message needs to be targeted at those folks. Texas Monthly has more.

The power to pay more for electricity

Deregulation really does create jobs.

When Texas deregulated electricity markets 16 years ago, the Public Utility Commission created the website Power to Choose to help consumers through the power buying experience. But what was promoted as an easy, free way for Texans to pick electricity providers has turned into a such a complex and confounding experience that it is spawning a cottage industry to help consumers navigate the scores of companies and hundreds of plans available.

At least five companies in Texas are providing both free and paid services aimed at helping consumers in Houston and other deregulated markets decipher confusing electricity offers such as free nights and weekends, multi-tiered pricing plans, and credits for high electricity use.

The companies have built computer algorithms that try to ferret out the best deals based on factors such as past electricity consumption, home size, and the number of people living there. In some cases, it’s just a matter of plugging in your monthly electricity into a website calculator. Others provide more comprehensive services, charging a monthly fee to advise customers which plan will save them the most money and then monitor the market so if prices fall, consumers can switch.

This kind of hand-holding is akin to car buying services, which save customers the time, energy and aggravation researching models, doing comparison shopping and negotiating prices. But unlike cars, there’s no difference in the electricity provided by different retailers, making the emergence of these power buying services a sure sign of the complexity of the system.

“The third party guys demonstrate the consumer is getting ripped off by the Power to Choose artificial configuration that the Public Utility Commission has rammed down the throat of Texas consumers,” said Ed Hirs, energy economist at the University of Houston.

The Public Utility Commission recently recognized the shortcomings of Power to Choose, with chairman DeAnn Walker criticizing retail electric providers for misleading pricing plans. Those plans offer rock-bottom rates at 1,000 kilowatt hours, but if consumers use just one kilowatt hour more, the price per kilowatt hour can jump as much as 10 times.

[…]

Jesson Bradshaw, a power industry veteran, saw an opportunity when his friends and family asked him which company they should sign up with for electricity. He sent them to Power to Choose, but he quickly heard complaints.

“I saw how confusing it was,” said Bradshaw, who worked as a power trader and owned the retail power company Amigo Energy until he sold it to Just Energy in 2011.

Four years ago, he and a partner launched the buying service Energy Ogre. The company charges customers $10 each month to find the lowest price plan and monitor rates to see if it makes sense to switch mid-contract. It doesn’t take commissions from power providers.

Bradshaw said his business is not exactly popular among the retail providers, many of which bet that customers won’t shop for better rates when contracts expire.

“They don’t like us informing the customer,” he said. “ If there is a better rate, we move them. We don’t care which provider.”

Mark Axford of Sugar Land signed up with Energy Ogre about three years ago. Axford said the company switches electricity providers at least once a year and makes sure Axford and his wife do not get hit with penalties. The monthly fee is well worth it, he said.

If you want to save, you have to shop, said Axford. “But who has the time to keep shopping for electricity?”

The trade association for retail electricity providers in Texas said it recognizes that the buying services may help customers sort through offers. But it’s important to note, said Julia Rathgeber, president of the Association of Electric Companies of Texas, that these companies are not subject to oversight by the Public Utility Commission. It’s still up to consumers to decide whether plans are right for them, she said.

Got that? If you’re paying too much for electricity, it’s your own damn fault. Never mind how confusing or time consuming the shopping process is. There’s no reason I can think of why the state couldn’t provide, for free, the kind of easy, at-your-fingertips information that these entrepreneurs have done. Why wouldn’t we want to do that, if the goal of deregulation was to lower prices for consumers? The answer to that is left as an exercise for the reader. In the meantime, here’s the sidebar that tells you how to find the best deal for yourself:

MORE INFORMATION
Companies that help consumers find the best power deals:

Texas Power Guide

Website: TexasPowerGuide.com

Awesome Power Texas

Website: AwesomePowerTexas.com

Geek Your Rate

Website: GeekYourRate.com

Energy Ogre

Website: EnergyOgre.com

Real Simple Energy

Website: RealSimpleEnergy.com

You might also want to go back and look at some guest posts my friend Dan Wallach wrote about picking power plans. Good luck.

Dan Wallach: 2016 Electric Power Usage Update

Note: From time to time, I solicit guest posts from various individuals on different topics. While I like to think I know a little something about a lot of things, I’m fortunate to be acquainted with a number of people who know a whole lot about certain topics, and who are willing to share some of that knowledge here. In this particular case, I’m welcoming back someone who has written on this particular topic before.

We’ve now had a solar system on our house, and an electric car charging from the house, for just over a year. Also of note, in my post last May, I suggested that what we need is a retail electric plan that sells to you at a competitive rate (versus the inflated prices at Green Mountain) and buys from you at the wholesale price (which can climb impressively high on hot summer afternoons, when your solar system is cranking out the juice). Well, plans like this are starting to appear on the market. MP2 Energy has such a plan and others are looking into it.

Today, I want to discuss a few related questions:

  • How much electricity did our solar system generate, and our electric car consume, in the past year?
  • Based on our year of data, would we do any better to stick with Green Mountain or go to one of the newer plans?

Of course, I’m only writing about our own usage, with our house and our car. Your house and your car and your, umm, mileage will vary, but you might be able to extrapolate from our numbers to reach your own conclusions about whether you want to go solar.

How much electricity did our solar system generate?

Below is a graph of the energy-per-day produced by our solar array. You can see the system generating more energy in the summer months, with the correspondingly longer days. You can also see the occasional days with bad weather. No sun = no power.

Dan Wallach 2016 chart

In total, over this twelve month period, our solar array (36 panels, 250W peak production per panel) produced 10.3 MWh of electricity. At the $0.12/kWh buyback rate we’re getting with Green Mountain Energy, that means that our solar array saved us roughly $1240 this year. (Our panels are facing east and west, as a result of the way our roof is built. If your house has a large southern-facing roof, you could get this much power from fewer panels.)

How much juice did our Tesla consume?

According to the Tesla’s dashboard measurements, after a year of owning it, we’ve driven a total of 7033 miles, and used 2476 kWh to do it. That’s 352 Wh/mile. Assuming you were paying $0.10/kWh for your electricity, then we’re talking about 3.5 cents/mile. Contrast that with a comparably large sedan with comparable performance (e.g., an Audi A7), doing the same sort of city driving and thus getting something crappy like 15 miles/gallon, then with current $2/gallon prices, you’re looking at 13.3 cents/mile. You’d have to have some kind of amazing 57mpg  hybrid to achieve the same cost per mile. (A Prius is almost there. Big luxury cars, not so much.)

Another way to think about it: the “long tailpipe” problem. Some critics of electric cars note that they still burn fossil fuels, just somewhere far away from home. Our solar array produced enough energy to run our Tesla for nearly 30,000 miles. So if you want to have a “solar powered electric car”, you can do it with even a modest-sized solar system.

What if you drive a longer commute? The prior owner of our Tesla lived up in the Woodlands and commuted back and forth to Houston. He was averaging an even more amazing 300 Wh/mile, driving twice as many miles per year in the same exact car. He upgraded to a Tesla P85D (the four-wheel-drive version that goes insanely faster) and his mileage stayed roughly the same. Supercar performance, tiny hybrid efficiency.

All that said, I don’t have a really good handle on the overhead of the Tesla. Sure, it consumed 2476 kWh in the past year, but that’s going from the car’s battery to the tires. There’s some fractional overhead beyond that, going from the wall outlet to the car’s battery. Charging a battery creates heat, which represents wasted electricity, and also requires additional energy to remove. The Tesla will thus use extra power to run the A/C compressor while it’s charging. For now, let’s just say that measuring the charging overhead is future work. (Hey OffTheKuff readers: if you’ve got measurement infrastructure that I could borrow for this, let me know!)

Lastly, I’ll note that we did several road trips in the Tesla, using their Supercharger infrastructure. I’d estimate that somewhere around 500 kWh of that energy was “free” from the Supercharger network (i.e., included in the cost of buying the car).

Should we stick with Green Mountain or switch elsewhere?

Green Mountain has the best net metering plan on the market, but there are only two competitors. In a nutshell, Green Mountain buys and sells power from you at the exact same price: $0.12/kWh, inclusive of all fees and taxes. But there are plenty of standard retail plans that will sell you electricity at $0.08 or $0.09/kWh. Can we do better than Green Mountain’s net metering plan? The real issue, once you strip away all the dumb politics, is that the underlying pricing model isn’t at all a flat rate for electricity.

Roughly speaking, there’s a wholesale price for the electricity coming from a commercial generator and then there’s a distribution price to get it to you. Wholesale prices vary all day long, with overnight lows below a penny and mid-afternoon highs as much as 3 cents/kWh, with occasional peaks that are much, much higher. CenterPoint charges 3.8 cents/kWh for delivery of that power, no matter what, alongside a flat monthly charge of $5.47 per residential customer. All those charges are often rolled into the pricing plans you see from other retail electricity providers, who are essentially gambling that they can buy power at variable wholesale rates and sell it to you at a flat retail price while still somehow making a profit.

When a retail electricity provider wants to get into the solar buyback game, their actual costs to get power downstream to your house (so far as I can tell) are the wholesale price plus the distribution price. Your excess solar power production is worth the same to them as the spot wholesale price when it flows back upstream. CenterPoint doesn’t give any sort of rebate for upstream electricity flows. CenterPoint’s argument: Somebody else is receiving the power you’re sending upstream, and they’re paying to get it delivered. CenterPoint charges for that delivery.

Can a retail electricity provider offer a competitive pricing plan that’s closer to the wholesale market structure while still buffering consumers from the sometimes insane spikes of the raw wholesale market? One such provider, who prefers not to be named yet in public, approached me privately and offered me the chance to test drive a new plan they’re working on. Their proposal is to pass through all the CenterPoint charges, as is, and then have a flat 3 cents/kWh for buying and selling power, downstream or upstream. I ran these numbers through my spreadsheet for the same 12 months of data I’ve already captured. Here’s what came out: Green Mountain’s $0.12/kWh net metering plan cost us $692.84 for the year. If we had this new plan instead, it would come out to $712.07 for the same usage in the same year.

Evaluating MP2’s spot-price “solar buyback” plan is a bit more complicated, because the upstream price they pay you varies all day long. Conveniently, MP2 did this analysis for me. I emailed them all our data and their conclusion was that our annual bill would be $904.32, so not especially competitive with Green Mountain’s net metering. MP2 also offers a net metering plan, similar to Green Mountain’s plan, but it’s presently offered as part of getting your solar system installed through SolarCity. Thus, not an option for us.

Call me modestly bullish on this. Even though MP2’s solar buyback plan isn’t a good deal for our house, other firms are looking to offer variants on the same business model that are competitive. As an added bonus, I’d now be incentivized to put a big battery on our house to capture the excess daily production and reuse it at night. With standard net-metering, there was no incentive, but now I’d save those distribution charges. I’ll still wait for the cost of battery packs to drop, but it’s fun to think about.

Some Thoughts About the Future

There are always going to be a few days in the summer where the demand on the grid peaks out. In those cases, all the market-rate adjustments in the world won’t cause a new industrial generator to be constructed and placed online. That means high prices and brownouts. (If anything, there’s a reasonable fear that generators might deliberately go off-line to force price spikes. That’s beyond the scope of today’s post.)

Solar has a big role to play in stabilizing our grid, because those hottest hours of the day are exactly when solar panels will be generating the most power. Solar also happens to do the job without pollution, and without incurring large infrastructure costs for long-distance power distribution. On top of that, solar’s one-time purchase and installation costs are rapidly shrinking.

Consequently, it’s sensible and desirable for the Federal government to continue its solar subsidy, and it would make a lot of sense for the Texas state government to get in on the game as well. The solar on our roof helps our neighbors, not just us. I’m not suggesting that we’ll stop burning fossil fuels, but rather that a diversified set of sources is a desirable way to meet the needs for a stable and scalable power grid.

The biggest objection to solar, so far as I can tell, comes from shills who misrepresent the financial structure of the electricity markets and claim that residential solar production leads to “mooching” off the grid. What I like about MP2 and some of the other buyback plans coming online is that they address this concern head-on. By passing through the monthly CenterPoint connection charge and pricing power consumption somewhere only marginally higher than wholesale rates, these new plans make it clear that solar systems aren’t mooching at all. They’re paying their fair share, and they’re improving the reliability of the grid while they’re at it.

Dan Wallach: 2015 Electric Power Usage Update

Note: From time to time, I solicit guest posts from various individuals on different topics. While I like to think I know a little something about a lot of things, I’m fortunate to be acquainted with a number of people who know a whole lot about certain topics, and who are willing to share some of that knowledge here. In this particular case, I’m welcoming back someone who has written on this particular topic before.

I’ve been blogging about our electricity situation for the past few years here at OffTheKuff. In 2014, I mentioned that we were pondering going with a solar system. Well, we did it — a 9 kW (peak) solar system via Texas Solar Outfitters — and we also picked up a Tesla Model S. This is less about being green hippie freaks and more about disconnecting from what I’ve viewed as a deeply dysfunctional electricity market. (And also having a car that kicks ass, but that’s for another day and a different blog.)

We’ve only had the solar system since November, so it’s too soon to have full-year statistics. Once the system reaches its first full year anniversary, I’ll run the “profitability” numbers and do another guest post here. Stay tuned for more exciting charts and financial math (present value, IRR, and more)! Instead, I wanted to give some perspective on the economics of solar power.

Notably, Tesla just announced a new “PowerWall” contraption that puts a 10kWh battery pack on your garage wall for $3500 (plus hiring an electrician, plus permitting, plus ancillary equipment like inverters, so let’s call it $6000 minimum). Elon Musk envisions that we can truly replace our entirely fossil fuel-based economy with solar power: homes, cars, everything. (For more technical details on the PowerWall products, Teslarati has a good writeup.) Let’s do the numbers, shall we?

To begin, here’s our March electrical bill from Green Mountain — the best of the three available plans if you have solar.

WallachElectricBill

This is what “net metering” looks like. We drew 862kWh from the grid and fed back 573kWh. Meanwhile, over the same time period, our solar system reports that it produced 853kWh. Of this, the house consumed 280kWh and we sold back the remaining 573kWh. So, our actual power consumption for March was 1142kWh (solar generation plus grid consumption, minus excesses solar generation sold back).

I rolled back to last year’s stats, when we had neither solar nor a Tesla, and the monthly usage for the same time period was 864kWh, which says that the Tesla used around 280kWh for the month, or maybe it’s just hotter this year. Last year’s awful summer peaks were well north of 1500kWh, so presumably this summer, with the Tesla, we’re looking at 1800-2000kWh / month of peak usage.

(With our Tesla, we’re on target to hit about 7500 miles/year, so these numbers may represent a “low” usage point relative to others, but you can easily scale our numbers up if you want to predict your own hypothetical costs. Your mileage and the weather may vary, etc.)

Here’s where solar gets fun. The graph below shows the energy generated by our solar system on a beautiful, sunny April day. Positive numbers represent power we’re drawing from the grid. Negative numbers represent excess power we’re selling back to the grid. You can see our Tesla charging itself up after we got home from eating dinner out. You can also nicely see when the sun came up and when it went down again. On this particular day, midnight to midnight, we drew 20kWh from the grid while the sun was down. The solar system generated 52kWh, and we had an excess of 44kWh that we sold back to the grid (i.e., we consumed a total of 28kWh on this particular day and were a net seller of electricity). Sounds great right?

WallachSunnyDayApril

The new Tesla PowerWall contraption leads you to ask the question of whether you could store all that extra energy in a battery during the day and release it at night. If you could do that, you could then cut yourself free from the grid. Today’s question: what would it take to go completely “off grid”?

To pull this off, you need to generate everything you might ever need, even in the worst case. So how bad is bad? Here’s a chart of our power usage over a two day period in early April when it was rainy and awful.

WallachRainyApril

Over these two days, our total power drawn from the grid was 46kWh. The solar system generated 25.2kWh, of which 9kWh was sold back to the grid (i.e., we consumed an average of 31kWh/day on these two days). To make this work “off grid”, we’d need to double the size of our solar system. To make this work on a bad weather winter day, with correspondingly less daylight, the solar system would need to grow yet again. Also, this included a typical day of driving with our Tesla. What if we did a long drive and got home with a near-empty battery? You’d have a whole new form of range anxiety to deal with. Conversely, on days when you generate more than you use you’re just throwing it away.

Our current solar system cost us roughly $30k to purchase and install (before the 30% tax credit, which might go down in future years). No matter how you slice it, the profitability of the system is dubious, given how much cheaper electricity became after the Saudis decided to crank up their production. Doubling the solar system, installing expensive batteries, going off-grid, and discarding excess production? Sorry, that’s not financially rational.

Incidentally, if you want to know how to size up a Tesla PowerWall system for an off-grid solar application, you pretty much just add up your grid consumption during the night; you need to ensure you have enough solar capacity and battery capacity during the day to cover it. For our house, two PowerWall batteries ($3500/ea, for 20kWh total storage capacity) wouldn’t quite do the job. We’d need three of them to have a decent margin. If you had a bigger house or you drove many more miles on your electric car, then you’d have to ratchet everything up appropriately.

Conclusion 1: building a solar system to deal with worst-case power generation, operating your house “off grid”, will require your solar system to be much larger than you’d specify for a net-metering application, where you can rely on the grid for bad-weather days. As solar panels get more powerful and cheaper, the economics of this will change. Today, no. Ten years, maybe.

Next question for today: is there any point in buying a PowerWall if not to go off-grid? If what you want is “emergency” service in a power-outage situation, you can buy all sorts of natural gas generators. They’re loud when running and they require regular service, but after Hurricane Ike knocked our power out for ten days, we could feel the soulful allure. Unfortunately, a smaller PowerWall system wouldn’t help here, since for a ten day blackout, you’re really in a situation equivalent to the fully off-grid scenario.

Sadly, with only flat-rate grid electricity pricing available here, I conclude that a PowerWall has no real use at our home.

Caveat 1: so long as TXU is willing to give you “free nights”, then a PowerWall means free electricity for your home! You can expect TXU to kill that program off quickly once Tesla’s battery packs start shipping. Sorry about that.

Caveat 2: electric utilities are cranking up the scare machine that it’s “unfair” for solar consumers to pay less for the grid. First off, this is totally bogus, as we pay the same fixed fee as everybody else pays for CenterPoint to maintain the grid. (Many retail electric plans hide this fee, so long as you use more than 1000kWh, but they’re still paying it on your behalf. ) And if you’re a net provider rather than net consumer of power at peak times, you’re helping the grid. But let’s say the utilities win the argument and kill off or weaken solar net metering. At that point, we’re forced to buy a battery storage system to recapture our excess daytime usage. The grid then loses the benefit of our excess generation, and every new solar system just got more expensive for no good reason.

All of this would change if consumers were more exposed to the variable pricing of the commercial power market. Rice University, for example, buys its electricity a full year ahead of time, hour by hour, offset by in-house solar production. If it turns out that Rice pre-bought more than they need, they sell it back on the spot market. If they need more than they pre-bought, they have to go buy power on that same spot market. And, of course, when do they really need it? The same time as everybody else does, on the hottest days, so spot prices can be brutal. With this in mind, typical commercial flat rooftop solar installations point their panels southwest, maximizing their power generation in the afternoon when electricity is most expensive.

The real genius of power storage systems is that you can buy and store the power when it’s cheap and uses it when it’s expensive. Energy arbitrage! That means that the mammoth version of Tesla’s PowerWall might be very attractive for industrial and commercial users. Even utilities might deploy them into neighborhoods. And if home users were more exposed to the “real” pricing in the commercial market, they too would be incentivized to get personal battery storage systems, with or without solar, for the same reasons. So far as I can tell, none of the available-in-Houston 325 plans from the 52 different retail electric providers offer hour-by-hour variable pricing like this, but in Austin or San Antonio, your traditional electric utility might be able to do it. Here’s a nice NPR article with useful details.

Conclusion 2: so long as consumers have net metering available and are not exposed to variable time-of-day electricity pricing, they won’t be incentivized to buy a battery storage system, with or without a solar system on the roof. There’s really no benefit for Houston consumers today to buy a storage system.

Teslarati runs a similar analysis in a state with variable pricing. In Southern California, the PowerWall becomes profitable in 3-5 years, and is unattractive for off-grid. Also, Vermont’s Green Mountain Power, not to be confused with our NRG-owned Green Mountain Energy, is ramping up some kind of joint program with Tesla. Who knows, maybe we’ll see something like it here some day.

One parting thought: in the insane, fragmented universe of the deregulated Texas electricity market, where generation, distribution, and retail sales are performed by unrelated players, we’ll probably be stuck with pricing policies that incentivize consumers to waste energy for make benefit most glorious State of Texas. Of course, exposing consumers to the raw industrial electricity market would likely be disastrous. Consumers can’t easily manage their load or trade contracts against future use. The best we seem to get are “smart” thermostats that can throttle back at peak times. Yawn. What seems missing, then, is better regulations for how consumer pricing is structured to incentivize lower peak usage. My proposed solution? Net metering and predictable time-variable pricing should be a standard part of any retail electricity offering. Let me sell high and buy low! Similarly, every plan should be structured to eliminate perverse rate structures where marginal rates go down as usage goes up. That’s common sense. Deregulation!

Dan Wallach is a professor of computer science at Rice and a friend of mine who has written four of these analyses before.

Use less, pay more

Ain’t utility deregulation grand?

More than 70 percent of electric plans offered in the Houston area contain terms that may penalize customers who don’t use a certain amount of power, according to a Houston Chronicle analysis of more than 300 plans available in early January.

NRG and other companies with plans that include the fees say they offer a variety of products designed to meet the needs of different kinds of customers. They also point out that fixed fees covering some of their overhead allow them to reduce the rates they charge per kilowatt hour of consumption.

Some plans charge minimum-use fees to customers whose monthly power consumption falls below a particular threshold – usually 1,000 kilowatt hours. Other plans offer credits to customers who exceed a specified threshold of power use.

“The market probably still has a way to go toward rewarding people for using less,” said Troy Donovan, market development manager at CenterPoint Energy Services, which runs a website called TrueCost that factors the fees into its analysis of electric plans. It is a division of CenterPoint Energy, the transmission company that distributes electricity in the Houston area regardless of what retailer sells customers their power.

Consumer advocates say minimum-use penalties discourage energy conservation at a time when environmental groups, all levels of government and even electric companies themselves are encouraging customers to scale back on energy consumption.

“These fees often go unnoticed until you really cut back and you realize you still have a larger bill than you expected,” said Jake Dyer, a policy analyst at the nonprofit Texas Coalition for Affordable Power. “It’s bad news for a lot of folks doing their best to save power and save on their electric bill.”

Even customers penalized for using less energy pay for energy efficiency initiatives: A $3.05 fee on monthly bills in the Houston area covers installation of technically advanced smart meters partly touted as energy-saving measures; the city of Houston last year raised residential energy-efficiency requirements.

[…]

About a third of the Houston-area retail providers the Chronicle examined listed no plans containing penalties or credits based on power use.

TriEagle Energy, based in The Woodlands, charges customers flat monthly fees – in addition to their electricity rate per kilowatt hour – but the fees aren’t tied to power consumption. Consumers are more likely to stay with the company if they don’t get surprises like minimum-use fees on their bills, said Kasey Cline, TriEagle’s director of sales and marketing.

Other retailers, how­ever, say the fees make sense.

Champion Energy Services uses them to cover fixed costs that it otherwise would roll into energy rates, said Brenda Crockett, vice president for market development and regulatory affairs. The company has to pay costs of billing and other services for all customers, she added, regardless of their electricity use.

Other companies echoed that response.

“There’s a cost to cover, whether they’re using 1 kilowatt hour or 1 million kilowatt hours,” said Robbie Wright, a founder of Bounce Energy, which also charges minimum use fees.

That argument rings hollow with Dyer, of the Texas Coalition for Affordable Power. “You don’t pay a minimum-use fee when you step into a grocery store,” Dyer said. “You don’t pay a minimum-use fee when you shop for any other product. Most businesses price their product in such a way that the people who actually buy it will pay for their fixed-cost infrastructure.”

Dan Wallach noted this feature back in 2013, in his annual report of choosing an electric plan for his house that year. There’s no logical reason for this – the companies do it because they can, because most people don’t read the fine print closely enough. Jake Dyer is exactly right, but in the absence of some kind of market regulation, or better educated consumers, they’ll get away with it. It’s easy to say that other companies could undercut the ones that do this on price and steal their business, but that isn’t what has happened. Maybe this Chron story will help, but I doubt any one story could. It will take a lot more outreach than that to penetrate the public consciousness.

Another data point on Uber and Republicans

From Josh Barro.

Uber

Republicans have hailed Uber, the smartphone-based car service, as a symbol of entrepreneurial innovation that could be strangled by misplaced government regulation. In August, the Republican National Committee urged supporters to sign a petition in support of the company, warning that “government officials are trying to block Uber from providing services simply because it’s cutting into the taxi unions’ profits.”

But for Republicans, being the party of open and competitive markets is not always easy in practice. Just look at what happened two weeks ago, when UberX, one of Uber’s various ride-sharing options, began in Philadelphia. The local taxi regulator called UberX an illegal taxi service, so several drivers were fined and had their cars impounded.

Mayor Michael Nutter sent a clear message: Don’t blame me.

“I strongly support having Uber/Lyft services in Philly,” the mayor, a Democrat, wrote on Twitter on Oct. 27. “The #PPA, a STATE authority not run by the City, opposes them.” As Mr. Nutter correctly notes, Uber’s fight in Philadelphia is with the Philadelphia Parking Authority, a state agency that regulates taxis and whose board is appointed by the governor. Five of six parking authority board members are Republican appointees.

Anticompetitive business regulations are mostly imposed at the state and local level, and they usually have a strong built-in lobby: the owners of the businesses that are being shielded from competition.

The R.N.C. chairman, Reince Priebus, probably doesn’t get a lot of phone calls from taxi medallion owners, or car dealers, or other businesspeople who want to be insulated from competition.

But local politicians do; Republicans may be especially likely to hear from them because small business owners are a constituency that skews Republican.

As a result, in practice, it’s not clear Republicans are any more pro-market than Democrats when it comes to business regulation.

Andrew Moylan, a senior fellow at the R Street Institute think tank, has examined ride-sharing regulations around the country and doesn’t see a clear partisan divide. On Monday, R Street and Engine, a group advocating policies that support start-ups, [released] a report card rating the 50 largest cities on their friendliness to ride sharing. The eight cities receiving failing grades include ones in blue areas (Philadelphia and Portland, Ore.) and red ones (Omaha, Phoenix and San Antonio).

“There didn’t seem to be any obvious ideological trends,” Mr. Moylan said. “It may have something more to do with population density and consumer demand.”

In the case of Uber, the cities with the most to gain from innovation tend to be large and dense, and often Democratic. So at the local level, the leaders in welcoming Uber are often Democrats. Conservatives like to mock California as anti-business, but the state is one of just two to have enacted a comprehensive, statewide regulatory framework that is friendly to ride sharing. The other is Colorado, also run by Democrats.

But it’s not just about Uber and taxis. Consider state laws that prohibit auto manufacturers like Tesla from selling directly to consumers. Car dealers favor these laws, which interfere with Tesla’s direct sales model. Of 22 states that permit direct sales, 14 voted for President Obama. New York, California and Illinois all have freer markets in auto retailing than Texas. Did I mention that car dealers are a strongly Republican constituency? In 2009, the statistician Nate Silver found that 88 percent of car dealers’ political donations went to Republicans.

See here and here for previous musings on the subject of Uber and partisanship, and see here for the report. Note how California cities scored much better overall than Texas cities. R Street previously put out this press release that expressed their disappointment in Houston’s “onerous” regulations on ride sharing. We did score better than San Anotnio, for what that’s worth, and now you’ll be able to call Uber from the airports. As for Tesla, we all know about Tesla and Texas, right? Funny how that subject never came up during any of Rick Perry’s job-stealing trips. Anyway, I don’t have a lot to add to this, but as I’ve been tracking this sort of thing I thought it was worth mentioning.

Dan Wallach: Home power analysis, 2014 edition

Note: From time to time, I solicit guest posts from various individuals on different topics. While I like to think I know a little something about a lot of things, I’m fortunate to be acquainted with a number of people who know a whole lot about certain topics, and who are willing to share some of that knowledge here. In this particular case, I’m welcoming back someone who has written on this particular topic before.

It’s July and that can only mean one thing: time to worry about my electrical contract for the next year. As we saw in last year’s installment, I ended up going with TriEagle Energy’s 100% renewable product. They want to jack my rates by 10% over last year, so clearly it’s time to run the numbers again.

This year, I decided to try to sort out what each plan would cost based on my power usage data for the past year (thanks again to SmartMeterTexas.com). For five months, my usage went over 1000 kWh/month and for seven it was well below. I then downloaded the full spreadsheet of available offers from PowerToChoose.org, built an equation to estimate my monthly charges, and then all I have to is sort to find the cheapest, right? Sadly, it’s not that easy. The spreadsheet data they give you is a disaster. Rather than just listing the fees, there’s now a textual column titled “Fees/Credits” and there’s no standard way in which they’re reported. Some companies report what you’d pay per kWh, inclusive of monthly fees, while others report what you pay exclusive of those fees. This meant I had to go through every row in the table and try to interpret their mumbo jumbo. Deregulation!

If you just try to just naively scale the 500 or 1000 kWh numbers, you end up with a wrong answer by 2% or more, but the EFLs often fail to give you enough data to do any better. So, with that caveat, here’s a histogram of how much money I’d spend in a year with each of the nearly 200 fixed rate electricity contracts on offer. Higher points in this histogram mean there are more plans that would end up costing me that price.

WallachPowerAnalysisChart2014

While I don’t want to name names for companies with unhelpful Electric Facts Labels and PowerToChoose-published data, I do want to give kudos specifically to Our Energy for doing it better. They say explicitly what CenterPoint expenses they are passing through, and they themselves have a flat rate on the power they’re selling. This allows me to calculate my real expenses, not a cheesy approximation of them. That would adjust them from $1316/year (as everything else in the histogram above is computed) to $1277/year, moving them into the top competitive position on my chart. Would others be cheaper as well? Probably, but PowerToChoose doesn’t give me enough information to choose. Should I reward Our Energy with my business for having the best and most transparent EFL? It’s tempting, but first, a rant…

Can’t we please go back to having a centrally regulated traditional utility company?

San Antonio still has this. I had a friend there send me a copy of her utility bill. She’s paying approximately $0.11 / kWh. Her bill breaks out the fixed and variable charges, much like I appreciate from Our Energy. On my histogram above, she’d be somewhere in the far left — getting an exceptionally good rate and not having to do this stupid analysis every year. All of our lovely free market competition in Houston is really just a series of opportunities for fools and their money to be quickly separated from one another.

Hey, what about solar power and saving the earth and stuff?

When I first started writing this year’s analysis, I said to myself, “Surely solar power must be a real option by now!” After way too much investigation, the short answer is, “maybe, if you can afford the big payment up front.” After spending the last month getting quotes and doing the research, I’m this close to pulling the trigger on a solar installation. Here are the high points:

Solar works hand-in-hand with the grid. When you install a solar system, it’s generating power during the day that you probably don’t need, and you need power at night that your solar system isn’t providing. This means your meter gets to run backwards during the day and forwards at night. If you have a month where you generated more than you used, you get a negative electric bill, which is then “banked” for future months. (Curious side-effect: you don’t want to over-size your solar system, because you’ll never get all your money back from the “bank”.) Also notable: if grid power goes down, so does your solar system. You can install a backup battery system or a gas-powered generator, but that’s a whole separate animal.

The financial incentives are okay, not great. In rough terms, the system I’m contemplating, which might generate 9-10 kW from the mid-day sun, will cost $20k after federal tax incentives. After that, you have small or even negative electric bills, and you start making money back on your initial investment. You stir in a bunch of assumptions about the depreciating value of the asset you’ve bolted to the roof, and you come out with a bottom line that you can look at with standard financial investment terms (internal rate of return, etc.). The proposal I’m considering from Texas Solar Outfitters would have an IRR of 7.4%, under their standard set of assumptions. Under different assumptions, you’re better off just getting power from the grid. (The same numbers in a place like California are in the “no brainer” category, both from additional up-front incentives and from the tiered electrical pricing they have. Solar helps keep you out of the higher tiers.)

What about leasing vs. buying, warranties, etc. In short, a lease is a lot like a loan. You’re paying less up front and you’re making monthly payments. The leasing company is trying to make money. The net effect is that the IRR goes down to the point that the deals are less likely to be worthwhile. (Again, this varies on a state by state basis. Nobody’s subsidizing those leases here.) Solar lease deals also act like an extended warranty on your gear. If your panels aren’t up to spec, they repair them for you. Most solar parts have very long warranties of their own, so this is less of a big deal than you’d think.

The environmental impact of solar is less abstract than the premium you pay for a “green” grid electricity plan. No matter what grid plan you purchase, green or not, the same mix of mostly coal and gas-fired generators are still producing the power your house is consuming. The only difference is that you’re paying your utility middleman to also buy you “renewable energy credits”, which are sold by wind farms and other such things and which may or may not be feeding their electrons to your house. It’s at best unclear whether you’re incentivizing somebody to install more “green” generation capacity versus building another traditional plant. On the flip side, when you’re turning sunlight into power, you’re directly removing your demand from the grid. This sort of logic is especially attractive if you’ve got an electric car and you’re worried about the “long tailpipe” emissions problem.

Aren’t you just a leach on the electric grid, then? Umm, no. By installing solar, you’re doing the grid a favor by supplementing its power during the peak draws in the hot summer sun. If more houses could run their meters backwards, that would effectively supplement the big generators and help avoid brownouts. Also, you’re paying the same monthly fee that everybody else pays for connecting to the grid.

So, what’s your new electricity plan then?

I need to pick a new electricity provider now, even though it might be a while before I can get a solar panel system installed on my house. The set of plans that support solar sellback is very small. So far as I can tell, I’ve got precisely three choices: Green Mountain, Reliant Energy, and TXU. The winner among these seems to be Green Mountain, who will buy your first excess 500 kWh/month from you at full retail price and half price thereafter. TXU buys from you at 7.5 cents/kWh no matter what. I can’t seem to find the Reliant number.

Green Mountain says you can sign up for any of their plans and switch without penalty to the plan that supports buying your power back from you, so that’s probably the way for me to go.

Dan Wallach is a professor of computer science at Rice and a friend of mine who has provided this annual analysis three times before.

Davis presses the attack on Abbott’s obstruction on chemical info

I know, it’s a little lazy of me to do a post based on a campaign email, but this missive from the Wendy Davis campaign is the best roundup of the incendiary chemical disclosure issue and the potential fallout from it. So here it is, which will both serve to catch you up if you missed any of this last week and to keep it in the forefront for at least another day.

After weeks of backlash, Greg Abbott is in full-blown damage control mode. First, Greg Abbott said the location of dangerous chemicals shouldn’t be public, and then he says parents need to drive door to door in order to find them, which multiple news outlets have found is next to impossible.

Abbott is clearly scrambling to paper over his hugely unpopular decision any which way he can – especially after the Dallas Morning News reported that his ruling came after the Koch Industries Fertilizer Division – which own at least one dangerous chemical facility — gave tens of thousands of dollars to the Attorney General.

Take a look at two blistering editorials from this weekend.

Dallas Morning News Editorial, 7/5/14: Abbott Steps In It On Chemicals Issue: “Boy, did Attorney General Greg Abbott step in it. The occasion was Abbott’s explanation for how Texans could find out about volatile chemicals in their neighborhoods, in the wake of a ruling by his office restricting access to records on chemical inventories. “Drive around,” was the AG’s advice. “You can ask every facility whether or not they have chemicals or not.” That simple? To test Abbott’s “just ask” advice, a WFAA-TV news crew visited two Dallas plants to inquire about the chemicals on hand. The response from one place was the corporate runaround. The response from the other sounded like “get lost.'”

Austin American Statesmen, 7/6/14: Want to find out what chemical plants are storing inside? You must ask: “Particularly troubling are Abbott’s comments last week defending a ruling his office made blocking public access to state records specifying the location of dangerous chemicals… “You know where they are if you drive around,” the Tribune’s Jay Root reported Abbott as saying. “You can ask every facility whether or not they have chemicals or not. You can ask them if they do, and they can tell you, well, we do have chemicals or we don’t have chemicals, and if they do, they tell which ones they have.”

FIRST ABBOTT RULES THAT TEXAS CHEMICAL FACILITIES CAN KEEP SECRET THE CONTENTS OF THEIR PLANTS

  • WFAA reports on Greg Abbott’s ruling to keep dangerous chemical storage locations secret from parents: “Hazardous chemical lists no longer public record in Texas” [WFAA, 6/12/14]
  • DMN: Want to know about chemicals stored near you? Don’t expect Texas to tell you anymore: “The AG’s Office, which rules on open-records matters, said the department did have to keep the information from the public, according to a May 22 letter. WFAA-TV (Channel 8) first reported on the ruling Thursday night. As a result, the state health department will no longer release its inventory reports unless told otherwise by the AG, a spokeswoman told The News Friday.” [Dallas Morning News, 6.13.14]

COMMUNITIES START EXPRESSING OUTRAGE

  • Houston Chronicle, 6.15.14: “I have no clue what they’re doing over there,” West Mayor Tommy Muska said, referring to the office of Texas Attorney General Greg Abbott.”
  • KXXV (Waco), 6.17.14: Local officials won’t change procedures on chemical reports, despite state changes
  • Waco Tribune Editorial: Attorney general decision hinders public from readily learning of chemical threats: “That’s why we have trouble understanding the reasoning behind state Attorney General Greg Abbott’s abrupt decision to refuse to give the public key information about where plants stockpiling ammonium nitrate are located…The attorney general’s decision is definitely at odds with growing efforts to prevent another West…” [Waco Tribune, 6.19.14]
  • Houston Chronicle Editorial: Coming clean: “Texans have a right to know what dangers to our health and safety we are being exposed to – especially now, when Texas, and particularly Houston, is riding high, with a vibrant and welcoming economy that is the envy of the nation. If we are to continue to attract the best and the brightest, it is essential that we intelligently address quality-of-life issues on which we base our choices of where to live and raise our children – such as clean air, clean water and a safe environment.” [Houston Chronicle, 6.20.14]

ABBOTT THEN TELLS PARENTS TO “JUST DRIVE AROUND” AND “ASK EVERY FACILITY” IF THEY HAVE DANGEROUS CHEMICALS

Abbott Said, “You Know Where They Are If You Drive Around.” The Texas Tribune reported, “[Abbott] said Texans still have a right to find out where the substances are stored – as long as they know which companies to ask. ‘You know where they are if you drive around,’ Abbott told reporters Tuesday. ‘You can ask every facility whether or not they have chemicals or not. You can ask them if they do, and they can tell you, well, we do have chemicals or we don’t have chemicals, and if they do, they tell which ones they have.'” [The Texas Tribune, 7/01/14]

Abbott Tells Parents to

MEDIA OUTLETS TRY TO “JUST DRIVE AROUND” TO NO AVAIL

July 2: WFAA Reporter Brett Shipp @brett_shipp

Abbott refuses to release chemical inventory lists…tells citizens to get their own. We tried. We failed. What now?

  • WFAA Was Not Able To Obtain Information On Dangerous Chemicals From Private Companies. On July 2, 2014, WFAA reported, “Abbott says the public can still go knock on chemical company doors and ask…So, WFAA attempted to do just that…First up was Oxy Chemical…WFAA left empty handed. Next stop was Buckley Oil Company just down the road…Not only did they not give hand over their Tier II report, they said not to record images of their chemical inventory stored on site, which was clearly visible through an open gate.” [WFAA, 7/02/14]

Fact Checking Abbott, Houston Chronicle Proved The Public Cannot Get Information On Dangerous Chemicals From Any Private Company. [Houston Chronicle, 7/03/14]

WFAA once again denied access to chemical lists by state officials: “At issue was the Texas Attorney General’s decision to deny public access to chemical inventory lists called Tier II. Those lists were mandated by Congress in the mid 80s and are supposed to be available to the public to alert citizens of dangers posed by the handling of hazardous chemicals by local businesses. They were public records in Texas until two months ago when Attorney General Greg Abbott ruled they were off limits.” [WFAA, 7/03/14]

DALLAS MORNING NEWS REPORTS ABBOTT HAS RECEIVED THOUSANDS FROM KOCH INDUSTRIES, WHICH OWN AT LEAST ONE DANGEROUS CHEMICAL FACILITY

Abbott Received More Than $75,000 After The April 2013 Explosion in West From Koch Interests, Who Own the Georgia-Pacific Gypsum Plant in Sweetwater.The Dallas Morning News reported this week that five months after the April 2013 ammonium nitrate explosion in West, the president of Koch’s fertilizer division sent Abbott a $25,000 campaign donation. Koch’s chief and the Koch political committee also gave Abbott $25,000 checks. And Abbott rode on a company jet to a Koch-related retreat last year in New Mexico that introduced political candidates to wealthy donors.” [The Dallas Morning News, 7/02/14; 7/03/14]

  • Koch Owns at Least One Fertilizer Plant in Texas. The Georgia-Pacific Gypsum plant in Sweetwater is a Koch subsidiary. “The subsidiary now makes a nitrogen fertilizer.”[The Dallas Morning News, 7/02/14]

Koch Industries “and its subsidiaries are collectively one of the world’s largest producers and marketers of fertilizers.” The Dallas Morning News reported, “According to its website, Koch “and its subsidiaries are collectively one of the world’s largest producers and marketers of fertilizers … Koch Fertilizer’s expanded product portfolio includes ammonia, urea, UAN, phosphate, potash, and sulfur-based products, in addition to a variety of high-performance” nitrogen fertilizers.” [The Dallas Morning News,7/03/14]

Scrambling, Abbott Says That Getting Information About Dangerous Chemicals Is “Challenging.” [AP, 7/02/14]

ABBOTT TRIES TO ESCAPE CULPABILITY OF HIS RULING

Abbott Claimed He Wasn’t Aware That His Office Made A Ruling On Dangerous Chemicals Until The Decision Made Headlines…[AP, 7/02/14]

…Despite having taken credit for it previously. “That statement to the AP – that the ruling was “not a law or conclusion that I created” – was different from the “I ruled” phrase Abbott used on Tuesday, where he seemed to take credit for the decision.” [Texas Tribune, 7/03/14]

So there you have it. The one thing I will add is that if Abbott had any response to any of this yesterday, I didn’t see it in the news. I’m not sure what there is for him to say at this point – he’s already contradicted himself and made himself look more than a little foolish – so perhaps he’s just lying low and hoping it will blow over or some other shiny object will pop up. Good luck with that.

The Uber debate

In case you missed it over the weekend, the Chron’s op-ed pages featured a point/counterpoint on Uber and its push to enter the Houston market, which would require changes to various city ordinances. Here’s the pro-Uber piece:

Imagine it’s Friday night – date night. You pick up your phone, click a button, and within seconds a luxury car and driver are on their way to pick you up; just minutes later you’re on your way downtown for a show at the Alley Theater. The car is pristine, the driver is courteous and professional. When you arrive at the Alley, you simply exit the car while your payment is processed electronically. No fumbling for your wallet. No parking woes. As the show wraps up, you open your Uber app again and summon another ride to dinner at Reef. No waiting in a taxi queue. No worry about missing your reservation. At the end of the night, you request one last vehicle to take you home, unconcerned about that last glass of wine. Date night just got a lot easier (and better).

Uber is everyone’s private driver in 38 cities around the world, providing stylish, efficient and reliable rides in nearly every major U.S. city. It is why thousands of Houstonians – many of whom use Uber when traveling elsewhere – have petitioned Mayor Annise Parker and the City Council to clear the path for Uber in Houston. There is no reason that every town car ride has to cost a minimum of $70, last a minimum of 2 hours and require 30 minutes prior scheduling to enter the vehicle. These are just a few of the antiquated regulations inhibiting innovation in transportation in Houston – regulations that are designed to protect incumbent transportation providers from competition, at the expense of consumers and the city.

Mayor Parker and the City Council should acknowledge the unfortunate reality that current transportation options in Houston simply aren’t as affordable, reliable or pleasant as they should be and take action that will have tremendous impact across the city. As policymakers consider regulatory changes that will modernize the city’s approach to consumer choice in transportation, it is important to set the record straight about the way Uber works and make clear the value it will bring to Houston.

I’ve said before that I favor the idea of letting Uber into the market. I do believe that regulatory structures put into place years or decades ago for various industries need to be reviewed as new technologies and business models come along to ensure that they put the needs of the consumer first. Those aren’t the only needs in play, however, and having had a chance to meet with representatives from the taxi services, it’s fair to say they raise some valid points. Here’s their perspective on Uber.

Yellow Cab is required to comply with existing laws and ordinances; to not dispatch trips to unlicensed or otherwise incompetent drivers; and to maintain its vehicles in safe operating condition. Uber seeks to compete by avoiding all such responsibility.

In a small portion of Uber’s lengthy Internet contract disclaimer, the company states:

“You understand, therefore, that by using the (Uber) application and the service, you may be exposed to transportation that is potentially dangerous, offensive, harmful to minors, unsafe, or otherwise objectionable, and that you use the application and the service at your own risk.”

Our request is simply that competitors be required to follow the same laws and accept the same levels of responsibility as we do. Uber claims exemption from our local laws because Uber does not own cars, and it hires “partners,” not drivers. Uber further claims that it’s simply using technology (a smart phone app) to match drivers with passengers.

[…]

While Capitalism 101 would suggest this is nothing more than smart business, the taxi industry is treated as a public utility, and, as such, is required to charge established rates, to provide 24/7 service and to serve all areas and all people of the city, regardless of affluence, race or any other basis of discrimination. This is something we’re happy to do, but think everyone should be required to live up to the same standard.

That last paragraph gets at the crux of the debate. If we consider cabs to be basically a utility – an extension of Metro, if you will – then it makes sense to regulate them as such, with the goal being to ensure access to the service at an affordable price for as many people as possible. The analogy is therefore not to breweries or auto dealerships, which have hidden behind antiquated regulatory structures that have served to keep out competition and cushion their own places in the market, but to electricity and health insurance, which are things everyone needs but which are all too often inaccessible or unaffordable in a deregulated market. I’m not sure I fully buy this argument for cabs, but it’s logically consistent, and they are correct to note that would not be able to operate effectively if they are subject to a different set of regulations than a competitor such as Uber. This is a debate worth having, and worth thinking through.

Here’s a full list of regulations the cabs are subject to, according to a document they sent out. I believe that Uber and the cabs can co-exist, and that there is middle ground on which to find a compromise solution. One possibility is that perhaps there are some regulations that the cabs are subject to that could be loosened up for them as well as for Uber. To their credit, the cab companies have worked with Council to make changes to the regulations that allowed jitneys like the Washington Wave, pedicabs, and electric carts like RevCar onto the streets. There were bumps along the way, and the process was likely longer and more frustrating than the newcomers would have liked, but in the end it all got done. Though I don’t know what it looks like yet, I believe a similar outcome is possible here.

Uber

Mark me in favor of this.

A smartphone app could be the subject of the year’s most spirited regulatory battle at City Hall, as lobbyists line up for a fight that pits taxicab companies against a car-service technology company called Uber.

The firm’s entry into more than 20 U.S. cities has sparked lawsuits and cease-and-desist letters from taxi owners concerned for their livelihoods and regulators accusing the firm of skirting the law. Uber says it is merely a broker between riders and drivers, using a smartphone app to make getting a ride more efficient.

Uber must seek a change in ordinance for its business model to work in Houston, said Uber CEO Travis Kalanick. Company representatives first met with city officials in May; a social media marketing push launched in recent days.

The service the San Francisco-based startup wants to offer in Houston is UberBLACK, which would allow riders to hail town cars – also known as black cars or sedans – using the Uber app, alerting the nearest participating driver to respond. The fare is based on speed and distance using each smartphone’s GPS technology, with the fare charged automatically to the customer’s credit card.

Drivers who want to participate are given smartphones with the Uber app installed, said company spokeswoman Nairi Hourdajian, and must pass a background check and comply with all city licensing rules. Drivers continue to work for their limousine company or themselves; they do not work for Uber.

Houston is the last major U.S. city in which Uber does not operate, largely because of the city’s “draconian” regulations, Kalanick said, calling the city’s rules typical of those negotiated by taxi companies to protect themselves at the expense of riders.

“I don’t think taxis in Houston are as readily available as other cities, and (I’d like) to have something like this where you can call, it’s on-demand, they’re there, they’re always very reliable, very respectful,” said Houstonian Natalie Petratis, who uses Uber when visiting her native Chicago.

Uber wants to drop the minimum fare for a sedan ride in Houston from $70 to $5.50; wants regulations changed to enable on-demand service, as opposed to rides arranged at least 30 minutes in advance; and wants to delete the four-car minimum required for new limo and sedan companies, among other tweaks.

This is a no-brainer to me. Regulations that inflate prices while limiting choices are regulations in need of overhaul. Christopher Newport of the city’s Administrative and Regulatory Affairs department correctly noted the parallels between Uber and things like pedicabs, REV Houston, and the Washington Wave. To that list, I’d also add food trucks and their ongoing fight to be allowed to operate downtown.

I have no issue with the cab companies working to protect their interests, and I’m sure Uber will be disruptive to them, but I see no reason to stifle this kind of innovation. I presume cabs continue to exist in the cities where Uber already operates. As such, I see no need to fear it operating here. Uber sent me some information about what has gone on so far and what they’re specifically seeking to change. Here’s the letter from Administrative and Regulatory Affairs that outlines the relevant ordinances; Uber’s response to ARA’s letter; and Uber’s briefing statement about what it does and where it does it. If all that doesn’t have you convinced, note that in addition to using Uber to arrange a ride, you can also use Uber to request an ice cream truck on demand. Need I say more? Hair Balls was on this as well.

Will we have enough power?

Maybe not. From the EDF.

It’s understandable that no one seems to have noticed a strongly worded letter to the Electric Reliability Council of Texas (ERCOT) from the North American Electric Reliability Corporation (NERC) last Monday demanding more action to ensure electric reliability in Texas, and asking ERCOT to report back to NERC by April 30 on additional actions taken.  NERC isn’t some federal boogey man either; it’s a corporation founded by the electric industry to create commonly accepted standards for electric reliability across North America, usually through voluntary compliance.  President Bush’s Energy Policy Act of 2005 gave the corporation “the authority to create and enforce compliance with Reliability Standards,” which is where this letter comes into play.

In their 2012 report, NERC highlighted ERCOT as the only region in North America that was not maintaining adequate electric reserves to meet demand, and with this letter they made it very clear that the actions taken to date have not done enough to mitigate that risk.  In the letter, NERC President Gerry Cauley notes that the PUC and ERCOT are continuing to address energy reliability issues, but finds that “solutions have not yet sufficiently materialized to address NERC’s reserve margin concern.”

Cauley goes on to say that “it is still unclear to us how ERCOT intends to mitigate issues that may arise on the current trajectory and when new resources may be available to meet growing demand.”  So according to the corporation whose membership consists mostly of utilities, grid operators, large and small customers, and electric regulators, the actions that the PUC and ERCOT have taken at this point are not enough to ensure we’ll have reliable electric supply, risking blackouts as soon as this summer.

As lawmakers settle into Austin for the next few months they’ll certainly be paying close attention to this issue, though many have indicated they would prefer that ERCOT and the PUC develop the solutions to this problem.  Cauley’s letter serves as notice that the PUC and ERCOT need to be more aggressive if they want to ensure a reliable supply of power in Texas.  Certainly both agencies are putting serious time and effort into keeping the lights on in Texas, including effort so expand existing demand response programs, but NERC clearly thinks they need to be doing more.

This was also noted by Loren Steffy, who says that Texas is now “under more pressure than ever to encourage generation, and that’s likely to mean higher prices at a time when the deregulated market was supposed to be delivering lower prices to consumers”. (He also notes that consumer protections are likely to be weakened, because that’s how we roll in this state.) Thanks to the continued tax credit in the so-called fiscal “cliff” deal, there will be more wind projects gearing up, and ERCOT foresees $8.9 billion in electric transmission projects by the end of 2017, but neither will help in the short term, and it’s still not enough for the longer term. I don’t know what else there is to be done, so just consider this a heads up for when the crunch does hit.

The epic fail of utility deregulation

Surely no one is surprised by this.

The winners and losers in the nation’s wave of utility deregulation are clear.

The winners? Shareholders and executives. The losers? Customers and workers.

Over a decade of deregulation, the frequency and duration of outages have crept up, maintenance of aging infrastructure has been deferred, line workers have been laid off – and CEOs’ salaries have risen an average of 150 percent nationwide, a Hearst Newspapers investigation has found.

[…]

During a five-month investigation, Hearst Newspapers found four primary and interrelated factors – cited again and again in interviews, studies and other research – that drive investor-owned utilities’ problems with reliability:

» Aging infrastructure

» A shrinking workforce that has curtailed both maintenance and response to storms

» Persistent failure to trim and remove trees near power lines

» A culture change that has placed profits above reliability

Investor-owned utility CEOs’ pay packages are increasingly based on profit and stock performance, with very little or none of their compensation dependent on reliability for ratepayers.

Between 2000 and 2011, the 150 percent increase in CEO pay packages at investor-owned utilities brought the average to more than $6 million a year, according to a survey conducted for Hearst by Longnecker & Associates, a Houston compensation consulting firm.

From 1999 to 2002, utilities cut their manpower costs by shedding 13,000 electrical power-line installers and repairers, one-fifth of the total, according to data obtained by Hearst from the Bureau of Labor Statistics. The number of utility linemen remains well below pre-2000 levels.

“We’ve gone from having dependability and reliability being the gold standard of the companies to profitability and money,” said Jim Hunter, director of the utility department at the Internation Brotherhood of Electrical Workers in Washington D.C.

“There needs to be a national inquiry into the reliability and efficiency of our electric supply,” said U.S. Sen. Richard Blumenthal, D-Conn.

The story has a national focus, but it most certainly includes Texas, where deregulation hasn’t lowered anyone’s utility bills. There doesn’t appear to be much political will to do anything about this, though, so I’m sure we’ll be reading the same story in another five or ten years. I don’t know what it will take to make this a real issue.

Dan Wallach: Energy pricing 2012

This is a guest post that follows up on an earlier guest post.

Dan Wallach

Last year, I wrote a guest article for Off The Kuff where I discussed the complexity of trying to get a good price on your electric bill. In Houston, we have seemingly hundreds of companies who will gladly take our money in return for electricity. Which should you choose? The place to begin remains PowerToChoose.com, but the market has changed a bunch from when I last took a look.

If you really dig around PowerToChoose, you’ll see all these companies you’ve never heard of, each of which has a piece of clip-art on its web page of a beautiful meadow with a shining sun, or maybe a happy family with perfect teeth. (Exercise for the reader running the Chrome browser: you can right-click on those pictures, and select “Search Google with this image”, and see how widespread those stock images are used. In one case, the smiling family I saw also appeared in web sites for a car dealership, a dentist, a youth ministry, a nutrition supplements company, and an alarm system company.)

Last year, it was common for these companies to offer low teaser rates for the first month that bubbled them up to the top of the list. You’d then pay the regular higher rate thereafter. This made it very difficult to do comparison shopping, since you had to dig deeper into the “electricity facts label” sheets to find out what the real prices were. It also created a huge incentive for you to switch companies every month.

At the time, I decided to switch to Pennywise Power, who was advertising a relatively low variable rate. I was entirely happy with them until this July, when their prices exploded. My bill for June was $197.99 for 1873 kWh ($0.105 per kWh, after taxes, fees, and such). My bill for July was $289.78 for 1662 kWh ($0.174 per kWh). It’s come back down again, but at least for two months, they were charging far above other companies’ advertised rates. (Note: the wholesale market for electricity went bonkers at the end of June, and some of that was clearly passed on to me.)

My conclusion last year was that Pennywise’s rates were low enough to be attractive, but I apparently failed to notice my own warning:

“Variable rates” aren’t connected to much of anything beyond the whims of the executives who set these rates. If you read the legal verbiage closely, they can change your rate, at any time, to any price they want.

After seeing the shocking July bill, I figured it was time to jump into a fixed rate product, so back I went to PowerToChoose.com and slogged through the various options. These days, the low teaser rates from last year are all gone. Now, the advertised price seems to be the price you actually pay, but things are still a bit wonky. One of the tricks I observed with Pennywise is that their pricing, which included a $9.95 “base charge” if you use less than 1000 kWh, creates some perverse incentives if your electrical usage is just below that number per month. Wasting energy to get over the top might save you real money! This year, I resolved to find the best fixed price with zero “base” charge. That led me to Summer Energy, where I inked a one year lock-in at $0.093 per kWh. (If you sign up today, with the proper promotion code, it’s $0.085 per kWh.) My first bill showed up for the back half of July, and it included a $4.89 base charge! I had to threaten to abandon them if they didn’t fix it, and they eventually came around.

So, what have we learned here? First, when you’re doing business with faceless companies who advertise low rates, you might expect to have unexpected charges and unusual behaviors. (Summer Energy still hasn’t sorted out my request to set up automatic credit card payment.)

Second, this “deregulated” market could stand to have more regulation. If you read the electricity fact sheets that our vendors are required to publish, there’s a remarkable amount of diversity among them, and lots of fine print they leave out. If I were king for a day, all of these fixed “base rate” fees would be standardized, simplifying vendor competition to price per kilowatt-hour within equivalence classes of different percentages of “renewable” energy.

Finally, a word about the future. A buddy of mine in California got himself a fancy solar panel system on his house. He sells excess capacity back to the grid, but it’s much better than that. His electric utility company (for which he has no choice) has tiered rates. The more electricity he burns, the more he pays. But by selling power back, he stays out of the higher rate tiers. He also gets tax credits and other incentives that aren’t available in Houston; some other Texas utilities offer rebates, but Centerpoint has nothing in our area. In theory, with our shiny new smart meters, we could have some all kinds of sophisticated billing policies like variable day/night rates or solar systems that let you sell power back to the grid, but these aren’t happening yet. I suspect this is an unfortunate side effect of our multi-vendor deregulated market. (Reliant does have a plan that lets you sell power back, but the base electrical rate is uncompetitive.)

If you dig deeper into your electrical bill, you’re paying a big chunk of your bill to Centerpoint for “delivering” your electricity, no matter who you’re paying for your juice. That’s the place where we might eventually see some innovation. Centerpoint could charge variable time-of-day or tiered rates, they could buy back your electricity if you have solar, and so forth. One of these days, I might buy myself an electric car, and I’d be keen to have more sophisticated electrical pricing in place before then.

Dan Wallach is a professor of computer science at Rice University.

San Antonio chooses its solar provider

Nice.

They will be building a lot of these

Under a bright winter sun Wednesday, CPS Energy CEO Doyle Beneby introduced the companies selected to build one of the country’s largest solar projects and a solar manufacturing plant in San Antonio, an investment of more than $100 million.

OCI Solar Power, whose parent is a South Korean chemical company, will build the solar farms, using panels from a factory to be built here by Nexolon, another South Korean firm with close ties to OCI and a builder of solar cell components.

Both companies will open headquarters in San Antonio, part of their larger commitment to bring at least 800 jobs to town with a $38-$40 million payroll. Mayor Julián Castro said at a news conference that the average pay would be $47,000.

That does not include the temporary construction jobs that will be created to build the multiple solar farms, most of which will be in CPS Energy’s service territory. Together, they will generate 400 megawatts of zero-emission electricity — enough to power 80,000 homes.

See here for some background, and CPS’ homepage for more. As an earlier story notes, this is for a 25-year deal, and the price CPS will be charged for the energy generated will reportedly be on the order of 11 or 12 cents per megawatt. Not too shabby.

Apparently, this deal has some folks in Austin a little envious.

But as Austin Energy is set to begin public hearings tonight on its proposed rate increase, solar advocate Tom “Smitty” Smith said solar energy proponents will urge the Austin City Council to copy the San Antonio model.

“The race is on” to become a manufacturing hub, Smith said. “They are going to beat us, unless Austin takes action quickly.”

If the two cities get into a race like that, I daresay the residents of both will win. Too bad we can’t do that here in Houston, since we don’t own our utility like they do. But at least we’re free of the yoke of burdensome government regulations. That’s worth something, isn’t it?

On getting the best deal with variable electric rates

Note: The following was written by my friend Dan Wallach, who thought I might be interested in sharing it here. He was right. My thanks to Dan for putting this together.

Everybody in Houston has the ability to select any one of hundreds of different electrical pricing plans from a variety of vendors. If you visit the PowerToChoose.com web site, you can see all the different rates listed. Some are “variable” rate, with the lowest currently advertised at 5.3 cents/kWh. Others let you lock in a fixed rate for some period of time (the cheapest currently listed is 8.3 cents/kWh for a six month term). A few plans are “indexed” (meaning they track the spot price of natural gas), with the cheapest currently going for 10.7 cents/kWh. On top of all these different plan styles, there is also a significant variation in the “percentage of renewable content” from one plan to another, as well as variation in various freebies and incentives.

I wanted to keep it simple. Just give me the lowest price, please. I initially signed up with Amigo Energy, who in 2008 offered me something like 7.5 cents/kWh without requiring me to make any kind of deposit. At the time, they were one of the cheapest vendors around. That sounded great, and they even gave me free tickets at one point to a Houston Dynamo playoff game. Thanks! I didn’t really pay much attention to my electrical prices again until I noticed a recent bill was over 13 cents/kWh, earlier this summer, when the extreme heat was giving me some extreme electrical bills. I called them up and they said that they had discontinued the program I signed up for, so they unilaterally decided to raise my price to a much higher number. Oh, and would I like to switch to another plan? Lovely.

Lesson 1: “Variable rates” aren’t connected to much of anything beyond the whims of the executives who set these rates. If you read the legal verbiage closely, they can change your rate, at any time, to any price they want.

I want the lowest rate I can get. PowerToChoose.com listed several vendors offering 5.5 (give or take) cents/kWh, including one company I’d actually heard of before: Reliant Energy. Several of the vendors explicitly say that their cheap rate is “introductory” and you’ll be switched to the regular rate after one month. Reliant, however, makes no such caveat, at least not that was immediately obvious, so earlier this summer I dumped Amigo and went with Reliant. My first month was cheap. The bill that just arrived, however, averages to 7.5 cents/kWh (including taxes) on 2061 kWh of charges. That’s a $155.39 bill, which is still reasonable in the grand scheme of things for an August in Houston, but it wasn’t the $113.36 that I would have paid at my original rate, either. Oh, and if I call up Reliant on the phone to complain, the contract seems to say that they can charge me $5.95 to speak to a human being. No thanks.

Lesson 2: See lesson 1.

Challenge: how can I consistently pay these low advertised rates? Do I have to switch companies every month? As it turns out, every one of these companies is required to publish an “electrical facts label,” and those tend to include a pointer to a web page with their historical prices. The table below has the actual rates that I’ve been able to glean from these web sites. This was far more difficult to put together than it should have been. (Notes: all of this data was compiled on September 11 from PowerToChoose.com and the various vendors’ web sites. All prices are based on monthly rates at 1000 kWh usage and include CenterPoint delivery charges. If you’re outside of Houston and don’t have CenterPoint, your rates will be different. If you use less than 1000 kWh, many vendors tack on a surcharge that increases your effective electrical rate.)

Company / Product Initial Advertised Rate (at 1000 kWh / month) Historical Rates (at 1000 kWh / month)
First Choice Power (“First Choice Web Advantage Flex”) 5.3¢ No historical rates are on their web site for this specific product. Other products are much more expensive (all greater than 13¢).
Reliant Energy (“Basic Power Flex Plan”) 5.4¢ 8.2 – 10.0¢
Pennywise Power (“Wise Buy Monthly”) 5.4¢ 6.3 – 7.2¢
StarTex Power (“Promotional Month to Month”) 5.5¢ 11.3 – 13.8¢
Bounce Energy (“Thrifty Saver Promotional”) 5.5¢ 11.2 – 13.9¢, but with various promotions, coupons, etc.
Mega Man LP (“Mega Man Savings Plan”) 5.5¢ 11.8 – 12.5¢
Veteran Energy (“Freedom Month to Month”) 5.9¢ 12-13¢
Frontier Utilities (“Winter 11 Special Online Intro”) 6.4¢ 7.8-8.3¢ (only two historical prices are present, so this isn’t very meaningful)
APNA Energy (“Promotional Newcomer Variable”) 7.3¢ 12.3-13.1¢

Beyond this, prices jump two cents or so and we’re starting to see the various “renewable” energy products. What’s actually going on when you sign up for one of these plans is, at best, unclear. The electrons being pumped into your house are coming from the same power plants over the same grid, no matter who you’re actually paying for your service. (Hint: very few of the companies listed above actually own real electric plants. They buy power wholesale and sell it to you at retail.) What you are really doing, when you buy “renewable” power, is buying the same power as anybody else, plus you’re buying “renewable energy credits” (RECs). There’s a whole secondary market for RECs, which the “renewable” power generators sell and which you’re indirectly buying. In theory, this incentivizes power companies to increase their “renewable” capacity so they can capture those extra dollars themselves. In practice? There’s a very good 2009 study on the REC market. At one point, REC prices went negative! Suffice to say that the REC market is a work in progress.

If your goal is to reduce carbon emissions, you could buy “renewable” power, which might eventually do something, or you could invest in making your house more energy efficient, which does something right now. I’m going with plan B (“ask me about overpriced LED lighting!”), but you’re welcome to choose plan A if you want. So what do you pay for “100% renewable” power at variable prices?

Company / Product Initial Advertised Rate (at 1000 kWh / month) Historical Rates (at 1000 kWh / month)
Bounce Energy (“Organic Power Promotional”) 9.3¢ 12.9-14.4¢
Reliant Energy (“Monthly Flex 100% Texas Wind”) 9.4¢ no historical data provided for this product
Kinetic Energy (“Go Green Monthly”) 9.9¢ 7.5-13.3¢
Texas Power (“Promo Pure Variable Month to Month”) 9.9¢ no historical data provided for this product
Gexa Energy (“SmoothStart Green”) 10.4¢ no historical data provided for this product

Okay, let’s try to draw some conclusions. First, the low rates you see advertised on PowerToChoose.com are strictly for the first month of service. After that, your rates will go up, sometimes by a surprising amount. If you want to continue paying the low rate, then you’re going to have to be vigilant about what you’re being charged and you’re going to have to change companies every single month.

If you find that bothersome, then the best deal on the board today seems to be PennyWise. PennyWise is owned by NRG Energy, which also owns Reliant and Green Mountain Energy. In effect, PennyWise is their “discount” brand and Reliant is the “commercial” brand. Whatever. I’m switching to PennyWise and we’ll see whether they continue to have good prices or not.

Sidebar: What if I wanted to put in solar panels?

I’ve been pondering this for years. The front side of my house faces south. There’s a big area on the front roof, unobstructed by trees or anything else, that could well have some nice big solar panels on it. Reliant (but not PennyWise) offers two different programs, announced earlier this year. In one, you “lease” all the gear and in the other, you buy your own gear. Either way, you sell power back to the grid when you’ve got excess generation. Nowhere on any of their web pages are there actual hard numbers. If I buy, what will the gear and installation cost? If I lease, what do I pay up front and per month? Can I buy/sell power with any company on PowerToChoose or do I have to deal with Reliant? What do I pay on and off-peak for power under the variable plan? (I’ve only been able to find an old copy of their fact sheet which has uncompetitive prices.)

I don’t want to deal with a salesman. Please just post all the numbers online, maybe in a convenient Excel spreadsheet, so I can play with it on my own. If you want to be cool, put together an online calculator, like the banks do for mortgages, that asks you all the right questions and then estimates all the costs. Help me calculate when I break even on the deal.

There’s more than one way to do it

Really interesting story about the different approaches being taken by Austin and San Antonio to draw clean energy jobs to their towns. While Austin has taken the traditional route of offering various types of incentives to help create a market for clean energy there, San Antonio has leveraged its ownership of its utility company to great effect.

While Austin has long worked to create a market to attract clean energy companies, San Antonio’s leadership is now using CPS Energy’s purchasing power to demand jobs as a condition of doing business with the utility.

If it can become a clean energy hub, the city might be able to lure hundreds — if not thousands — of new jobs, San Antonio Mayor Julián Castro says.

“San Antonio can be for the new energy economy what Silicon Valley is to software and what Boston is to biotech,” Castro said in June as he announced that five energy-related companies plan to relocate a couple of hundred jobs to San Antonio.

Whether hype or hope, San Antonio’s muscle-flexing has lit a debate among Austin’s clean tech advocates about whether Austin Energy is in danger of losing its leadership role in clean technology and whether the city-owned utility could do more to attract jobs.

When it comes to leveraging a utility into a job creator, “San Antonio is capturing the value of a community owning an electric utility,” said Mike Sloan, a renewable energy consultant and founder of the advocacy group Solar Austin. “In Austin, we’ve talked about it, but we haven’t really done it.”

[…]

CPS Energy has 717,000 electricity customers, second only to Los Angeles. Austin Energy, by comparison, has 411,000 customers.

Accessing San Antonio’s large customer base whets the appetites of companies.

In June, Castro announced five companies agreeing to relocate their headquarters or parts of their operations to San Antonio. They range from a solar developer to a truck assembly firm to a lighting company.

Jack Roberts is the CEO of Consert Inc., a developer of software that allows homeowners to manage their energy conservation through their home computers. Customers save money, and utilities have to build fewer generators.

Roberts is moving his Raleigh, N.C.-based company to San Antonio with 50 jobs by the beginning of next year and said he expects to hire hundreds more as it expands.

He came without tax breaks or cash incentives.

“People want to know what the city, county and the state gave us. Zero,” Roberts said. “It’s all about a business opportunity and a fabulous chance to demonstrate what we can do.”

Remember, CPS is a publicly-owned utility, meaning that the San Antonio market (Austin, too) was not deregulated like much of the rest of the state. Not that any of this will stop Rick Perry from claiming the credit for the jobs that are being created as a result of this, of course. There’s a clear parallel here to the longtime push to allow Medicare to use its bulk purchasing power to negotiate lower drug prices from pharmaceutical companies. Fortunately for the people of San Antonio, there was nothing stopping them from taking this approach. Austin’s more traditional approach has been very successful for them as well, and as the story notes there are limitations to what San Antonio can do. The point is that they have a valuable asset in their public utility, and they’re using it for all they can. It’s going to be very interesting to watch how this all plays out.

New frontiers in sports branding

Would you like your electrons in burnt orange or maroon?

In a deal put together by sponsorship broker IMG College and Branded Retail Energy, a Dallas-based company that markets electricity through affinity partnerships, the schools will create university-branded power companies. Texas Longhorns Energy and Texas A&M Aggies Energy will begin selling electricity and natural gas to consumers in deregulated markets in the state next month.

“We’re very conscientious about our brand. We want to be careful with that logo and that symbol,” University of Texas Senior Associate Athletic Director Chris Plonsky said. “When BRE and IMG brought it to us, we went ‘Huh?’ But it made sense because the issue of sustainability, especially on large college campuses that use a lot of energy, is important to us.”

That was the hook — pardon the pun, Hook ‘Em Horns’ fans — to the whole deal. Texas Longhorns Energy will be powered by one of the nation’s top retail electricity providers, Champion Energy Services, and will provide renewable green energy to alumni and fans in deregulated regions of Texas. Each new customer account will generate funds for sustainability initiatives for the respective schools.

“I haven’t come across a university president yet who didn’t have a committee on sustainability,” says Larry Weil, chief marketing officer for Branded Retail Energy.

And to think I once considered university-branded credit cards to be a tad on the excessive side. I presume that “sustainability” here means “new and innovative revenue streams for the athletics department, so we can keep up with the Joneses”. I’d ask what could possibly be next, but I’m afraid to find out. Via Consumerist.

Brown’s energy plan

Completing our trifecta of Mayoral policy examinations, we come now to Peter Brown’s energy plan. As with other policy matters, Brown goes into more detail than the others – David Ortez recently wrote that Brown is “winning the policy campaign”, and I think that’s a fair assessment. I’m just going to comment on a couple of points in Brown’s plan, which you should read in full for yourself.

MAKE THEM DELIVER

When Houston residents pay for something, it better be delivered. As Mayor, Peter Brown will stand up to local utility companies, demanding that they adhere to existing contractual obligations under the terms of their current franchise. Utility companies should be responsible for demonstrating compliance with the maintenance, grid-hardening, and energy-efficient investments they’re supposed to be making. No more double billing, no more corporate bailouts. Peter Brown will make sure we get what we pay for, and don’t have to pay for it twice.

One thing I find myself asking over and over again as I look over various policy statements from candidates is “How much of this is something they can do themselves, and how much would require coordination with or the cooperation of some other governmental entity?” I’m really not sure how to answer this question here, though my impression is that this is more of a state issue than a municipal one. And as always with these policy papers, it’s about the what they want to do and not the how they plan to do it, so there’s no help there. I feel confident that this is something that can be made an issue and a prioirity by Houston’s Mayor, and there probably are some things that could be accomplished by fiat or city ordinance, but more than that I couldn’t say.

Still, even if everything Brown proposes here requires the Lege or a state regulatory agency to accomplish, a Mayor Brown can still bring attention to these issues, and can pledge to work with or put pressure on whoever can get them done. Which suggests to me that how effective a Mayor may be in getting other elected officials or agencies to do things he or she wants to do is something that perhaps ought to be given more priority in how we decide who to elect. Perhaps the endorsements that a Mayoral candidate gets from other elected officials is a possible indicator of this, and should be given some weight as a means to guide one’s voting decision. Just a thought.

A BETTER DEAL FOR HOUSTON

As it is, we pay too much. Electricity in Austin and San Antonio is nearly half the price of ours. The City should use its leverage and drive a harder bargain, protecting Houston consumers and getting them a better deal. And we should explore creative ways to lower monthly electric bills, like an opt-in program that would allow residents – especially seniors and those on low or fixed incomes – to buy their electricity from the City and enjoy the discounted bulk rates the City already receives.

The question of why Houston’s electric rates are higher than those of Austin and San Antonio deserves more exploration. For that, I refer you to this 2006 Observer story about electrical deregulation in Texas:

What makes the Texas experiment with deregulation especially interesting is that a “control group” has survived—the municipal utilities and rural electric cooperatives. Nobody disputes that higher electric rates are partly due to the near-tripling in cost of natural gas, the fuel for 46 percent of Texas power generation. But the rates of still-regulated city-owned utilities and electric cooperatives, which also use natural gas power plants, are substantially cheaper almost across the board. A ratepayer in Austin—who must buy power from the city-owned Austin Energy—spends a little less than $95 each month for 1,000 kwh of electricity. In San Antonio, it’s about $72. Austin and San Antonio have the advantage of owning their own power plants, but the statewide average bill for customers served by municipally owned utilities is a little over $100 and is $97 for cooperatives, according to the PUC.

The cheapest service plan—one negotiated by the City of Houston—in the entire deregulated market is about 35 percent more expensive. What accounts for this difference? “[T]he energy being sold in the deregulated service areas didn’t cost any more to produce than in the regulated areas,” says Biedrzycki of Texas ROSE. “The difference is in the way the pricing is established.” In the deregulated market, economists and industry experts say, expensive natural gas-fueled plants generally act on the “margin” to set the wholesale price that retail power companies must pay for all power generation. Even though it’s currently much less expensive to create electricity from coal and nuclear generators, costly natural gas plants control the market price.

“[O]wners of nuclear and coal plants have no incentive to charge anything less than the gas-based market price [to retailers],” as the Association of Electric Companies of Texas explained in a presentation to lawmakers recently.

Again, one wonders what the Mayor can do on his or her own about this, and what would require legislative intervention. Regardless, one presumes that Brown or any of the other candidates would prefer not to rely on coal-fired plants to get a better deal for Houston consumers. Brown does talk about making a bigger investment in renewable energy in his plan. I hope we’ll see something like this as part of it.

EMPOWER HOUSTON TO HELP

Peter Brown will use the latest technologies to allow residents to instantly alert the City of poorly maintained infrastructure – including downed lines and poor maintenance – to keep our grid working and electricity flowing. Streamlined notification processes using smartphone applications enable quick and easy reporting to city departments, allowing residents to quickly collect and share photographic evidence of disrepair or neglect. We can also connect with residents via their existing social networks like Facebook and Twitter to enhance communication between residents and City departments.

I highlight this to show Brown’s commitment to better service through smartphones. Of which I definitely approve.

Overall, I like Brown’s ideas, and think that more attention should be paid to stuff like this. For all the talk we always get about “finding efficiencies” in government, this is exactly the sort of place that we should be looking for them. Of course, some of these things require an up-front investment, which may not pay off within the six years of a Mayor’s term in office. That doesn’t mean they’re not wise or necessary, but it does tend to warp the political dynamic of implementing them.

That wraps up this week’s look at Mayoral policy positions. I’m sure we’ll get more of these as we pass the tradiational Labor Day start of the campaign season. I’ll do my best to do more of these analyses as we do get them. Let me know what you think.

Tuition reregulation passes the Senate

Off to the House.

The Texas Senate unanimously approved legislation today that would sharply restrict the ability of public university governing boards to raise tuition. The measure now goes to the House.

Lawmakers granted boards of regents virtually unfettered authority in 2003 to control tuition. Increases since then have prompted something of a legislative backlash.

Some lawmakers wanted to withdraw all tuition-setting power from regents. Others had proposed a temporary moratorium on increases.
Senate Bill 1443, whose primary author is Sen. Judith Zaffirini, D-Laredo, would allow governing boards to raise tuition, mandatory fees and course fees at the state’s 35 public universities, but it would strictly limit such increases.

As Floor Pass notes, SB1443 is also supposed to “encourage” the Lege to appropriate more money to higher ed to make up the shortfall, which will be a necessary ingredient to this. We’ll see what the House makes of it.

UPDATE: Here’s the Chron story on this.

Deregulation fail

How’s that electricity deregulation working for you, Texas?

In the decade since Texas deregulated its retail electricity market, rates have skyrocketed higher than any other state with such open competition, according to a report released today.

Commissioned by the Cities Aggregation Power Project, a nonprofit coalition of Texas municipalities, the report found that residential electricity rates rose 64 percent between 1999 and 2007. Before that, Texans paid rates that were well below the national average, according to the U.S. Energy Information Administration.

Boy, the one time we’re below the national average for something in a good way, we go and screw it up. If only we could bring such results to the number of uninsured children or something like that. In any event, since I’m a numbers kind of guy, if electric rate increases had been capped at five percent a year, which is what Governor Perry and some members of the Lege would like to do to property appraisals, the maximum total increase over an eight-year period would be a little less than 48%. For some odd reason, this issue just isn’t as salient to them. Go figure.

The report does give the law credit for encouraging the use of renewables, enhancing efficiency standards and helping to reduce emissions.

The Cities Aggregation Power Project, which pools the energy needs of its member cities in order to negotiate better prices, does not recommend going back to the pre-deregulation system. But the group says it wants the Legislature to curb market abuses by limiting how much power any one utility can generate.

The coalition also advocates reforms that would allow citizens living in its municipalities to join together and negotiate better rates the way governments do now.

Here’s CAPP’s press release, and their full report (both PDF). The main takeaway from all this is that what we have is not a “free” market. There’s too many abuses, and the consumer has little power to do anything about them. It also contains this blast-from-the-past gem:

Enron played a key role in the deregulation of the Texas electric market. Some of the current problems with the market structure can be attributed, at least indirectly, to the considerable political influence of Enron during the late 1990s.

They’re just the gift that keeps on giving, aren’t they? Remember, kids, what is good for business – in particular, what is good for one business – is not necessarily good for you. EoW has more.