Actions speak louder than words. Despite the established narrative, public servants are making Texas’ electrical grid more unreliable and unaffordable, potentially putting Texans’ lives and livelihoods at risk.
The Era of Energy Liberation
As previously reported in Part 1 of this investigative series, the year-to-year actions of Texas public servants have created an environment where our state’s power grid’s downward trajectory is being whitewashed.
From October 2021 to October 2022, Texas’ average electricity rate spiked higher than the national residential electricity rate: 17.8 percent compared to 14.4 percent. This information was gathered by the website Save On Energy. Texas wasn’t ranked as having the cheapest electrical rates, nor the most expensive, in the nation; rather, it came too close to joining the list of those states with the largest annual increases.
Increases in Texas electricity costs appear to be a trend. The website Electric Choice reports that from September 2020 to September 2021, Texas was one of 22 states where the average electricity rates increased. The other states’ rates saw decreases.
This did not happen in one legislative session, or even three; it’s the result of a series of actions over the course of decades. Those actions held severe consequences for Texans, because in the modern Western world, electricity is not a question of mere convenience. It is more than just not being able to charge your smartphone or stream videos.
Electricity maintains safe climates in homes and apartments, particularly during times of extreme weather conditions.
This is a life or death issue, and increasing grid reliance on unreliable energy sources is a recipe for disaster.
But, Texas was not always on this path. In his 2022 white paper, subject matter specialist Bill Peacock recalls the positive and productive history of the state’s era of energy liberation.
It was the 1990s, and Texas had teamed up with other states in liberating energy markets. They were attempting “to get cheap electricity out of cheap natural gas” by swapping “political rate setting” with customer-empowering market competition. “The details of what would be sold and how it would be priced were left to the ingenuity of buyers and sellers,” economist Robert Michaels stated.
In short, the customer became king. Of all the states in this electric liberation alliance, only Texas went all the way.
The benefit for customers was that the power generators would bear the cost for building new power generation. Such an environment would make building too much generation, or building unreliable generation, unattractive.
“Under the old regime, consumers had to pay for new power plants whether or not they were needed,” Bill Peacock wrote in his 2022 white paper “The Decline and Fall of Reliability, Affordability, and Competition in ERCOT.” ERCOT is an acronym for the Electric Reliability Council of Texas, the state bureaucracy that regulates the state’s power grid.
Peacock’s study noted that in order for the new customer-is-king market to work, the state “allowed on-peak energy prices to reach extremely high levels.” That sounds shocking, but the competition that came with this market forced energy generators “to become more efficient and brought substantial improvements in grid reliability.”
Energy generators were now accountable and responsible for their actions. This accountability resulted in an improved grid.
But not all energy generators liked this accountability and responsibility.
The Great Reset
Texas public servants, after long years of work, had finally made the energy customer king. They had done so by shifting from a government-regulated system to a market one. A true free market makes businesses accountable and responsible for their decisions. They own the consequences, both good and bad.
But already efforts were underway to undo all of this.
It was 1999, and the sun was setting on Democrat rule in Texas. George W. Bush was in his second term as governor, and in the process of running for president. Democrats held the Texas House with a six seat majority, but Republicans had the Texas Senate with a slim one vote majority.
Peacock’s research finds that it’s in this environment that state lawmakers started to nervously reset from energy liberation. They passed “numerous antitrust measures,” due to fear of “potential” price gouging by large companies that deliver large quantities of energy.
This turned out to be only the beginning.
In 2007, state lawmakers almost took Texas’ energy market to the polar opposite of the customer being king. Their attempt to completely annihilate the presence of any competition, reducing energy customers to serfs, barely failed because of a technicality.
But public servants did keep steady progress in a dangerous direction. Years after that session, state lawmakers gave new powers to the Public Utility Commission. These powers were not to protect competition, but to reintroduce government-manipulation into the market. Namely, these powers included “emergency cease and desist authority,” the power to “disgorge revenue,” and authority to give a thumbs up or thumbs down vote to “mergers and acquisitions.”
Slowly, bureaucrats were being made king. And businesses began demanding an end to accountability and responsibility for themselves.
Making Energy Unaffordable
In 2007, Energy Future Holdings came into being out of the largest debt-backed purchase ever in America. “Debt is dumb,” the oft-cited axiom of personal financial specialist Dave Ramsey, was proven true again when EFH declared bankruptcy seven years later. “The problem was not with the market,” Peacock wrote in 2022. “It was the massive debt EFH had taken on just before electricity prices began to follow natural gas prices in a steep decline.” The Wall Street Journal had also criticized the actions of Energy Future Holdings, not Texas’ environment of accountability, responsibility, and the customer being king.
Other energy generators saw profits decrease. Rather than work on more efficient means of delivering energy, they instead resorted to what too many big businesses often do:
Complain to the government.
Peacock records they didn’t just complain, they effectively blackmailed statewide public servants and regulators, threatening that unless they also got paid for existing, Texas would lose power. These are called “capacity payments.” Instead of being accountable, these generators now wanted a formalized extortion racket. Slowly, the swap was in effect. Government and big energy were being turned into kings, dictating to the customers–turned-serfs how much they would pay, and for what. This is called a “capacity market.”
Peacock wrote this is where energy customers are forced to pay twice for the same product. The first payment the customer is paying for nothing, just the benefit of the power generator’s existence. The second time is for an actual product: electricity. “Capacity markets add extra expenses without giving the reliability it promises.”
A 2013 study by Andrew Kleit and Robert Michaels counter-attacked the big energy blackmail. “An examination of ERCOT’s current state does not provide coherent support for radical change in its markets,” it stated. Their study found that power shortfalls in 2011 through 2012 were thanks to “political, regulatory, and weather events.” In other words, thank the government and nature.
Rather, Kleit and Michaels reported that in the customer is king environment, power “generation adequacy” was restored despite three or five year projections showing ERCOT “falling dangerously short of reserves” during most years of its existence.
The report also blew a huge hole in complaints about building new power generation. “On the surface it appears odd that generation investment in ERCOT continues apace despite official calculations of its unprofitability,” it read. “In reality a more detailed picture of the choices available to generators shows that building them for ERCOT’s actual markets is often profitable.”
Rather than heed this data and breathe easy, commissioners at the Texas Public Utility Commission succumbed to big energy’s threat. They tried to create the very extortion racket they whinged for.
These efforts were forced to go underground after the Texas Senate barked at the idea. Capacity payments were made to generators through “numerous backdoor payments” that hiked up customer’s costs.
One such effort by the Public Utility Commission that bilked customers was named the Operating Reserve Demand Curve (ORDC). While the year to year cost changes, Peacock found that in 2019 it cost customers more than $3 billion.
PUC commissioners also handed out windfalls of cash to “some generators and well as suppliers of natural gas” by fiat during the 2021 winter blackout season. How? They hiked the price of electricity to $9,000 per MWh. “Depending on the source one consults, the cost to buyers of electricity that week increased at least $16 billion to as much as $38 billion,” Peacock wrote. “Much of it paid—or paid for in the future—by Texas consumers.”
The customer was no longer king, but a serf to big energy and bureaucracy.
The PUC did even more to hike customers’ energy bills, while claiming they were out to stop price gouging, by using “ancillary services” even more. Peacock told Texas Scorecard that this is where “the PUC goes in and buys electricity off market, and raises prices that way.”
But there’s another important data point. “Ancillary services” are promoted on a Federal Government propaganda website promoting unreliable energy sources like wind and solar. This is in keeping with another action by the state’s public servants that put the state’s power grid, and customers, at risk.
Making Energy Unreliable
Primitive people once killed goats to appease the volcano gods. We are much more sophisticated now, but are still sacrificing our industries and our living standards to the climate gods to little more effect.
Former Australian Prime Minister Tony Abbott spoke those words in a 2017 speech about the unreliable energy cult. “Environmentalism has managed to combine a post-socialist instinct for big government with a post-Christian nostalgia for making sacrifices in a good cause,” he said. “So far, climate change policy has generated new taxes, new subsidies, and new restrictions in rich countries and new demands for more aid from poor countries.”
The pet cause of climate worshippers is pushing unreliable energy sources like wind and solar. Despite the Texas Legislature, and all statewide offices, being dominated by Republicans for decades, the Lone Star State has not stayed out of the green grift. In fact, lawmakers have offered sacrifices to the unreliable energy gods, either in the form of monies ripped straight out of the hands of the taxpayers, or by strapping burdens to their backs.
One such example is the corrupt system state lawmakers created in response to concerns about the state’s burdensome property taxes. Rather than eliminate this immoral tax, the Legislature set up school boards as mafia committees to hand out limited tax relief deals to certain businesses. In exchange, they’d extort protection money from these businesses, even though the school districts would suffer no loss of expected tax revenues from the deal. This was the Chapter 313 tax abatement system, on which Texas Scorecard recently launched a five-part investigative series.
Peacock found that in 2019, the Texas comptroller reported 57 percent of those awarded with these corrupt tax favors were for unreliable energy projects. In other words, a corrupt system state lawmakers created directly contributed to the state’s power grid’s growing instability.
Chapter 313 recently expired, but certain state lawmakers have signaled a dedication to reviving and rebranding it.
But there’s more. The Texas state and local governments joined with the federal government to give more than $24 billion (since 2006) of taxpayer monies and other taxpayer-backed benefits to unreliable energy generators operating in the state. About $12 billion of that came from federal taxpayers, $10 billion from state taxpayers, and $1.5 billion from local ones.
Of particular interest are the deep pockets of the companies receiving these handouts. In 2019, Peacock found the largest subsidy at the time in Texas was the federal Production Tax Credit (PTC), at just over $16 billion of taxpayer monies through 2029. All for unreliable energy. “This $14.4 billion worth of tax subsidies to date has gone to generators with more than $355 billion of market capitalization.”
Not exactly helping the smallest and poorest.
It looks like taxpayers will continue to be forced to finance this green grift. The Energy Alliance, where Peacock serves as policy director, estimates the costs of federal and local subsidies will be roughly $2.6 billion in 2026. Of that, $167 million will be from local property tax abatements for unreliable wind and solar generators, and $2.4 billion will be from federal subsidies. Namely, the Production Tax Credit for unreliable wind, and the Investment Tax Credit for unreliable solar.
In his 2021 white paper Subsidies To Nowhere, Peacock noted an 80 percent growth in unreliable energy, and how government-handouts of taxpayer cash and other benefits powered this explosion. “Wall Street bankers and investment firms have partnered up with renewable energy companies from all over the world to chase the billions of dollars available if the companies will pick this form of energy favored by politicians and bureaucrats across the globe—including the state of Texas.”
Further reliance on unreliable energy sources not only threatens grid stability, but also contributes to increasing unaffordability. “It has been well documented that renewable energy has played a major role in increasing the cost of electricity for Texans and in reducing the reliability,” Peacock wrote in November 2022. This is concerning as ERCOT data Peacock analyzed shows that through June of last year, 37 percent of total electrical generation in Texas came from unreliable wind and solar. “Even when the intermittency of renewables hasn’t led to reliability problems, it has significantly increased the cost of electricity as regulators have forced Texans to pay billions of dollars to get enough generation online to keep the lights on.”
Double Down
As economist Milton Friedman said, policies must be measured by their results, not their intent. The effects of the policies and regulations state lawmakers and bureaucrats have wrought has turned customers into serfs of big energy and government. The result is Texas’ electrical grid incrementally becoming unreliable and unaffordable.
And state public servants aren’t backing down, they’re doubling down.
Peacock’s November 2022 white paper analyzed the Public Utility Commission’s proposal to redesign the state’s electricity market. He found that costs to energy customers would be even higher than what the PUC’s report suggested. “The recommended alternative in the E3 report will force Texas consumers … to pay $5.8 billion a year above market price for the electricity they purchase in ERCOT,” he wrote. “Most of that will be used to subsidize thermal and renewable generators in Texas with multi-billion-dollar market caps in Texas’ newly designed capacity market.”
Considering the recent reports of reliability concerns with the grid following the February 2021 winter blackout, moves doubling down on what created this unreliability should be concerning for all.
And in light of inflation and a struggling economy, bureaucrats mandating customers’ energy bills increase should be seriously reconsidered.
Not all public servants appear to be on board with this doubling down, though.
“Texas can’t thrive on a wind and solar-only energy future. When we need it most, wind and solar can’t deliver enough to make a significant difference,” tweeted State Sen. Tan Parker (R–Flower Mound) on February 2, 2023. “Oil and gas will continue to be the main energy source for our state and nation for the foreseeable future.”
In Part 3, Texas Scorecard will go over what happened at one facility where the power went out in the February 2021 winter blackout.
