[yongjik]

I have a hard time understanding how such a system would work in an emergency. So when production is crippled and demand is soaring, some producers voluntarily decide "Well this is too much hassle, I need to be paid more!" and restaurant owners get the electricity bills and say "WTF? Tim, kick out everyone and turn off the light, we're closed now, they're charging us fifty thousand dollars and we can't afford to pay any more!" and all of this is supposed to happen within two hours before the infrastructure melts down?

I mean, who checks their electricity bill every two hours?

[tschwimmer]

You might imagine a world in which everyone knows that electricity prices are dynamic and frequently changing. In a regime like this and under the recent circumstances in Texas, yes, you would expect businesses and people to rapidly change their behavior in order to not incur a giant electricity bill. Under limited generation with hugely inflated prices, only those entities that both need and could afford it will use electricity. What you have under this regime is a much more efficient use of electrical power in constrained circumstances.

Since electricity prices are mostly fixed[1] this type of price discovery cannot exist and everyone pretty much goes on using electricity as per usual during periods of shortage, leading to blackouts.

On the face of it, it seems like the market price regime might be preferable, but one has to remember that economic efficiency isn't the only thing we're optimizing for a society. Instead policy makers have decided that having low electricity prices for everyone is more important than maximizing efficiency with respect to power generation. I'm inclined to agree with them. The downside to this approach is that you have to invest more into making sure that you never run into these shortage events - otherwise you end up with the disaster that happened in Texas. That said, I can't imagine a free-floating price regime would have left Texas better off; instead the real world outcome probably would have been about the same: most people would have voluntarily turned off their power (or would have been 'margin called' by their utilities when they ran up huge bills inadvertently). Better efficiency, but similar outcome.

[1] Apparently one of the providers in Texas was called Griddy, which had a novel model where they did charge floating rates for electricity. Not coincidentally, they advised their customers to switch providers or risk enormous energy bills.

[AnthonyMouse]

They obviously need (and apparently lack) some kind of system for notifying people when prices are spiking unusually high so that exactly that can happen.

[yongjik]

So, let's say I'm a consumer in Texas, and the power company says, "Here's the power plan - there's no flat plan because we don't have to offer you one. But there's plan A which will charge you exorbitant prices when we want to, and there's an even more expensive plan B, but plan B comes with its own alarm system so you will know when the price is skyrocketing. The alarm will activate maybe once in next ten years, and you will just have to trust us that it will work when it needs to."

Then, being a good free-market consumer, I should of course choose plan B... wait, there's no regulation, so there's no reason for me to believe plan B actually works as advertised. So of course I should pay $$$ to hire an auditor who goes through the company's infrastructure and certify that what they're saying is actually correct. Actually, the auditor had better keep an eye on the company from now on, because even if plan B is will-maintained now there's no guarantee that it will continue to be.

But of course I can't afford such an auditor by myself - it would be really convenient if there's an organization that I can join, with a bit of membership fee, and then it certifies these plans, and maybe they need to have some actual teeth, because otherwise how would we know the company isn't lying its ways through.

Hmm, this free market is getting really complicated, it might be nice if there's some kind of blueprint, let's say, a prototypical organization that takes membership fees and holds these companies responsible for their words ...

[rualca]

> They obviously need (and apparently lack) some kind of system for notifying people when prices are spiking unusually high so that exactly that can happen.

I fail to see how this classifies as a free market solution. If customers are not free to choose their supplier, and providers can whimsically just abuse their dominant position to hike prices at will, then that's not a free market at all. It just sounds like a monopolistic market dictating price hikes whenever they feel like it without fear of any consequence.