Texas Observer: Some Companies Made Millions Off the Texas Blackouts

[elehhhhna]

Texas Observer: Some Companies Made Millions Off the Texas Blackouts
February 4, 2011

Michael Giberson

In other commentary on ERCOT’s rolling blackouts: “Some Companies Made Millions Off the Texas Blackouts.”

While Texans suffered rolling blackouts yesterday, some power generators were enjoying windfall profits. Starting around 5 a.m., prices in the wholesale market surged to the market cap, $3,000 per megawatt-hour, and stayed there, off and on, until around noon. Prices are typically below $100/megawatt-hour, acknowledged ERCOT CEO H.P. “Trip” Doggett today in a press conference.

There are still more questions than answers but this much is clear: At best, some power generators around the state raked in oodles of money thanks to the way ERCOT has structured the energy market. At worst, some may have manipulated the market to drive up prices.

http://knowledgeproblem.com/

[xchrom]

1. GASP! no -- who would have thought that?!?! nt

[arcane1]

2. This is giving me ENRON flashbacks

and their phony "energy crisis" here in California

[shanti]

4. HELLO!

when i first heard of the tx rolling blackouts, the cali enron energy crisis came to mind.

[Sal Minella]

11. Little Old Grandma Millie is taking it in the shorts yet again.

The names the Enron glee club used for their manipulations were particularly fetching, remember? "Donkey punch" was one.

Worked in California, why wouldn't it work in Texas?
Worth the risk, to multiply profit 30 times.

[DBoon]

13. I was hoping that maybe *one* of the companies would be CA-based

no such luck

[Brother Buzz]

16. Yes, and Ross Perot flashbacks, too

If someone scratches around a bit, they will discover Perot Systems Corporation software was used to game the system.

[Rosco T.]

3. We are still havin them today...

#3 since 5am just finished, power has been on about 20 minutes.. I figure got about an hour before we go phffft again.

[badtoworse]

5. This is what you get when you make power plant development difficult and expensive.

If you make it difficult to develop adequate capacity, then you won't have enough during an emergency situation as we have now. When that happens, any generators who are selling into the spot market will charge the maximum price - that should surprise no one. The generators in question are probably gas fired peaking plants that normally operate on 3% -5 % of the time. Most of the time, the spot price is too low for them to make a profit. What is happening now is predictable and I have no problem with it.

I'd be very surprised if there was market manipulation. I'm sure ERCOT has rules that prevent that.

[aquart]

7. Riiiiiiiight.

It's all the fault of too much regulation. Yeah, that's the ticket.

[badtoworse]

10. So why do you think there isn't enough generation available to meet the load?

[justabob]

14. if we have no capacity why can we all crank our ACs high in summer

with no rolling blackouts?

[badtoworse]

15. The problem is that a lot of capacity is likely in maintenance outages right now.

In the summer, every megawatt is available because demand is usually higher then, and so are prices. In Texas, demand is usually lower in the winter so that is when most plants do maintenance. That is most likely the reason why power supplies are short. Going forward, Texas will likely improve its capacity reserve margins so this doesn't happen again.

[justabob]

17. ok, so what we are complaining about,

is that the power companies didn't fire up the back ups even when it was clear the power WOULD BE NEEDED,and that failures were LIKELY and other people profited by that. It is a legit criticism and I am sorry, but people shouldn't have to worry about crap like that. I understand when power lines go down etc, but that isn't what we are dealing with. This was easily preventable if the power companies gave a shit. On edit: or weren't worried about the cost of possibly "wasting" money on excess capacity for a few HOURS.

[badtoworse]

20. That's baloney

It takes weeks to overhaul a large turbine and costs a few million bucks. You don't just put them back in service.

"fire up the the backups"? At $3,000 per MWH, they would have fired up every MW that was available. The problem is that they didn't have enough backup available to meet an unusually high winter load. That is probably a combination of allowing too much capacity to be out for maintenance and not having enough reserve margin to begin with.

As for "wasting" money on reserve capacity, how would you propose paying for it? Generating capacity is very expensive and nobody is going to build it if they're not going to paid for it.

[justabob]

21. not buying it, sorry

call me stupid or ignorant or whatever you want, but I cannot believe that in this day and age we cannot keep the power on when it gets down to the teens in Texas.

[badtoworse]

22. The lights aren't staying. What's your explanation?

[girl gone mad]

34. Your story keeps changing.

Is it big, bad government or is it incompetent maintenance decisions by plant operators?

February is always the coldest month in Texas and big snow storms are not uncommon. Power should have been available.

[Sal Minella]

24. "Maintenance" was the excuse given when Enron was deliberately

shutting down functional plants in California -- ye gods, how can people's memories be so short???

[badtoworse]

25. Enron is gone and this isn't California

Power plants really do need regular maintenance and it's scheduled months in advance. $3,000 is the ceiling price and it's about 30 times the normal price. Holding back generation isn't going to drive it higher and anyone who could be generating is generating - this is as good as it's going to get for a generator. They just don't enough reserves or they scheduled too much maintenance. It's probably both

[Horse with no Name]

26. IF you dig deep enough

There are quite a few folks from Enron still in the energy business in Texas.

[Sal Minella]

30. "Holding back generation isn't going to drive it higher "

So . . . somebody just forgot to tell Ken Lay's boys that???

"Holding back generation" sure as heck worked for them.
That, and pumping it back and forth over the California-Nevada border.

[badtoworse]

36. How does the saying go? Put up or shut up

If you have any evidence that generation was held back to drive up prices let's see it. If you don't, then you're just speculating,

[gkhouston]

33. No one sane would schedule much maintenance in early February. It makes

far more sense to concentrate it in March and October, months when demand would be less and unexpected outages would be less likely and less painful.

[badtoworse]

37. You might be right; it depends on the seasonal load profiles

I've had almost 30 years experience, but it's in PJM (northeastern US). Your statement about March and October would be true up here, but I would expect Texas' profile to be flatter in the winter. That would allow generators more latitude in scheduling maintenance. I didn't have the time yesterday to do the research and confirm, but I strongly suspect that capacity reserve margins in ERCOT are too low. If that's true, it would not require a lot of units in maintenance to create a problem given the extreme weather we've been seeing.

What I'm not buying are statements that the system is being gamed. True, Enron did it in California, but that was 10 years ago in CAISO. I am sure that all of the country's ISO's and FERC reviewed regulations to prevent a similar occurence. I know that in PJM, we have an independent market monitor that review operations to make sure that no one has the power to maipulate the market. I'd be very surprised if ERCOT did not have something similar.

[oldhippie]

27. Because most of our heat pumps down here ....

.... draw one hell of a lot more current in the auxillary heat resistance coils heating mode than in the cooling mode. About 19.2 KW more in my case. I'm an EE and I watch these things carefully. When it's below 25 F the heat pumps are not very efficient. Most house in my area do not have gas hookups and are all-electric.

[theophilus]

8. You're wrong. This is what you get when greedy f*&ks game the system.

Put 'em all in prison. Wind and solar will fix this sh*t!

[badtoworse]

12. What a crock!!

Texas already has more wind generation than it knows what to do with - if anything, it's oversupplied with wind.

How are the greedy f*&ks gaming the system? Do you know anything about the power business?

[KamaAina]

28. We're talking about TEXAS

I doubt that power plant development is as difficult or expensive there as in most of the U.S.

[WinkyDink]

6. Couldn't happen to a better state.

[Horse with no Name]

9. Problem is

I live here and struggle to pay my electric bill every month. It is as much as my car payment and house payment combined.

I can ill afford a rate hike now.

[Ishoutandscream2]

18. Remember there are DUers from Texas

And none of us here were cheering the rolling blackouts in California. Yeah, there's no Texas bashing on DU.

[blogslut]

19. Please stop

You don't mean that.

[blondeatlast]

23. Enough with the state hate. nt

[SammyWinstonJack]

29. I'll remember that when I struggled to pay my electric bill that is already double what it was just

a few yrs ago. Thanks.

[Dappleganger]

31. There are human beings there.

Sorry, I don't agree with state bashing.

[somone]

32. Most large cities in Texas are blue

something worth remembering

[Liberal In Texas]

35. Texans on this board don't tolerate bullshit like this very well.

As you are finding out.