The Liberty Cafe
The Liberty Cafe
The End of Affordable and Reliable Electricity in Texas
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Ever since the 2021 blackout, Texas politicians have been trying to cover up their role in bringing it about. Now, they are at it again. On this week’s Liberty Cafe, we’ll look at new plan from the Public Utility Commission of Texas to redesign the electric grid that could lead to the end of affordable electricity for Texans.

 

Transcribed by Otter.ai:

No one over the age of 10 will ever forget the great Texas blackout of 2021. We are plunged into third world literally third world conditions. And so ever since that time, Texas politicians, Texas regulators, and Texas generators, in particular, have been scrambling to cover up their leading roles in bringing that about. And now they’re at it again. Last week, the Public Utility Commission of Texas issued a report that is describing the path forward, there’s a lot of options there. Still, nothing’s been finalized. But the general path forward for a total market redesign of ERCOT, which is the electricity market that covers most of Texas. So this week, on Episode 104, of the Liberty cafe, we’re going to talk about how this may spell the end of an affordable and reliable supply of electricity in Texas. Hi, this is Bill Peacock, and welcome to Liberty cafe. As always, it’s a blessing to have you here with me, it’s a blessing to have you listening, then it’s a blessing to be taking part in the battle for liberty with you, as we fight this battle here in Texas, and it’s also of course, a blessing to be part of the fight with Texas scorecard, a great group of men and women fighting for liberty, and spreading news of that fight to everywhere and showing us as Texans where we need to concentrate our efforts. And as Christians, where we need to focus and concentrate our prayers. So we’re gonna get in today to this new PUC plan, and I’m going to strive it can get really technical. And I’m going to strive just to keep it plain for for all of us, really, because the one of the things that big government and big government advocates use to to help us help confuse us about things as they make everything really complex. And through all this complexity, it’s really hard to see the truth. And of course, that’s what they’re trying to do. They’re trying to turn us away from the truth for a variety of reasons. But one is, in this case, they don’t want to be held responsible for what they have done to assist the collapse of the Texas electricity market. And then some folks in government just don’t want us to see the truth at all, because they’re in the process of trying to turn our government into a tyranny. So let’s go back just briefly, to the Great Texas blackout of 2021. There’s so much that went on during that time. And I don’t need to remind most of you of what happened. So I’m not going to get back into that what I want to do is just look at talk about the three primary factors that we have to focus on. When we’re thinking about what happened. Number one, it got really cold, it was a record cold event, it was the coldest the Texas has ever been in my entire life. And I was born in 1959. So that that gets us close to a one in 100 year event, a true one in 100 year event. And Texas just wasn’t ready for it. Because for the most part, Texas shouldn’t be ready, in some ways for one and 100 year event. We can make plans and we can try to mitigate things. But there’s no way. If we spent all the money, we needed to protect ourselves from every one and 100 year event, whether it’s flooding or rain or heat or whatever, we’d go broke. And so we have to moderate how much money we spend on things. So that’s factor number one, it was really cold. Factor Number two are subsidies for renewable energy that has been going on here in Texas, since about 1999 or so just depends on where you start counting. And it certainly wasn’t very much in those early years. But it’s grown rapidly, both at the federal level and the state level. And the local level for this year, for instance, there’s gonna be over $2 billion worth of subsidies for renewable energy, and that’s trailed off a little bit, although it’s probably going to pick up pretty soon again, with the all the renewable subsidies the new renewable subsidies contained in the inflation Reduction Act that our government recently passed with Mike had the help of Republicans in both the House and the Senate. So there’s factor number two, that has caused a tremendous increase in renewable energy production here in Texas, wind and solar, which is flooded and disrupted the Texas market. And then number three is the manipulation of prices. So one of the big problems of course, with the blackout was, we were we didn’t have electricity. And that was a big problem that that had something to do with it being really cold. It had a lot to do with there being subsidies for renewable energy. And it also had something to do with the manipulation, excuse me, the manipulation of prices. Because what had been going on for years in the PUC is that it was so scared of these companies, big generation companies, manipulating prices themselves, and earning too much profit, market power abuse, exercising market power, and abusing their market power is the one of the economic terms for that, that the PC went the other way, they forced prices down. Now, it was partly, a significant part of that was the renewable energy subsidies driving prices down. But another not the cost, by the way, because the subsidies came out of our pocket books from our tax bills, right. So we pay for electricity two ways today through tax bills, both income taxes and property taxes, and through our electric bills. So just because we may pay a lower price for some renewable energy, doesn’t mean it costs less, it just means they’re hiding, how we’re paying for it. And so these, so the government was pushing down the prices of electricity, through these renewable subsidies, but also through other interventions in the marketplace, because they were afraid of generators making too much money. Well, guess what happened, they were really successful. And turns out generators weren’t making enough money, or at least, not enough money to really invest in the new natural gas fired generation that we need here in Texas to keep the lights on. Now, that hasn’t always been the case, we went to what we call the energy only market, where basically, we’re just paying for electricity that we buy, which is the way the market should be. And that worked well from 2000 or so when that got started through about 2013 or 14, but, but the manipulation of prices got so bad by the PUC and in the entities that regulate electricity in Texas, that the market started failing in many ways. And that’s why we ran into the problem we ran into in 2021. So a lot of people would look at the perspective of the blackouts. And say that it was the cold. The cold was the main proponent, the main cause of the blackouts, and that and perhaps a lack of winterization by irresponsible generators. So that’s kind of the party line from politicians, and regulators and generators, except the generators don’t call themselves irresponsible. But I would suggest to you that the real problem is, was the renewable energy subsidies over billions and billions of dollars, over 20 plus years in the Texas market, and the ongoing manipulation of prices, because if you recall, it wasn’t just that we’re out of electricity. It’s that electricity got really expensive. So the prices go up when you have a shortage. And that happened here in Texas. And during the winter storm, the price of electricity per per megawatt hour was went up from Oh, you know, the average if you just look on any given day, it’s probably around $50. That wide variations but about $50. But on the day that the winter storm really hit that Monday, Monday morning, Monday afternoon, prices were at about $2,000. But the PC just off the top of its head arbitrarily and capriciously decided to raise prices to $9,000. Their rationale was, well, if we raise prices, people more people will sell electricity. But the big flaw in their rationale and in their minds was that there was no more electricity to be sold. The winter storm had knocked out a lot of power. Everybody was already trying to get their generation back online because a lot of generators were losing money. They still had generation to supply to people, and if they couldn’t do it, they had to go by it to honor their contracts. But the PUC raised their prices, the prices to $9,000 per megawatt. And,  and what happened was, and they kept it there for like three days. And so we pulled up a bill. And it’s counted a lot of different ways, but 16 billion 30 billion, but whatever the particular more people would put on it, Texan spent more for electricity in the week, two weeks around the winter storm URI than they had in the previous two years combined. So that’s the big picture of what we’re looking at. So we get to last week. And as the Public Utility Commission, had been tasked by Governor Greg Abbott, about a year ago, last July, to make a totally redesign the electricity market here in Texas called the market redesign. And so, the PUC had hired this company, e three is what it’s called. Let’s see, I have it written down here somewhere. No, I can’t see it. But it’s energy and electricity, and something else. Anyway. E three. And so over the last several months, e three has been putting together this report now it’s E threes report, but trust me, the PC has had a significant amount of input into what this report will look like. And some some of the things I know for a fact that are in this report II three really doesn’t like but they were told to put it in by the PUC. And so they did. And so they’re, it’s a total mess. And why is it a total mess? What there are three main reasons for that. And I’ll go through them briefly right now, number one. So what the PUC report, the E three report does, it just doubles down on the status quo. So they go through, and they create six alternative forms of energy markets that we might be able to use here in Texas. And they weigh those against what they call their status quo option. And so they look at the costs of the the six options, and they look at the reliability of these six options. And they say, Okay, this option number one, is cost this much more than the status quo. And this option number two, brings this much more reliability than the status quo. But what they don’t do is, look at the status quo, the energy only market in Texas, and look at that and say, well, the status quo is not good. Why don’t we because it’s not really an energy only market. Why don’t we model what a true energy only market looks like? Maybe the what the market looked like in Texas 10 years ago, or something like that, or even better, just what a true energy only market would look like, and then model that and then compare these new models, these new alternatives to what a real energy only market would look like. But but they don’t do that. Because everybody, the politicians and the regulators, and the generators all want to get away from the energy only market, the politicians want to get away from it. And the regulators really want to get away from an energy only market because they can’t control it. And if they can’t control it, they’re afraid that they’re gonna get blamed for something that they weren’t in control of. And so they think that they can control it and keep bad things from happening. Well, that’s not going to happen. But that’s what they envision in their minds. Because what they if they go back to 2021, they think the problem was that they weren’t in control. And if they had been in control, we wouldn’t have had these blackouts. The truth is, they were in control. And a lot of ways they were manipulating prices, they’re throwing subsidies at renewable energy and traditional generators. And that’s what really messed up the market. So they think doubling down on the interventions that they have been doing for the last 10 years or so is going to make things better, but it’s not. And of course, the generators want to get away from energy only market because they don’t like competing. When Texas first went to this model, it was the only state in Texas and one of the few places in the entire world that allowed market prices generally to set the the price of electricity market forces to set the market price of electricity rather than having regulators involved in all that. And it first regulators. I mean, generators are making money hand over fist because there are high gas prices and a lot of factors. But then once the market got into play and competition really dug in. Some of the generators stopped making money, some of them went bankrupt. And it’s the only state where these big companies have to do that. And they decided they liked a lot better going to these other states and asking regulators to give them money from the consumers. And rather than having to go to the consumers themselves, and ask for money, because they have this, this regulatory system all set out, and they could get themselves better profits for less work through a regulated system. So that that’s why the generators want to get rid of this energy only system. And so that’s the first big flaw of this report by the PUC. And an E three, is it just doubles down and provides more regulation on top of the failed regulation that we’ve already seen. The second one. The second flaw in all this is that the E three report doesn’t provide a path for slowing or stopping the growth of renewable energy, intermittent generation, which is renewable energy, because why is it intermittent, because a natural gas plant, for instance, can generate electricity 24 hours a day, basically, on call, now, you know, it’s going to have some downtime for maintenance and those types of things. But they run, I can’t remember the exact term, but probably 97 98% of the time they’re generating, they run about that much of their capacity. But that’s not true for wind and solar, the wind, wind power can only generate electricity when the winds blowing. And quite often, it’s not blowing when we need it the most, like four or five o’clock in the afternoon, or at 1am. On a cold February morning, when freezing temperatures are down. And around 10 degrees across the state, there was no wind, of course, we have the same problem with solar, right, solar at least has the benefit of generating electricity during the day, on a regular basis when we need it. But it’s still intermittent because of the clouds come by. There’s a problem that happened. This dismay, I think it was where it was really hot. Over in East Texas, Austin, basically and east of here. But Cloud Cover came over West Texas where all the wind is most of the wind is and it messed up the whole system. And we had a nearly a bad event come out of that. And of course, solar power was nowhere to be found again at 1am on that freezing cold Monday morning back in February. So that’s what intermittency means. Yet, over the last, let’s go back to 15 years or so to 2007. Renewables have just overloaded the system. Right. So if we go back to 2007, nuclear gas and coal generation made up about 94% of the electricity generated in Texas, when was 2.9% Solar was non existent. But today, what has happened is that solar and when combined now make up 37% of the electricity generated in Texas that’s so far in 2022, gas, coal, and nuclear all of a sudden, are down to about 59% 59%. And in fact, when now generates at 32% generates more electricity in Texas than does gas. Well, you can see some of the problems that creates, in that we’re so heavily reliant on wind and solar. And if we need electricity, we can’t count on it being there. That’s a big problem. And that’s one of the problems we see in the summer all the time. And particularly a couple of times, specifically back to 2021. On on when it comes to the intermittency problems of renewable energy. And so the last thing I want to talk about is how this new market design they’re coming up with and it really doesn’t matter which design they go with. There’s a favorite one, the chairman of the PUC has a favored part of the proposal and not all the people on the five member PC agree with him. But that seems to be the direction they’re heading. But whichever one they go with, it’s going to cost Texans billions of dollars. And there’s all kinds of money, places where this money is coming from, for instance right now. Well, back in January, the PC increased the operation of what is known as the operating reserve demand curve or the RDC. It’s very highly technical. I don’t understand all of it, but basically what it does is it it has the PC and ERCOT managers have made the decision that the market doesn’t work so that the demand curves in this market for whatever reason aren’t working. And so the RDC is a bureaucratic effort to replace the market. Price curves. And they do that. And what they do is when certain conditions, particularly tight conditions when, when we’re getting when generation is getting, or Wintley Put another way, when demand is getting close to the maximum generation that we have available, it starts artificially increasing prices. Now, why does it do that? Well, they would tell you that it’s the hope that more people will come in and sell electricity. But why they’re really doing it. It’s just a straight subsidy, that generators who have been complaining for a decade or so now that they’re not making enough money. And so they, this is literally the truth they put us or DC in for an only reason to do that was to get more money to generators. Now, did generators need more money, maybe they did, maybe they didn’t. But if they did need more money, the reason they were running short on money was because the problems that renewable energy subsidies were causing and dropping prices on the market, because renewable energy generators so low a lot, because they’re getting all these subsidies, so they can actually sell below market prices, and still make a profit because of their subsidies. And then of course, the other reason was the market manipulation by PC regulators who were scared to death of these companies making too much money. So go figure so so that that is about $2 billion. So far this year, it could go a little bit higher before we get to the end of the year, the RDC. And one study is estimated that it will add at least an additional 1.3 billion on top of that next year. So next year, the RDC could cost Texas consumers about $3.3 billion. So there’s $3 billion of the cost, then there’s all the cost of what’s known as securitization, remember, we had that $16 billion electricity bill from 2021. Well, rather than make consumers pay all that at one time, what they did was the state allowed these companies that are so electricity and part of these costs are also in natural gas sellers, retailers, to go out and borrow money bond, sell bonds, and use those bonds to pay the high bills that they faced, because, you know, some of these retailers just went broke. Others were able to survive and go sell these bonds. And then now we as consumers are going to be paying those bonds off for the next 30 years or so there’s another will about $10.5 billion or so cost that’s over the whole period of time, that should run out to about $400 million per year, we’re paying extra on that. And then on top of that, there’s just the cost of renewable energy subsidies, right from, as I mentioned before, it’s about $2 billion this year. And just to break that down for you about 237 million that’s coming from property tax abatements at the local level, about 700 million of that is coming from state subsidies of different sorts, and about 1.2 billion of that’s coming from the federal government. So if you add all those costs up, plus about the $400 million cost, that the three report says the new alternatives are going to cost, you add all that up, and it looks like by the year 2026, when that comes around, Texas will be spending $6.4 billion more on electricity, then the real true market price for electricity. And all that is coming about because politicians in Texas are scared to admit their fault that they’ve been subsidizing renewable energy and traditional energy generation for years, manipulating prices for years. And they don’t want you to know that they cause all this problem. And so rather than have you find out why things went wrong, then they’re just going to make you pay more money and pretend like it never happened. Now there is a way out of this. And basically, the bottom line here is to get government get politicians get regulators out of the electricity business. And let buyers that’s us, you and me and Exxon Mobil and target and small businesses, let the buyers work with the sellers through a market and decide what the prices need to be that that works everywhere. I know some people get scared that how can I stay Not too big company, but it works all the time talks about clothes. It works with computers, it works with all kinds of things, go to Ikea, look at the prices there, go try and buy a you know, a laptop now doesn’t mean that inflation isn’t getting in the way of all that today, but still it works. And so if we just let buyers and sellers work together, eliminate all the subsidies and all these manipulations of prices. All of us here in Texas can have an affordable and reliable supply of electricity. Well, thank you for being with me today on the Liberty Cafe blessing to have you here with me and please go on over to Texas scorecard.com and see what you can do to contribute to the battle for liberty in Texas.

 

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