[samkater]

My understanding, to put it in AWS EC2 pricing terms, is that we do not pay the market "spot" rate for electricity (variable, often less than what you might pay elsewhere, but could spike up) - which is what Texas allowed. Typically we pay the "on demand" rate which is fixed. Large energy users probably negotiate "reserved" pricing.

My point being, we pay the market rate, those massive hikes are just built-in over a long period of time.

[ajross]

That only works if the demand curve (the price the market will bear at given levels of shortage) and the cost curve (the actual price to produce the energy) match up.

In fact they never do, especially in this market. Texas producers weren't spending 100x (or whatever) more to produce that electricity, that spike just reflected the amount that customers who "had to keep the lights on" were willing to bear. In fact total utility costs are basically flat. They didn't hire 100x more employees or work 100x more hours to get things running again. They didn't have to build 100x more substations, etc...

And that's why spot pricing is a disaster for consumers. It creates a perverse incentive for producers to reduce supply.

[shiftpgdn]

There are currently no residential consumers in Texas on spot rate plans since the only provider had their license revoked. https://www.cbsnews.com/dfw/news/ercot-shuts-down-wholesale-...

[selectodude]

Yeah, after the last catastrophe. They learned a lesson.

[JamesBarney]

The economic reason people should be paying 100x the cost to supply is to incentivize people to build spare capacity.

[notch656a]

Generally agree although there is something a bit sinister about a market where you don't really know the price until after you've bought the product. IMO giving a utility provider blank check is like raw-dogging cheap hookers every night and then being surprised when your luck runs out.

If people WANT this kind of contract I hope that their consent is an informed one. I'm not one to stop people from engaging in their own reckless behavior.

[csours]

The Texas spike was not what customers were willing to bear, the Texas spike was set to the max price by the regulator because they thought the pricing system wasn't working.

[sangnoir]

> Texas spike was set to the max price by the regulator...

IIRC, a member of ERCOT who resigned claimed high-ranked state politician(s) pressured the regulator to do set the max price - so it wasn't the independent judgment of the regulator that the system was working; or that this was the solution.

[notch656a]

When you have an outage, it's possible the instantaneous cost of electricity is in fact 10x/100x/infinitely more than baseline cost. Looking at it as 100x more employees is the wrong direction. If you're producing 1/100th the electricity for 5 minutes due to power outtages but you still have to pay all your employees during that time, your instantaneous cost (per unit energy) actually are proportionally higher.

[ajross]

Total Texas energy production during the worst part of the crisis last winter was like 60% of maximum though. Most generators were running. If consumer had to pay a 2x premium then no one would have even complained; we'd have all said the system was working.

But that's not how it works, because as I mentioned the demand curve is non-linear. When you have 60% power, yet 60.1% of your capacity needs to go to "must keep the lights on" customers, then prices go to infinity (or in practice to the credit/spending limits of those customers making bids).

[notch656a]

You don't 'need the lights on.' I have lived in multiple third world countries where outages happen regularly if you have electricity at all. This is a failure of customers to adequately prepare and instead playing the victim because of their failures. People knew for years Texas grid was vulnerable, and it's an exquisite display of Darwin Award for those who didn't prepare for it.

Only a moron doesn't keep some sort of off-grid combustibles and cold weather gear on hand, even if you live in the most southern edge of our nation. The customer is to blame for paying, not capitalism.

[ajross]

> You don't 'need the lights on.'

Hospitals do. Street lights do. Network operators do. Just think back to the beginning of the pandemic and how many industries were suddenly discovered to be "essential". You're thinking from the perspective of "can I, personally, suffer a power outage in my own home[1]" and imaginging that "running a civilization" works like that. There are many entities who simply can't stop buying power.

> Only a moron [...]

Please think harder here. It's not remotely as simple as you think it is.

[1] Knowing that you can use your phone to reach effective emergency services in the event of need, of course.

[notch656a]

Hospitals are 60.1% of capacity? Hospitals have generators, also. Lets not make hypocritical statements about think harder.

>imaginging that "running a civilization" works like tha

And yet many rich civilizations do run just fine 'like that' and many may consider those civilizations just as good as yours. Your statement is simply ethnocentric arrogant elitism.

>Just think back to the beginning of the pandemic and how many industries were suddenly discovered to be "essential".

You're describing tyrants trying to shut down business. Being 'essential' was simply a chosen word of propaganda as part of a tyrannical process to destroy some people's line of work while favoring others. We are discussing free-market pricing and their interconnection with power disruptions and acts of god.