Tag Archives: ERCOT

Electric Utilities and Power Grids Are At a Critical Crossroads

By Bill Oakey, August 25, 2022

On August 16th, President Biden signed the landmark climate and energy bill. It provides $60 billion for clean energy manufacturing, $9 billion for home energy efficiency rebates, and a decade of tax credits for homeowners who participate. But there is one huge problem. Some U.S. utilities are already losing money because of “too much energy efficiency” for their customers. New Mexico’s utility is fighting a brand new solar program, that was approved by their State Legislature.

Three of California’s utilities have routinely raised rates because of declining sales. (See P. 9, Table 1.8). Thankfully, the state may delay a controversial plan to cut back solar credits by up to 80%, and impose a monthly fee on solar customers. This is framed as an income inequality issue. But it’s misguided, because of their devastating, climate-induced wildfires and extreme drought.

Austin Energy is planning both rate increases and solar credit cutbacks to cover declining revenues. They say that they are not selling enough electricity. And yet, reducing the usage of electricity generated from fossil fuels is critically necessary, in order to save the planet. Just this week, we learned some bad news about the Fayette Coal plant, which Austin Energy co-owns with another utility. It has made #10 on the list of the worst-polluting power plants in the country.

But, the energy generation landscape is changing rapidly. Elon Musk builds a line of Powerwall Batteries, and he hopes to become a tough competitor in the retail electricity market. He has also partnered with a builder in Austin to build homes with solar panels and batteries included.

All utilities should have planned for the upward curve of 5%, 10%, 20%, etc. of customers living in highly efficient offices and dwellings. And they should have planned for the growth of customers expecting to sell excess energy back to the utilities. (Although at some future time, utilities may need less of that unused power).

I recently made a proposal to the Austin City Council, to push for big-box retailers to install rooftop solar panels. This followed a revealing CNN investigative report, that outlines the enormous carbon emission reductions that such a plan would yield. Because of Austin Energy’s “not selling enough electricity” problems, my proposal landed with a dull thud. And yet, a Washington Post special series details the horrifying devastation that awaits the Colorado River reservoirs, that supply Arizona, Nevada and California with water.

The Texas Power Grid Is Fraught With Problems

Here in Texas, we live with the fear that our independent electric power grid will fail, throwing us into life-threatening blackouts. If that were to happen, the special interests who control the politically-run ERCOT grid management agency would reap millions of dollars in profits. The system is set up to reward oil and gas producers during weather emergencies. Utilities that purchase fuel to run some of their power plants are forced to pay exorbitant prices in the ERCOT-controlled market. The alleged rationale for this is to incentivize the utilities to build more power plants, to meet growing demand. And yet, State and Federal  reviews, following 2011 Texas blackouts didn’t lead to either fixing the grid or construction of enough power plants. Texans remain at risk, even as our state continues to grow and prosper.

During the 2021 Texas winter storm, ERCOT used a $9,000 per megawatt hour price cap, that was 250-300 times higher than the normal market rate. It generated $50 billion in electricity sales during the single week of the storm. That’s more than the entire annual budgets of Austin, San Antonio, Dallas and Houston, combined!

The special interests who made huge financial gains multiplied their profits through lucrative Wall Street investments. The then-chairman of the Texas Public Utility Commission was caught on tape, promising to protect those profits. Meanwhile, San Antonio’s municipal utility went heavily into debt. Their customers will be paying back over $400 million through a special fee, for the next 25 years. Several electricity retailers were driven into bankruptcy. So, in order to help “fix the grid,” our legislators responded. They lowered the maximum allowable rate for ERCOT sales from $9,000 per megawatt hour to $5.000 – still highly outrageous.

Summer Heatwaves Pose an Even Bigger Risk

In May of last year, the New York Times ran a story with this headline – “A New, Deadly Risk for Cities in Summer: Power Failures During Heat Waves.”  Consider this stunning paragraph from the article:

“Power failures have increased by more than 60 percent since 2015, even as climate change has made heat waves worse, according to the new research published in the journal Environmental Science & Technology. Using computer models to study three large U.S. cities, the authors estimated that a combined blackout and heat wave would expose at least two-thirds of residents in those cities to heat exhaustion or heat stroke.”

A Major 2016 Report On U.S. Power Grids Deserves Attention

“The Grid: The Fraying Wires Between Americans and Our Energy Future,” by Gretchen Bakke, Ph.D. is highly recommended reading. It’s an eye-opening examination of how the system works, and the various challenges that we face. Consider this paragraph from Page 3 of the introduction. Add 6 years to the 25 year ages quoted below, since 2016 was six years ago:

”More than 70 percent of the grid’s transmission lines and transformers are twenty-five years old; add nine years to that and you have the average age of an American power plant. According to the industry expert Peter Asmus, we rely on twice as many power plants as we actually need because of “the massive inefficiencies built into this system.” As a result, significant power outages are climbing year by year, from 15 in 2001 to 78 in 2007 to 307 in 2011.”

One fascinating takeaway from the report is that our power grids were not designed to efficiently transport modern clean energy, such as wind and solar. Rapidly emerging battery storage holds the promise of filling that gap. Check out this webpage from the investment banking firm, RBC Capital Markets. One of the biggest barriers is surmounting the thorny required regulatory processes.

Don’t Celebrate the New Federal Energy Benefits Too Soon

President Biden’s success on the climate and energy bill brings Texans some hope for ratepayer relief. However, Austin Energy may spoil the party, as we try to celebrate the newly-promised benefits. They have filed for a base rate increase. One local newspaper quoted them as stating, “Our rate design is not as efficient as the customers.” (See 6th paragraph). The new rate design would discourage conservation for both small and big users of electricity. And the utility told the Fitch bond rating service that “additional rate increases will be necessary” to improve cash flows. (“See Analytical Conclusion,” 2nd paragraph).

The current rate proposal also calls for weakening the methodology used to calculate the Value of Solar buyback credits for residential solar customers. Public Citizen has published their objections. (See third paragraph from the bottom). And, buried deep within the Appendices of Austin Energy’s rate filing brief, comes the threat of cutbacks to the Value of Solar credits for businesses. (See Appendix E. Sec. 2.1.1., Pg. 408). It says, “Some staff expressed concern over Austin Energy’s Value of Solar (VOS) pricing scheme, stating the current VOS structure is unsustainable, if commercial customers continue to adopt on-site solar and reduce their peak demand charges.” This disturbing signal runs counter to the City’s adopted climate change goals.

After a Summer From Hell, Bid the Rate Increase a Fond Farewell!

A good solution for Austin can be found in my recent blog piece. It makes a reasonable case that the City Council should cancel the rate increase, because Austin Energy will gain windfall summer revenues, their highest in history, thanks to the heatwave. San Antonio CPS is considering using their $75 million In surplus revenues to issue billing credits to customers.

When Two Worlds Collide – What Will Happen?

News reports about power grid problems, heatwaves and utility rate increases have led to one predictable result. American entrepreneurship has stepped up to the plate. This summer, we have seen a wave of sales promotions for solar panels and batteries. Then…BOOM…Congress passed a historic energy bill that promises $1,800 in annual energy savings for eligible families. This news article offers a clear breakdown of the climate bill’s benefits.

But, hanging over all of this like a dark shroud, is that looming question – How will the utilities cope with the big revenue losses that will accompany the promises of customer financial relief and a greener planet? With advancing technology, eventually hundreds, and then thousands of customers might be able to generate more electricity than they need. Or at least, a significant  percentage of what they need. At that point, the size and role of centralized utilities will change forever. Maybe utilities should be allowed to enter some non-traditional markets, not directly related to utilities.

The Future Is Coming Faster Than You Think

I will close with a parting thought for you regular folks, reading this in your living rooms. Picture yourself relaxing in an easy chair, with a cold beer on a blazing hot summer afternoon. You have solar panels on your roof, and a backup storage battery. You flip on the TV and see a special announcement. Your city is going into rolling blackouts within 24 hours.

Well, what if you could reach for your phone? Suppose somebody invented an app, just for this occasion? The app lets you select which rooms in your home to give priority for backup power, when the blackouts come. Are you thinking that this is somebody’s visionary dream for 10 years into the future?

Well, it’s not. There are several options available for you to do it right now. Not everyone will be able to afford these options right away. But check out this sample ad, and this one, along with another one for a phone app. Then, go back to that cold beer that I distracted you from. And don’t forget to pay your electric bill!

Blog Writer’s Note: I am a retired accountant and longtime Austin affordability advocate. As a former member of the City’s Electric Utility Commission, I have been involved with electric rate cases for the past 39 years.

Musical Accompaniment for This Blog Piece:

1. “Blackout” – Aviva
2. “Heat Wave” – Martha & The Vandellas
3. “Windfall” – Rick Nelson
4. “The Battery Song” – Mark Cummings
5. “I Just Want To Celebrate” – Rare Earth
6. “I Don’t Want To Spoil The Party” – The Beatles
7. “Storms Never Last” – Waylon Jennings
8. “Wichita Lineman” – Glen Campbell
9. “When Two Worlds Collide” – Jim Reeves
10. “The Night The Lights Went Out In Georgia” – Vicki Lawrence

Opposing Forces Up The Ante On Climate Change / Electric Utility Dilemma

By Bill Oakey, August 3, 2022

I have written about the big conundrum facing Austin Energy and other utilities. As their own employees help homeowners and businesses become more energy efficient, the utilities find themselves wanting to raise rates, because they’re not selling enough electricity. Austin Energy has forecast the potential need for more than one rate increase. And as I’m writing this, a dear friend is preparing for contractors to install solar panels on her roof. A 10 kilowatt battery to store excess energy comes with her package.

It’s easy to see how rate increases to shore up lost utility revenues will backfire. The contractor that is helping my friend will boost their advertising, as will the others in that business. Utilities will find that chasing revenue deficits with successive rate increases could send them into a death spiral. Climate change is the trigger here. It drives summer electric bills to historic high levels. That pushes businesses and residents to go solar, and employ every other efficiency measure they can find.

This daunting dilemma looks to get worse, because of a series of circumstances that have yet to be widely recognized. That’s why I’m making a push to alert the news media and the Austin City Council, as well as Congressman Lloyd Doggett.

Big Changes May Come to the Texas Power Grid

I was jolted awake this morning by a shocking article in the Texas Tribune. Come to find out, there is plenty of West Texas wind energy available. But ERCOT, the Texas grid management agency, has ordered a lot of the wind turbines to be shut down this summer. Why? Because there aren’t enough transmission lines to deliver the cheap wind power to big cities like Dallas, Houston and Austin. The Texas Public Utility Commission is working on a solution (we hope)! Two recent grid assessment reports cited in the Tribune article highlight the many shortcomings in the grid system. Three entities will collide over what response follows those reports – public interest groups, special interest groups and politicians. The problems can be fixed, if the solutions aren’t nixed. The future of your bill rests on political will.

There is reason for hope. From the Tribune article comes two profound statements. “This month, the PUblic Utility Commission formed a task force to develop a pilot program next year that would create a pathway for solar panels and batteries on small-scale systems, like homes and businesses, to add that energy to the grid. The program would make solar and batteries more accessible and affordable for customers, and it would pay customers to share their stored energy to the grid as well.”

And this comment from John Hensley, with the American Clean Power Association. “Storage is the real game-changer because it can really help to mediate and control a lot of the intermittency issues that a lot of folks worry about when they think about wind and solar technology. So being able to capture a lot of that solar that comes right around noon to [1 p.m.] and move it to those evening periods when demand is at its highest, or even move strong wind resources from overnight to the early morning or afternoon hours.”

How Can the Utilities Stay In Business, As Efficiency Drains Revenues?

That’s the big challenge that demands to be addressed. I submit that, above all, it should be discussed and resolved out in the open. Our local leaders, our Congressmen and women, and the public should all be granted a seat at the table. If we stay in the background and hope for the best, nothing good may come of it. With or without Congressional passage of the current climate bill, future legislation will probably happen. Utilities may need to completely rethink their business models. Austin would be an ideal place to host a major conference on resolving the dilemma.

One thing is certain. All utilities will be generating and selling a lot less energy in the years to come. That’s a good thing for progress on climate change. But utilities must not be allowed to charge unreasonable rates, and cut back credits for end users who generate and store their own energy. For now, Austinites are staring down a terribly flawed rate increase proposal. That calls for a poem:

The folks at Austin Energy are way out of touch
They simply don’t care about us very much
In a fancy new building that cost $150 million
They wrestle with a budget of a couple gazillion

Amongst them is a band of renegade abusers
Who want to raise rates for the smallest users
While the Austin economy sees poverty expansion
They would lower the rates for a big, sprawling mansion

Pardon me if I be so bold
But their rate increase should be put on hold
From the month of May to the end of September
They’ll make more money than anyone can remember

The City needs time to assess the situation
And we’re in a recession with high inflation
My idea might be met with a blanket rejection
But there’s an upcoming City Council election

We need transparency, reason and fairness
And a whole lot more public awareness
This is a time for all hands on deck
We and our neighbors should protest like heck!

Musical Accompaniment for This Blog Piece:

  1. “Blowing in the Wind” – Peter, Paul & Mary
  2. “Wind Beneath My Wings” – Bette Midler
  3. “Candle in the Wind” – Elton John
  4. “Catch the Wind” – Donovan
  5. “Summer Wind” – Frank Sinatra

Two More Electric Bill Shocks Are Coming!

By Bill Oakey, July 21, 2022

If you have seen your latest electric bill, you know that the historic heatwave has pushed it way up. That’s bad enough – with rents skyrocketing, along with gasoline, grocery bills and property taxes. But strap yourself in…The second and third episodes of this ugly electric bill drama are right around the corner. At least we may have a chance to slow down or significantly curtail Episode 3. But that will require a call to action, with a united citizen backlash. (I’ll be on the front lines for that!)

Episode 2 – The Power Supply Adjustment Charge

The sky high bills that we are seeing this summer are simply based on our usage – the number of kilowatt hours that we consumed in order to beat back the heat. Most of us were propelled into the third tier of the base rate structure. Anything above 1,000 kilowatt hours is billed at a higher rate. It doesn’t take much to jingle the cash register to $25, $50 or $100 above the normal charges that we are used to seeing.

So, you might wonder, how could it get any worse? Well, there’s the little matter of power generation costs – Austin Energy’s fuel costs, plus their energy sales and purchases through the ERCOT power grid. Those net costs are passed through to the customers, but there’s a hitch. The Power Supply Adjustment is a fixed monthly charge. Austin Energy and the City Council only recalculate it once a year. So, this summer it’s relatively small. That’s because we had a mild summer last year, before the latest calculation was made. The adjustment charge will be reviewed next month, as part of the City’s annual budget discussions.

That’s when the next shockwaves will probably come to light. Many Texas utilities adjust their fuel charges and ERCOT net costs on a monthly basis. Statewide news reports are filled with grim accounts of skyrocketing electric bills. They cite the huge spike in national gas costs for power plants. That’s because of the war in Ukraine and the worldwide heatwave. Texas is one of the highest U.S. gas producers. We are exporting lots of it to Europe.

That’s where supply and demand kicks in. It falls to ERCOT to regulate the daily sales and purchases of electricity across the state. Because of the Big Special Interests who created this system, and lobbied the Legislature to keep it, we’re screwed! During peak demand periods, the price per megawatt hour for ERCOT transactions can skyrocket. The normal rate of $40 to $50 per megawatt hour can legally spike up to $5,000 per megawatt hour. It shouldn’t hit that cap unless the grid goes into a weather emergency, like it did during the 2021 winter storm. But it has already swung to well over $1,000 per megawatt hour at times, during this heatwave.

For now, we are at arm’s length from Episode 2 of electric bill shock. I have asked the City Council to give us some sort of estimate of how bad it might be. Austin Energy actually made a $100 million profit during the winter storm. They produced more electricity than they were allowed to use. So, they sold it through the grid and netted a profit. But without any usage restrictions yet this summer, we are probably on the hook for high power purchase costs.

Episode 3 – A Ludicrous and Outlandish Rate Increase Proposal

As mentioned in my last blog posting, Austin Energy wants to jack up the fixed monthly customer charge from $10.00 to $25.00. That extra $15 per month would generate a stunning annual windfall of $84 million. Suspicions abound that a great portion of that would be transferred to the City’s general fund. They could be planning to circumvent the Legislature’s 3.5% revenue cap on property tax increases.

In addition, the rate proposal calls for increasing the charges for small users of electricity. This is a shameful act from Austin Energy. Austin’s “inverted block” rate structure was never based on “cost of service.” It was proudly established over 40 years ago, pioneered by Austin consumer and environmental icon, Shudde Fath. Sticking low-income residents with such a penalty during a city affordability crisis should be unthinkable. Let’s just hope that the City Council agrees. In the meantime, we’ll have to wait out a formal rate hearing process, peppered with reams of paper full of lawyerly crosstalk and legal jumbo-jumbo.

By the way, we may not even need a rate increase. Austin Energy will be earning historic profits from a record hot season from May through September. I’ve asked the City Council to request an updated estimate on that.

A Blast From the Past

This is my fifth decade as a consumer activist in Austin electric rate battles. In the early 1980’s, I defeated a 20% electric rate increase, by getting it cut in half. Late one night, I discovered a “magic sentence” in the City Budget. It stated that the 20% rate increase was based in part on the passage of lignite bonds in a City election. Well, the budget was adopted before the election, and the lignite bonds failed. City staff forgot to mention that detail to the City Council when they passed the rate increase.

If You Thought It Couldn’t Get Any Crazier, Think Again!

By Bill Oakey – March 28, 2021

The U.S. Congress took up their investigation of the Texas power blackout last week. And the bumbling, bungling shenanigans of Texas officialdom went on full display. When you read the editorial below, ask yourself this question – If you owned a large Texas business, would you hire any of the numbskulls from ERCOT, or the political hacks that interact with or pretend to oversee them? The gang that couldn’t shoot straight was called upon the carpet in Washington. Here’s what happened…

Editorial – The Houston Chronicle

By the Editorial Board, March 28, 2021

Texas leaders, get tough on grid security

Human mistakes shut off the electricity. Now the humans in charge must do their jobs.

It wasn’t the wind turbines. It wasn’t natural gas. It wasn’t coal that was to blame in the blackout that killed 111 people across Texas.

The truth is all those power sources went offline at some point during last month’s winter storm, not because they were “renewable” or “base load” or “liberal” or “conservative” fuels but because generators and pipeline owners chose not to weatherize their equipment for a predictable winter storm. Some gas operators chose not to fill out a simple two-page form to exempt their operations from losing power during rolling blackouts and other shortages.

They chose not to do these things because nobody in Texas government required them to.

Let’s stop wasting time, as U.S. House members did in a hearing last week, bickering over which political party’s preferred natural resource saved the day and which caused death and destruction.

The culprit was not vegetable or mineral. It was human.

It was the people in Texas government who had the duty to secure Texas’ power grid and refused. The people who had the power to protect millions of Texans from an accident waiting to happen and opted to just let it happen. The people who chose not to require that companies delivering life-sustaining energy do so responsibly, opting instead to make basic emergency planning optional.

It is elected officials, political appointees, and well-compensated executives who, more than a month after the catastrophic failure of Texas’ power grid, refuse to take true responsibility or move with urgency to fix the problems.

The shameful show of finger-pointing and shallow concern hit the national stage Wednesday as several Texas officials testified before Congress on the impact and causes of February’s storm.

One moment served as a glaring allegory of Texas deflection: Railroad Commission Chairman Christi Craddick was asked whether she, as the state’s top oil and gas regulator, would start requiring operators to fill out a short form that keeps their power from being shut off during outages.

The question by U.S. Rep. Marc Veasey should have been a no-brainer. Craddick herself had testified that in the middle of the blackouts, crews returning to gas fields found they couldn’t restart production because they’d lost power for their equipment.

“Frozen roadways prevented crews from going out, but the No. 1 problem was a lack of power at the production sites,” she said.

That problem, as Houston Chronicle reporters Jay Root, Eric Dexheimer and Jeremy Blackman reported this month, was the result of gas production plant owners not filling out simple paperwork to become designated as “critical facilities,” making them exempt as hospitals are from having their power cut so they can keep supplying fuel to power plants.

Even so, Craddick wouldn’t commit to requiring the form, only saying that her agency had sent letters to all operators “suggesting” that they file it. She also insisted that she hadn’t “realized this form existed” before the winter storm and that power grid operator ERCOT should have done a better job getting the word out about the exemptions. Never mind that her name was on the letterhead of a 2013 Railroad Commission memo explaining the exemptions and urging natural gas facilities to apply.

“But do you don’t think it should be required?” Veasey pushed back.

Craddick continued to dodge the question, pivoting again to her favorite punching bag. She blamed ERCOT for not prioritizing oil fields for such exemptions, and tried to claim they only were available to processing plants anyway. While the 2013 letter uses the term “facilities,” it also states clearly that “high volume gas wells are examples of such facilities.”

Letting industry police itself is a basic tenant in Texas’ laissez-faire approach to oversight. But while expense may be behind Craddick’s previous refusal to require winterization of natural gas wellheads, it’s unclear what kind of burden she thinks filling out a free form that takes about two minutes to complete would impose on companies.

Veasey wasn’t having Craddick’s excuses.

“Republicans just want this problem to go away,” he said. “They don’t want to deal with this, they don’t want to require anybody to do anything, which means we’re going to be sitting in the cold again and that is the problem. They are running out the clock.”

Coming from a Democrat, that may sound like partisan rhetoric — except for the fact that the complacency and political cowardice he describes has all happened before. It set the stage for February’s disaster. And it will lead to another tragedy unless lawmakers resolve to finally act this session.

Just as Gov. Greg Abbott and lawmakers knew Texas’ grid was vulnerable in winter without proper weatherization, Texas oil and gas regulators knew that gas suppliers had their power cut during the state’s last major freeze in 2011. A federal after-incident report had warned that communication gaps between gas and electric companies should be fixed to prevent it from happening again.

A state report in 2012 said the same thing, with regulators at the Texas Public Utility Commission and Railroad Commission concluding that “cascading” grid failures could happen if companies that provide fuel for power generation lost power themselves. That’s exactly what happened in February.

The former PUC regulator who oversaw that 2012 report, Jennifer Hubbs, told Chronicle reporters she was shocked to realize during the storm that her simple recommendations hadn’t been followed.

“I’m on Twitter and I see a photo of downtown Houston lit up like a freakin’ Christmas tree and all the houses around it dark. It hit me like a physical blow,” she told the Chronicle. “You know, we might have avoided rotating outages entirely if we had just approached it with some sense.”

Sense. It’s something as scarce in Austin these days as toilet-flushing water during last month’s storm.

It is not government overreach or far-left sabotage to require energy companies to engage in basic emergency planning. It’s the least a government can do to protect its residents from a harsh winter storm or even an attack on our power grid from a foreign adversary such as Russia or China.

Abbott needs to lean on lawmakers to require safeguards, lawmakers need to pass them, and elected leaders such as Craddick need to stop leaving Texans’ health and safety to chance and voluntary compliance.

Why should Texans put up with leaders whose loose regulations leave us vulnerable to everything from random chemical explosions to prolonged blackouts that put our homes, our businesses and our loved ones in harm’s way?

Leaders, do your jobs, not industry’s bidding. Texans don’t deserve to live this way — or die this way, either.

———————————————————————————–
My Recommendation: The Legislature should make sure that the form is easily accessible. Right now, once an entity submits it, they are permanently registered. If their status changes, or if they are new to the system, they need to submit an updated form. I recommend that the Legislature set an annual fall deadline to submit the form. Failure to do so should be greeted with a stiff fine. Here’s what’s so crazy – It’s in a company’s best interest to submit the form. They’ll sell more gas during the power outage (!) If the right hand is unable to help the left hand, perhaps either Alexa or Siri could help with a friendly reminder..

Get Your Wooden Nickels Ready – Here Comes the Jukebox!

1. “All Right, I’ll Sign the Papers” – Mel Tillis
2. “I’ve Always Been Crazy” – Waylon Jennings
3. “Still Crazy After All These Years” – Paul Simon
4. “No Place But Texas” – Willie Nelson
5. “Texas In My Rear View Mirror” – Mac Davis

Dallas Morning News Blows The Lid Off ERCOT’s Sordid History!

By Bill Oakey – March 26, 2021

Strap yourselves in for a wild ride, folks! If you think you’re heard everything…Nope, not even close. No wonder this guy won a top journalism award. What in the ding-dong-dang are the politicians going to do now!??

Dallas Morning News Watchdog Column – By Dave Lieber, March 26, 2021

In 20 years, ERCOT has been a misbehaving, secretive, arrogant, even criminal grid operator

Looking at the history of the state’s all-powerful electricity overseer, The Watchdog finds a pattern of failure.

ERCOT, the operator of the Texas electric grid, has been a problem child since the state’s electricity market was deregulated at the turn of the century.

When it comes to the Electric Reliability Council of Texas, incompetence and lack of accountability and oversight is nothing new.

If you know your history, you shouldn’t be surprised about what happened in last month’s cold-weather catastrophe.

The power to bring us electricity rests in the hands of a nonprofit, mostly invisible group whose leaders claimed we were a mere 4 minutes and 37 seconds from a massive blackout that could have shut the grid down for months.

Texans wonder why it would take months. It takes that long for replacement transmission towers to be built shipped, placed and powered up.

With the help of The Dallas Morning News Archives and a history book by R.A. “Jake” Dyer of the Texas Coalition for Affordable Power, let me show you year by year how bad it has been.

It might make you wonder why we don’t throw up the white flag and join the interconnected national grid.

2001: Tasked with creating a pilot program to handle the new deregulated system that began that year, ERCOT blows it by going over-budget and failing to meet goals. Customers who wish to switch electricity companies are blocked. Bills generated by ERCOT are wildly inaccurate. Its budget, built on fees paid by electricity customers, is hatched in secret.

That year, the first price spike to the maximum-allowed cap hits customers, but ERCOT says it won’t happen again. Yet it happens again and again in the next few days.

2002: About a quarter-million customers do not receive bills, sometimes for months. An expensive marketing campaign promoting the new deregulated system is delayed because ERCOT can’t handle the influx of consumers wanting to switch companies.

A peek at financial statements shows ERCOT’s average salary with benefits is $99,000. Employees receive a $10,000 travel allowance. Critics pounce on ERCOT’s sponsorship of a minor league hockey team as frivolous. After promising to cut back, ERCOT asks that its customer-paid fees get doubled.

2004: This is — aside from 2021 — ERCOT’s worst year. The Dallas Morning News reveals a massive procurement scandal at ERCOT that will lead to criminal convictions. Fake companies are created by several ERCOT managers, and millions of dollars are siphoned from ERCOT funds. Legislators blast ERCOT’s weak financial controls and complain about “perceived arrogance among top officials in the face of these problems,” Dyer writes.

2005: A grand jury indicts six ERCOT managers. They include the chief information officer, director of information technology, data warehouse manager, director of program development and physical security manager. The sixth, a former FBI agent, is responsible for corporate security. The men use the stolen money to buy boats, luxury homes and expensive cars.

“The maze of illicit business dealings going on within ERCOT over a year’s time is simply stunning,” the Texas attorney general says. “This is not about electricity. It’s about corruption at top levels of ERCOT.”

The AG at the time? Greg Abbott.

In response to the growing scandal, the Legislature gives all oversight of ERCOT to the Public Utility Commission.

2006: Running out of power on an April day, ERCOT launches, without public warning, rolling blackouts. Even the PUC, which supposedly oversees ERCOT, isn’t notified. Under fire, ERCOT’s chief executive resigns. On the criminal front, the indicted managers are convicted and some are ordered to pay fines, while others are sent to prison.

One state senator says: “There’s an ongoing, cavalier attitude over there [at ERCOT] that you are a standalone entity and not responsible to the people of the state.”

2009: Bills to rein in ERCOT are introduced at the Legislature, but they do not pass. ERCOT’s CEO resigns, the fourth such resignation since 2000.

2010: A consultant’s report finds ERCOT is hindered by “poor corporate governance, leadership and culture.” The consultant finds that ERCOT has too many employees and recommends that 166 get cut. ERCOT cuts 37. A state report finds poor financial oversight, questions ERCOT’s large debt (more than $300 million) and suggests removing industry representatives from the board.

2011: An icy cold snap hits during Super Bowl week, but ERCOT isn’t prepared, resulting in rolling blackouts. Similar cold weather problems occurred in 1983, 1989, 2003, 2006, 2008 and 2010. Meanwhile, during the summer, the state keeps setting records for hot-weather usage. A bill that gives the PUC even more oversight of ERCOT dies in the Legislature.

2015: New electricity demands break records. ERCOT lifts the regulatory cap to its current $9,000 per megawatt-hour. Originally, until 2011, the cap was $1,000 per megawatt-hour. ERCOT’s cap is the highest in the nation.

2018: ERCOT planners predict that generators will note the state has lower reserve margins of power and build new power plants to make profits and boost energy supplies. Because of this, they say, Texas will have a much stronger system by 2021. Oh, well.

2019: The $9,000 cap for wholesale electricity is hit twice, once in May and once in August. “Such high prices eventually trickle down into home rates,” Dyer writes.

Texas’ population of 29 million people is projected to grow by 2050 to 55 million. Can the current system handle the added power load? Why isn’t anyone talking seriously about joining the national grid?

The Watchdog took the “P” away from the (p)UC because the commission doesn’t care about the public. Watchdog Nation member David P. Bader of Dallas suggests, “Going forward, until some meaningful reforms are made, you should refer to ERCOT as E(r)COT since “reliability” doesn’t appear to be part of their purview.”

Done. Considering its sketchy past and dangerous present times, you have to wonder if E(r)COT can handle the future.

News researcher Alyssa Fernandez contributed to this report.

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Blog Special Feature – Songs From the ERCOT Jukebox

1. “Ain’t No Honky Tonks in Jail” – George Goss (Totally Hilarious)!
2. “Shame and Scandal” – Shawn Elliott
3. “Shame, Shame, Shame” – Cher & Tina Turner
4. “In the Jailhouse Now” – Johnny Cash
5. “Mama Tried” – Merle Haggard

ERCOT’s Pricing Structure Must Be Reformed – Here’s Why

By Bill Oakey – March 25, 2021

During the winter storm, we were all told why the price of electricity sold through ERCOT was increased to the maximum rate. We were told that it’s a demand-based system. The high prices were designed to incentivize energy producers to build more capacity and supply more power to the grid.

Well, Texas utilities did their part. They paid the outlandish price of $9,000 per megawatt-hour, which is 250 to 300 times the normal rate of $30 to $35 per megawatt-hour. These astronomical prices continued for 32 hours after the storm ended. The Washington Post reported that nearly $50 billion in electricity sales were generated during the week of the storm. To put that $50 billion figure in perspective, it’s over 3 times the entire annual budgets of Austin, San Antonio, Dallas and Houston, combined! Check the numbers and sources below for this fiscal year’s budgets:

Austin: $4.2 billion
San Antonio: $2.9 billion
Dallas: $3.8 billion
Houston: $5.1 billion
Grand Total: $16 billion, times 3 equals $48 billion

A wave of bankruptcies and lawsuits are unraveling by the day. Many Texas consumers will see higher electric bills, stretching far into the future, as pass-through power supply adjustment charges are recalculated several months from now. San Antonio’s electric utility is considering spreading these charges over an entire decade, to make the rate jolt less onerous. Close your eyes and contemplate what would happen if ERCOT sees no reforms, and we get another severe winter storm in the next year or two.

So, here is the one big question that begs to be answered:

How Many New Weatherized Power Plants, and How Much New Capacity Will Texans Get, After Paying All Those Tens Of Billions Of Dollars?

We have a right to expect a precise answer to that simple question from the likes of ERCOT, the Public Utility Commission, and the folks at the State Capitol who gave us an independent power grid with these pricing policies. Otherwise, how could they possibly justify keeping ERCOT’s current pricing model in place? Exelon Corp., which lost close to $1 billion, told the Washington Post that it may consider leaving Texas unless its market system is reformed.

So far, we haven’t heard a word from the folks who walked away with windfall profits about building us the new generating capacity that we were promised. And they are not required to do so under the weak Texas laws. As soon as this blog receives the list of power plants and their capacities, we will publish it here in detail.

If You Would Like to Wade Into the Weeds of the Data

Here is a bucketful from the U.S. Energy Information Administration. You won’t find anything close to ERCOT’s $9,000 per megawatt-hour peak prices.

Musical Accompaniment for This Blog Piece

1. “Such An Easy Question” – Elvis Presley
2. “A Lover’s Question” – Clyde McPhatter
3. “What a Price” – Fats Domino
4. “96 Tears” – ? and the Mysterians
5. “What Did I Promise Her Last Night?”– Mel Tillis
6. “Promises Promises” – Lynn Anderson
7. “When” – The Kalin Twins
8. “The Twelfth of Never” – Johnny Mathis

What You Haven’t Been Told About The ERCOT $16 Billion

By Bill Oakey – March 22, 2021

In just 32 hours, after the winter storm was over, ERCOT billed enough electricity charges to fund the entire annual budgets of Texas’ four biggest cities combined. Read on for further details…

We know that the Big Boys on Wall Street are thrilled with their massive windfall in ERCOT’s utility pricing overcharges. They and our governor would like everyone else to just butt out now, and leave well enough alone. The Chairman of the Public Utility Commission was caught on a recording, promising to protect the Wall Street profits. The Texas Tribune recently published an article entitled, “Experts Fear Reversing Electricity Charges Will Make Things Worse.”

Why? Because “That might have a chilling effect on companies wanting to come in and invest money in Texas.” Those same “experts” insist that consumers would not be affected if the overcharges were paid back. So, we pay more when the price goes up, but if it came down, with a huge price correction, we would get nothing. Huh?

In Austin, over a dozen people were hospitalized with frostbite. Eleven feet were amputated, and five people had both feet amputated. They will be disabled for the rest of their lives. 

How Much Is $16 Billion…Really?

1. Take a guess at how much this year’s entire city budgets for Austin, San Antonio, Dallas and Houston add up to. Here’s the simple math:

Austin: $4.2 billion
San Antonio: $2.9 billion
Dallas: $3.8 billion
Houston: $5.1 billion
Grand Total: $16 billion (Holy cow!)

2. If you laid a bunch of $10 bills end to end in a line, that line would have to wrap around the world 6 times to total up to $16 billion! Here’s the math:

The earth’s circumference at the equator is 24,901 miles
24,901 miles converts to 1,577,727,360 inches
1,577,727,360” divided by 6.12” (length of any U.S. bill) = 257,798,588

That’s roughly a quarter of a billion single dollar bills. Those would wrap around the world 4 times to reach $1 billion. So, it would take 4 times 16, which is 64 times around, to reach $16 billion with $1.00 bills. For $10 bills, it would be one-tenth of that, which is roughly 6 times.

3. Austin Energy’s annual budget is now $1 billion. So, at the current rate, a $16 billion windfall would keep the utility running for 16 years!

Just take a deep breath and try to swallow this – In just 32 hours, after the storm was over, ERCOT billed enough electricity charges to fund the entire annual budgets of Texas’ four biggest cities combined! If that doesn’t tell you that we need serious reform of our power grid pricing system, then nothing will.

Two interesting questions – How many fully weatherized new power plants could be built with $16 billion? And how much of that money, plus the profits earned during the storm actually be used for that purpose?

We’ve heard a lot about “winners and losers.”  So, who are the winners, and what are they going to do with all that money? We deserve a full accounting of what happened to the entire $16 billion, including the $12 billion or so that was supposedly “settled.”

For the Readers: A Simple Multiple Choice Question

The assertion that Texans should shrug off ERCOT’s $16 billion in overcharges, because it wouldn’t make any difference is:

A. Tommyrot
B. Poppycock
C. Balderdash
D. Bull-Malarkey
E. All of the above

If you answered “E,” then congratulations, you passed the exam. But don’t expect any kudos from ERCOT, the Public Utility Commission or the Governor’s office. They are all out to lunch!

Musical Accompaniment for This Blog Piece

1, “Money Makes the World Go Round” – Liza Minnelli
2. “Around the World” – Connie Francis
3. “Miss Otis Regrets” – Linda Ronstadt
4. “Money, Money, Money” – Abba
5. “For Your Sweet Love” – Rick Nelson

State Needs To Resolve ERCOT Billing Kerfuffle

By Bill Oakey – March 17,  2021

Almost every day, news reports pop up with a different twist on the confusing numbers. How much did ERCOT really overcharge Texas electric utilities? First, we heard the staggering figure of $16 billion. This amount came from Potomac Economics, who monitors ERCOT’s market functions. As I noted previously, $16 billion works out to roughly $552.00 for every man, woman and child in Texas.

Before the ink was even dry on the newsprint, you could hear the whimpers and the hollers. City officials squawked, utility companies balked. Suddenly, that $16 billion figure began to morph into something much smaller. All sorts of numbers were tossed around. If you mix hard numbers with politics and powerful special interests, they become soft and squishy. Like something you would not like to feel between your toes, while stepping through a cow pasture.

Let’s Make Our Way Through the ERCOT Shuffle

Everybody pick a partner and form a circle. But please stay 6 feet apart, and keep your masks on.

1. We are told that ERCOT overcharged customers by $16 billion – after the storm was over.(Shuffle to the left and swing your arms around. Keep the circle moving clockwise).

2. The Public Utility Commission doesn’t initially deny the number, but refuses to order ERCOT to fix the errors – It would only create winners and losers. It’s too hard to “unscramble the egg.” (Shuffle to the right, take two steps, and kick your left foot forward).

3. Lt. Gov. Dan Patrick calls on ERCOT to repay the $16 billion, plus additional overcharges billed above the approved maximum rate. He cites RRCOT’s own regulations. (Clap your hands and wiggle your hips. Then continue shuffling clockwise).

4. ERCOT’s monitor announces that only $5.1 billion needs to be refunded to consumers – later revised again to $4.something billion. The rest has already been settled with large providers. The PUC Chair claims that the remaining amount is not really an error, and blames it on a formula. (Shuffle sideways to the other side of the circle, and choose a new partner).

5. The PUC Chair tells the Lt. Gov. and a Senate committee that it would be illegal to change any of ERCOT’s billings, and stands by his assertion that the overcharges were not errors. (Face the center of the circle. Turn your backsides outward, and bend forward to your waist).

6. The Texas Senate votes in record time to order that the overcharges be repaid. But the House leadership slams on the brakes and hesitates. Big business leaders urge the State not to “meddle” with prices that were previously set. That translates to “We’re happy with the winners. To hell with the losers.” (That’s all the time for dancin, folks. Now, y’all come back and see us real soon, ya hear?)

The Drama Will Shift to the Courtroom

Regardless of what the State does, this big mess is headed for months, and possibly years of litigation. The cities of San Antonio and Denton have filed lawsuits, along with multiple private utilities. The Legislature should take some action soon to clarify the whole confusing situation. Somebody besides a court judge should tell us whether the big “settled” chunk of the $16 billion was settled accurately and fairly.

Of course, they should order ERCOT to pay back the remaining overcharges. Failing that, they could ask ERCOT’s independent monitor to assist in identifying who now has the unsettled money that was collected in error. Then, the State should pass legislation to retrieve that money and place it in an escrow account. That way, the courts will know that the money is really available to award to the parties that win the various lawsuits.

Will the Public Ever Have Confidence In Such a Crazy, Convoluted System?

Probably not, unless our State leadership is willing to ensure that we are given all the facts. They also need to establish clear guidelines on how ERCOT handles electricity pricing going forward. We are just one polar vortex away from another severe winter storm. But just leaving ERCOT to continue legalized price gouging is not a workable solution. The February storm and exorbitant pricing caused extraordinary financial harm to cities, businesses and citizens throughout the state. We need a whole new electricity pricing model that better reflects the actual cost of delivering the power, with nothing more than a reasonable amount of profit.

Blog Music Special Edition – Songs for the ERCOT Shuffle:

1. “Put Your Little Foot Right There” – Lawrence Welk
2. “It’s a Cowboy Lovin’ Night” – Tanya Tucker
3. “Dance In Circles” – Tim Ryan
4. “Copper Canyon” – Lisa Kirk
5. Do-Si-Do and Face the Sides – Square dance lesson
6. “Changing Partners” – Patti Page
7. “The Winner” – Bobby Bare
8. “Born to Lose” – Ray Charles

Lt. Gov. Dan Patrick Calls for Payback of ERCOT Overcharges

By Bill Oakey – March 9, 2021

The unbelievable $16 billion in utility overcharges that followed the February storm will have to be paid back by ERCOT, and the Public Utility Commission will not be able to stop it. Lt. Gov. Dan Patrick called for the action on Monday, citing ERCOT’s own regulations requiring the paybacks to be made within 30 days (Nodal Protocol Section 6.3 (6) (a).

“Unscrambling the egg” to make it happen will no doubt require armies of lawyers and rooms full of accountants. In addition to the large block of overcharges that happened after the storm was over, Patrick cited other billing errors that came from stratospheric pricing well beyond the State’s already high approved cap. The cap was set at $9,000 per megawatt-hour. But IMM, the outside firm that monitor’s ERCOT’s operations identified sporadic charges as high as $24,000 per megawatt hour. Those errors must now also be corrected.

In the meantime, heads are rolling at all level’s at the State’s utility authorities. On Monday, a second member of the three-member Public Utility Commission resigned. Shelly Botkin’s departure was effective immediately, leaving just Chairman Arthur D’Andrea in place. Then, early Tuesday morning, the Texas Observer reported that ERCOT is refusing to turn over records related to their preparedness and their response to the winter storm. They are seeking an opinion from the State Attorney General to avoid disclosing the information. ERCOT insists that it is not subject to the State’s open records laws because it is not a State agency. The result could be a long legal dispute that ends up at the Texas Supreme Court.

Stories of astronomical electric bills from ERCOT’s demand-based pricing system and the billing errors abound. On Monday, the City of Denton filed suit against ERCOT over an electric bill for $207 million. This compares to their entire annual budget of around $230 million. On a hopeful note, there is word emerging of a huge Tesla “secret battery” that is being constructed at a site close to the ERCOT grid. If all goes well, this could become part of a much needed solution to our power generation woes.

The Legislature is currently rolling out a bucketful of bills to deal with some of the immediate problems. I will not be surprised if they have to appoint a two-year interim committee to hammer out long term reforms to fix the entire tangled up mess. The question remains as to what might happen if we get another severe winter storm before enough current power generating facilities are sufficiently weatherized and enough new ones can be brought online. In my view, the best way to protect citizens from serious danger and costly water-related repairs would be to focus on strategies to implement effective rolling blackouts.

Good News From Austin Energy!

While many Texas utilities faced devastating losses during the storm, Austin Energy estimates that it earned $54 million. That’s because our City-owned utility has done an excellent job weathering its generating facilities. The actual amount of revenue that Austin energy receives, however, could be anywhere between minus $16 million and plus $104 million. It all depends on how well ERCOT “unscrambles the egg” to reprice the State’s power purchase transactions. In any case, our utility’s ratepayers should not be saying “yikes” to massive spikes in forthcoming bills.

But…wait! You might be wondering why we had to freeze in the dark if Austin Energy weatherized most of its power plants, and they were working during the storm. That’s because our electricity goes into the ETCOT grid, where it is sold statewide through a convoluted demand-based bidding process. A process that we now know can lead to other-worldly prices, and become riddled with pricing errors.

Where Is Austin Energy’s Reward for Weatherizing Power Plants?

Under the current system, why doesn’t Austin Energy get some kind of financial reward for better management of its facilities? This is definitely an issue that our City Council and our Legislative delegation needs to look into. The reward for well-managed utilities could come in the form of discounts applied to power purchased from the grid. Or, the State could hold some revenue in reserve from power that is sold. Then, they could do an annual review and issue payments to well-managed utilities, based on a certain set of criteria.

Perhaps there is some provision buried deep within the  troves of ERCOT and PUC regulations that we just don’t know about. If not, let’s hear it for a new bill at the State Capitol to give utilities like Austin Energy and their ratepayers proper compensation-for now, and into the future.

The Great Texas Power Swindle – State Refuses to Correct $16 Billion ERCOT Billing Error

By Bill Oakey – March 8, 2021

While you and your neighbors were freezing in the dark for several days in February, you probably wondered if you could trust the “powers that be” to straighten out the big, ugly mess. Fast forward to Friday March 5. We learned that ERCOT, the team that manages the Texas power grid, kept the maximum price allowable for electricity for 32 hours past the end of the storm. So, for a day and a half, Texas electric utilities were overcharged to the tune of $16 billion. During the full period of the maximum pricing, including the overcharge period, utilities were charged $9.00 per kilowatt hour. That is 75 times the normal winter rate, according to NPR News.

How much do Texas ratepayers stand to lose in this shameful debacle?

Here’s the simple math. This is based on very rough averages, but it will give you the basic perspective:

  1. $16 billion billing error divided by 29 million residents of Texas = $552.00 for every man, woman and child in the state.
  2. $552.00 times 1 million Austin residents = $552 million lost to Austin ratepayers
  3. $552.00 times 2 million Austin metro residents = $1.1 billion lost to the Austin Metro

Surely, the Texas Public Utility Commission would order those overcharges to be paid back. Right?

WRONG!

Like Trying To Unscramble An Egg?

On Friday March 5, Mr. Arthur D’Andrea, the new PUC Chair, who just replaced the ousted former Chair, tried to explain their decision NOT to correct the overcharges. “It’s just nearly impossible to unscramble this sort of egg,” he proclaimed. Then he did an artful Texas two-step to dance around the issue. In doing so, he left a big boatload of unanswered questions:

  1. Are there procedures in place to guard against keeping prices high beyond the conclusion of a power emergency?
  2. Is there a written policy regarding if, when and how the related overcharges should be corrected? If not, why not, and will such a policy be forthcoming?
  3. Who all is responsible for monitoring the fluctuating electricity prices?
  4. What specifically were the various breakdowns in procedures that led to the February overcharges?
  5. Are there any penalties placed upon employees for actions or inactions that can lead to these types of overcharges? If not, will there be some in the future?
  6. What is the historical record of previous overcharges similar to these?
  7. What specific steps can be taken to prevent these overcharges from happening again?
  8. Do any State laws or regulations need to be revised or new ones written to authorize and mandate that these type overcharges be corrected?
  9. Does the Governor have emergency authority or any other powers to make this happen? If not, can political pressure be applied?
  10. How long has it been since ERCOT and the PUC have been audited by the State Auditor?
  11. Are there any reports showing whether or to what extent these agencies have followed previous audit recommendations?
  12. Who will be the first State leader to demand that the overcharges be paid back, ask for revised procedures for both agencies, and request new State audits.
  13. Have you ever heard of any business or agency, public or private, that has ever even suggested not correcting a $12 BILLION billing error??!!

The biggest question – Why do we have such a screwball system? A convenience store owner could face civil penalties up to $10,000 per violation for price gouging. And yet the electric power suppliers get away with it. A bunch of fat cats are now laughing all the way to the bank! For the wonks among you, here’s the scoop on how ERCOT works. This article is from April, 2019. The warning signs were flashing, as they have been for a very long time.

Humpty Dumpty – Texas Style

By Bil Oakey

Humpty Dumpty fell from a tower
That ERCOT assigned to bring us all power
None of the bureaucrats and none of their friends
Could put Humpty back together again

So they gathered his innards and tossed ’em in a bowl

And scrambled him up, unaware of the toll

Try as they may, and try as they might

Those buffoons just couldn’t get anything right

 

They overcharged Texans by $16 billion

How’s that for relief from the freeze and the chillin’?

You can’t unscramble this sort of egg

Said the PUC Chairman – was he pulling our leg?

 

The Texans I know are smart and tough

We won’t put up with that kind of guff

Charging 75 times the normal rate

Is no way to run the Lone Star State!

 

Humpty Dumpty will not be forgotten

By now the poor fellow is probably rotten

It’s time for our leaders to stand up and be counted

There’s a big hill to climb, but it must be surmounted


Anyone who reads this should contact their State Representative’s office and their State Senator to ask for an end to the insanity surrounding our electric power grid and the lack of common-sense regulations.

Check out this amazing, but unverified YouTube video on how to  unscramble an egg.

A Blast From My Past

My days of consumer activism began in the 1980’s. As a member of Austin’s Electric Utility Commission, I fought many electric rate battles. Here is one of my letters to the editor in the Austin American-Statesman. The last line became my slogan:

Isn’t it interesting how many words in the English language have more than one meaning? Take, for example the, word “bill.”  Birds have bills. The Legislature passes bills. Entertainers are listed on bills. But the worst kind of bill is the kind you have to pay, like an Austin electric bill. Well, I have a very simple message. My name is Bill, and I would like to lower yours.

Musical accompaniment for this blog piece:

1.Humpty Dumpty Heart – Hank Thompson (original 1947 version)
2. Dirty Old Egg-Sucking Dog – Johnny Cash (live from Folsom Prison)
3. Four Strong Winds – Bobby Bare
4. The Blizzard – Jim Reeves
5. Storms Never Last – Dottsy
6. I Am The Walrus – The Beatles
7. Texas Two-Step – Vance Lane
8. Take The Money and Run – Steve Miller Band