Wholesale electric prices spiked 3,000 percent
The cold weather has been blamed for the blackouts that left thousands of Texans without heat and power this week. ERCOT, the organization that operates the Texas power grid, said it had lost about 7,000 megawatts of generation — a massive amount, the equivalent of more than two big nuclear plants. Many questions remain.
- Texas homeowners were prepared for the cold snap and knew enough to wrap their pipes. But what about the state’s big electric generators? The temperature dropped overnight Tuesday — but not to unprecedented levels. And the quick drop should not have come as a surprise to anyone. And yet it’s been reported that 50 of the state’s 550 power plants had been knocked offline by severe weather. What could have been done to prevent such a massive loss?
- Wholesale energy prices spiked dramatically shortly before the rolling blackouts, and then remained at nearly unprecedented levels for several hours afterward. Were these prices warranted? A review of ERCOT data shows that for much of the evening spot energy was selling at below $75 to $125 per megawatt/hour. That’s a bit high, but nothing too far out of the ordinary. But then at 3:45 a.m. — nearly two hours before the rolling blackouts began — prices spiked to more than $1,100, an increase of approximately 1,000 percent. At 5:15 a.m., 15 minutes before the rolling blackouts, spot prices shot past the $3,000 mark. And they stayed there for much of the morning.
Obviously, someone within the electric industry made hundreds of thousands or even millions of dollars during the blackouts. Were those high prices justified, or was there a breakdown in the competitive market? It’s also clear that Texas lost a massive amount of generation, but it’s not clear why.
The Public Utility Commission and the state’s Independent Market Monitor (an entity that’s charged with playing a watchdog role in the wholesale electricity market) should take a long hard look at the blackout and the circumstances surrounding it. Texans deserve answers.