Thread by @SRuhle

1/
It’s Saturday Night, Let’s Get NERDY...
Why are some Texans seeing crazy electric bill spikes? It goes beyond supply/demand & really cold temperatures. It’s about deregulation and risk management.

2/ Bc Texas electricity mkt is so competitive, providers offer all sorts of incentives & unusual offerings like wholesale prices vs fixed. Why is this the worst moment for wholesale?

3/ The obvious: supply/demand In the face of record demand to heat homes, supply crashed.
- cold snap made everyone jack up the heat in their homes
- cold snap caused some power generation plants to shut down which reduces supply

4/  In addition, POWER is extremely hard to store. Unlike oil which can be held in reserve in enormous tanks & transported around the world, POWER needs to be generated on demand. So when demand spikes & supply drops, prices naturally rise.

5/ The NOT obvious and hugely problematic: - Electric utility companies offer 2 kinds of contracts: fixed price over long term or floating price over short term. - Floating price is riskier. Every day the supplier gets to reset the price and it’s usually cheaper,

6/ but this week exposed the unlikely but enormous risk.
Most utilities charge a FIXED rate that cannot be increased without approval from the state regulatory body. That is NOT how Griddy (Texas Electric Co) works.

7/ The model for Griddy is a wholesale subscription that uses the floating rate & bc of deregulation,there are not caps to prevent this extreme price spike.
And here we are...

8/ Per Griddy website - Who is Griddy? “Texas’s wholesale electricity provider. Get wholesale prices......You’ll pay what we pay.” And now those unlucky ones who went the wholesaler are paying a whole lot more.

9/ Most people in other states don’t have that option. We have regulated prices. We pay more day-to-day, but this never happens to the rest of us.