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"Texas Power Crisis Continues: Prices Soar 10,000%
As Grid Emergency Causes Power Supply Shortages"
by Epic Economist
"Texas is facing another threatening power grid emergency just months after a polar vortex sparked chaos all across the state, and resulted in billions in collateral damages for millions of Texan households and businesses. The new power-grid scare happened last Tuesday night, less than 60 days after generalized blackouts left large swaths of the Texan population without light and heat for several days due to a deep winter freeze. The grid operator, the Electric Reliability Council of Texas issued an energy conservation appeal in an attempt to avert another catastrophe. On Twitter, ERCOT requested energy conservation for nearly four hours, writing that "consumers and businesses are urged to reduce their electricity use this afternoon and into the evening".
The operator came under immense pressure for mishandling the devastating winter storm that happened in mid-February when the Lone Star state suffered from disastrous power supply interruptions amid freezing temperatures with nearly half of the state’s generation capacity being completely knocked out, which fatally impacted over 100 people, pushed energy prices to unprecedented highs, and lead to billions in damages. One more time, ERCOT failed to correctly forecast weather conditions and was caught off guard when an unexpected cold front stalled in one part of the state, leaving demand for power much more elevated than experts anticipated.
ERCOT cited that cloudy conditions have blocked numerous solar panels in West Texas, therefore, wind power was lower than expected. Also, there were higher than expected temperatures in some parts of the state adding more pressure on the power grid. The main problem was that the cold front started moving through Texas when almost 25% of the state's electricity generating capacity was off-line for maintenance related to the February freeze and to get ready for the summer months. However, Texas residents were not enthused by the grid warnings and reacted on Twitter, complaining about the companies' lack of efficiency to adapt and handle the crisis.
But the outages and the conservation appeals aren't the only determinants making residents extremely frustrated with the energy company. According to a Bloomberg report, "the average spot on-peak electricity at Ercot’s North Hub jumped more than 10,000% to $2,012 a megawatt-hour as of 5:30 p.m". A FOX San Antonio article warned Texan residents should expect a sizable spike in this month's electricity bill once again. The price controversy stems from the 32-hour period during the freeze when prices were left high, resulting in $16 billion in unnecessary charges to power companies and others. And according to ERCOT's vice president “we could be in the same situation in the next few weeks."
The financial pain experienced by power companies is making experts fear that reversing electricity prices from the winter storm could make things even worse. While state regulators try to pass repricing measures on Congress, Joshua Rhodes, research associate at the Webber Energy Group at the University of Texas at Austin, said the prospect of repricing the market “might actually do more harm than good”. Caitlin Smith, an energy adviser in Austin underscored that when repricing a market “you don’t know who you’re hurting. And you think you’re protecting the consumer, and it turns out you’re bankrupting someone else.” Already, numerous companies and entities at every tier of the state’s energy system have been severely affected and a wave of bankruptcies has started. Most notably, Brazos Electric Power Cooperative, which supplies electricity to over 1.5 million customers, registered massive losses and filed for bankruptcy, citing a $1.8 billion debt to ERCOT.
Repricing initiatives are likely to trigger more shutdowns and bankruptcies over the next few months, adding to the strains faced by the companies and threatening to provoke a calamitous and prolonged power supply crisis. “We are facing a disaster right now,” CPS chief executive Paula Gold-Williams said. “If we can’t have access to the financial markets and come through with a plan that works, then we really can’t maintain operations". In short, the Lone Star State will have to address the tricky dilemma of either letting energy operators and distributors charge exorbitant prices to consumers or risking seeing the downfall of companies that provide an essential service to the Texan society. It seems that the energy crisis is far from over, and if leaders want to avoid a brutal catastrophe and much more turbulence in the months ahead, they have to start acting right now."