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Electric Cooperatives, The Lone Shining Utility Star Of The Texas 2021 Winter Storm

Frank McCamant's picture
Principal McCamant Consulting LLC

McCamant Consulting, owned by Frank McCamant, is a business and strategy development partner for organizations involved in energy resource management and smart grid development. Based in Austin...

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Matt Chester's picture
Matt Chester on May 12, 2021

Interesting article, with some clear implications for Texas. Can the lessons be readily applied elsewhere as well?

Frank McCamant's picture
Frank McCamant on May 13, 2021

I think electric cooperatives are inherently more responsive and concerned about their members than the for-profit utilities. Not sure there are any real lessons here but just an awareness of this reality. I think electric cooperatives across the country would be the same.

Bob Meinetz's picture
Bob Meinetz on May 13, 2021

"Regulated electric utilities where a single entity is responsible for the commercialization, transmission and distribution of electricity might be better able to respond to the type of challenges presented by the February 2021 winter storm than are deregulated electric utilities where one entity is responsible for commercialization and another is responsible for transmission and distribution."

However quickly Californians are forced to learn the lesson there is no free market in electricity (we should have learned it in 2000-2001), it won't be quickly enough. Texas is the perfect example - where a entrepreneurs took advantage of their captive customers while the state looked the other way - and until we re-regulate electricity, with full SEC oversight of monopolies and limits on self-dealing, nothing will change.

"Can the lessons be readily applied elsewhere as well?"

I don't know that Texas has learned any lessons, Matt. If it plays out anything like it played out 90 years ago (there's every indication it will), things will get much worse for all public utility customers before they get better.

Frank McCamant's picture
Frank McCamant on May 13, 2021

What happened in Texas was not a systemic failure, but a major event failure. The deregulated market has served Texas well but this event exposed some critical weaknesses, for both electric and gas delivery that were known and should have been addressed properly. For the long-term, Texas must address the fundamental issue of maintaining a proper balance between intermittent resources and dispatchable rotating machines. This is critical to maintaining reliability and reserve margins.

Bob Meinetz's picture
Bob Meinetz on May 15, 2021

I don't think you'd find many customers that would agree with that assessment, Frank.

The real problem in Texas: Deregulation

"Texans in deregulated markets have paid higher average prices than those in regulated ones. In fact, one report showed that Texas customers could have saved $27 billion from 2002 through 2016 had they paid the same price as customers living in regulated parts of the state. Energy choice, it turned out, wasn’t all that it seemed.

"The result for Texas’ power system? That’s becoming more clear by the year. In July of 2018, we wrote that the reserve margin in Texas — the measure of how much surplus power the grid can count on in extreme conditions — had fallen to less than 10% as three coal-fired power plants and one natural gas plant were forced into retirement. That July, peak demand in Texas hit 71,444 MW, with actual reserves of just 2,000 MW, or just one more closed power plant away from brownouts.

"Projections for the summer of 2019 were no better, with the reserve margin at just 7.5% and Chairman of the Texas Public Utilities Commission (PUC), DeAnn Walker, calling the situation “very scary.” Consider that in 2001, just one year prior to Texas memorializing deregulation into law, Texas PUC Chairman Pat Wood boasted of the state’s 25% reserve margin being North America’s largest.

"Now, blasted by winter storms that sent demand soaring to a seasonal record of 69,150 MW on Valentine’s Day, the Texas grid simply couldn’t deliver. That’s because the power system in Texas wasn’t really designed to deliver power to customers. It was designed to deliver revenue to the patchwork quilt of companies that choose to participate in its marketplace. Companies that could disappear in a year. Companies that collect bills from customers, but have no obligation to restore downed power lines, because someone else owns them. Companies that promise the moon to customers in the hopes of gaining market share, but have little to no stake in what happens to Texas communities in the coming decades."

The problem is pretending utility electricity is a competitive enterprise. It never has been, and never will be. And shouldn't be.

Frank McCamant's picture
Frank McCamant on May 18, 2021

Bob, your sourced article has many flaws in it. The so-called report about $27B savings was sloppy and flawed. If 'companies', i.e., REPs, 'disappear' there is a POLR in place to serve customers. The 'companies' that collect the bills are the TDSPs who are the wires companies who do have the obligations restore power. Please do your homework Bob before quoting your source.

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