The Utility Shuffle

Regarding "Texas suffers from Soviet-style electricity distribution system" (Sunday Outlook), it's ironic that Edward A. Hirs III and Paul W. MacAvoy go to such pains to criticize the computer model that the ERCOT (Electricity Reliability Council of Texas) uses in "equalizing generation plus transmission costs across most of the state".  ERCOT uses the computer model to set wholesale prices based on what the authors call a "Soviet-era programming tool".  It seems to me, though, that the solution they propose merely compounds the problem.  Instead of advocating for a real open market for electricity based on supply and demand, the authors simply want to tweak the computer model to get rid of what they perceive to be its faults, those faults being 1) that the system doesn't allow wholesalers to "deregulate prices for power purchased at wholesale for industrial and retail distribution", and 2) that the model doesn't provide distributors enough incentives to expand the grid.   

 

It is interesting to note that the authors completely fail to mention that Suppliers were already granted the right to jack their rates up from $3,000 per kilowatt hour to $9,000, as reported in the Chronicle a couple months ago. Have they not done their homework, or is a 200% increase not enough for our poor, impoverished power companies?  And why are their solutions exclusively about putting more money into the pockets of suppliers and distributors?  More importantly, why is there never a word about the effect on the consumer?  To me, the reason is the same as those driving the debate about water rights last year: it's a money grab, pure and simple, and the various players are lining up to get their slice of the pie with consumers footing the bill.

 

If ERCOT and Messrs Hirs and MacAvoy really want to improve Texas' power grid, they would both abandon their Soviet-era obsession with improving the lot of Suppliers, and advocate for either a) a model that also protects Consumers based on free market principles, or b) a return to the centralized public utility of yore.  In either case, Consumers would at least have a voice, which is more than you can say for the current system which seems to do nothing but coddle the monied Special Interests.

 

Pete Smith

Cypress