A Free-Market Energy Blog

The Texas Blackout: Markets or Regulators?

By Robert Bradley Jr. -- February 24, 2023

Is there a ‘free market’ solution to the question of capacity incentives versus volumetric charges? I contend this the PUCT/ERCOT is in a central planner situation versus a true free market where integrated gas and power companies would solve the economic calculation problem, not state and federal regulators. More here: https://www.masterresource.org/texas-blackout-2021/central-planner-ercot-worked-as-planned/

Joseph Pokalsky: Integrated gas and power companies and gas companies are monopolies, don’t compete, and essentially tax ratepayers through rate setting by Public Service Commissions, a.k.a. Central Planning Committee Kommissors.

Robert L. Borlick: ERCOT is the furthest away from a central planning paradigm as any power system I know of. To argue that a free market consists of integrated gas/power companies is laughable. You don’t appear to understand the concept of a natural monopoly. As for the document you cited, it is a political rag that misrepresents the situation in Texas and unfairly blames Professor William Hogan for the irresponsible behavior of the Texas politicians. They had 10 years to mandate the winterization of power and natural gas infrastructure in the wake of the 2011 blackout. They were warned but chose to do nothing substantive. The fault lies not in the ERCOT market design but in the fsailure to impose uniform operating standards on all of the participants and their key suppliers. The death toll in Texas has now exceeded 200. That is blood on Governor Abbott’s hands as well as the legislators that pandered to the state’s power and natural gas corporations.

Bradley to Borlick: We disagree, from history to economics to political economy. Natural monopoly was a theoretical ruse by economists working with utilities that wanted franchise protection. There was too much competition for many ‘public utilities,’ not too little, which is why the manufactured gas industry lead the way to public utility regulation. Electricity and Samuel Insull was a different story, as I try to cover in my Edison to Enron book–but Samuel Insull waged a huge PR campaign, much under the table, to come under state regulation. Regulatory failure, not market failure, marks the Texas crisis, Can’t outsource the reliability function to regulators/experts and expect they can coordinate an industry that has been dis-integrated by regulation, state and federal. And renewables were at root the main cause, not failed natural gas entrepreneurship. https://www.instituteforenergyresearch.org/renewable/renewables-market-failed-natural-gas-in-texas/

UCT/ERCOT is a central planning agency to the hilt with its control over prices, among other things. https://www.masterresource.org/texas-blackout-2021/ercots-planning-snafu-16-billion/

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