Sirwin
Sirwin

Who's to Pay for the Texas Grid Failure

By Cje95 | Texas Living | 27 Feb 2021


When the grid failed the State several things occurred. Most people lost power however if you did not... well you might have wished you had. The price of electricity spiked like nothing seen before and in some cases, the wholesale cost went from $20-30 a megawatt to $9,000 a megawatt. These increases are something that the average person like myself are dumbfounded by. 

 

The biggest cost though has yet to been addressed and dealt with. The grid obviously needs to be updated, it needs to be winterized to some point at least. Updating the whole grid is going to cost billions of dollars and the question is who is going to pay for this. Thus far it seems the state wants the private companies to pay for it and that does make some sense. With the way, deregulation has taken place these companies have been able to make a ton of money while also being roughly 25% cheaper than the cost of electricity on a national average. This has given them a much much larger profit margin than found elsewhere in the United States. 

 

Texas though is an extreme business-friendly state and this causes issues in itself. Does the government instead pay for it themselves or subsidize it? The State government does have a huge "rainy day fund" they could tap into. I mean the fund is actually getting close to violating the law that established it by having too much money in it. The Mayor of Houston has since called for the Government to pay for the cost of the outages and the upgrades now needed to fix the grid. What I am sure will upset people no matter who pays for it though is how some of it will be done. For example, natural gas pumps froze over during the freeze. To winterize a single well could cost well over $1 million whereas capping the existing one and building/installing an entirely new natural gas well would cost roughly $100,000-$200,000. This makes the answer pretty each on what to do and people are going to be upset because the money is being spent or the fact it's being spent on a fossil fuel even though it is an extremely clean fossil fuel. 

 

Having lived through the "once in 500-year floods", that happened in back-to-back years might I add, allows me to understand you cannot plan for everything. Texas is known to be hot... there is the famous saying that goes "you may go to hell but I am going to Texas". So constant sub-30-degree weather is not exactly what anyone had in mind. 

 

Regulators and people, in general, should be concerned that if these costs of upgrading the old sections of the grid are put on them then will they pass along the cost to consumers? You always hear about things like this either happening or possibly happening but could this cause it? If I were an electrical company, it wouldn't be a crazy idea to increase prices because of this. What also interesting to look into is most if not all of the companies operating these lines were not the companies that laid or built them. The government paid for a lot of this infrastructure back in the '50s and '60s so if companies are forced to pay to upgrade the state's grid could they have some form of recourse against the state? After all, it was purchased or leased from the state and now the state is trying to get these people who acquired it from them to pay for the upgrades. This issue is alleviated in the areas where new infrastructure is being built so new buildings have to follow a new code but the old sections..... those are going to cause some issues.

 

It wasn't that long ago now that the largest operator of the lines in Texas actually went bankrupt. Energy Future Holdings was a Texas Utility Giant that went belly up in 2014. In 2017 it was still trying to find its way out of the adventure that is Chapter 11. Could different utility or power generating companies go belly up then? Especially the smaller operators that could be forced to carry a larger part of the cost? This would just allow for consolidation which in Texas is not exactly what the people nor the politicians want. 

 

It will be a very interesting next few months as more information comes out and as more decisions must be made. The biggest issue will be the one that will take the longest to figure out and that's who is paying for what. 

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Cje95
Cje95

Graduated from Texas A&M in May of 2020 had dabbled in crypto since 2017 but dove in at the end of 2019. December of 2020 packed up and moved to D.C.! Huge sports fan, space nerd, and international newsreader! Follow me on Twitter @Cje95_


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