how does a high demand for power equate to a $10K power bill for either wholesale or civilian accounts? (TX)
In: Economics
Some of the billing in Texas are either fixed rate or variable rate, depending on the power company and the customers choice. If you had the variable rate plan, your power cost is based on supply and demand. If there is a very large supply (very sunny and windy) and not much demand (mid 60s temp), then power costs would go down and you would save money compared to a fixed rate. But when the temp really dropped, everyone was trying to use power to heat their homes (High demand) and power generation plants went offline due to freezing problems (very low supply). So that drove the cost extremely high for the given power available. If you were on a fixed plan, you made out great. If you were on a variable plan, well, it cost you a lot for a very short amount of time. The guy being used for the 10k example is an extreme but he did use 600 dollars worth a month normally. So he is a big consumer of power for his 3 different meters. He played the gambling game of variable rates. And got burned at it.
Supply and demand drive the prices more in Texas than they do in the rest of the country due to having a disconnected grid. Since they have lost some power generation, and with natural gas pipes frosting/freezing, the available amount is much lower than demand. Catch is, that the power companies will most likely never see that pay out because price gouging necessities during a declared emergency is illegal.
I was looking at this all wrong. Googled what you’re talking about. So the people that have those ridiculous bills are on a wholesaler group provider, not a standard power company deal. So the wholesaler buys power, then sells it at market rate. But with the increased demand, from lack of insulation, and the abnormally cold for the last few years weather. The price per unit of electricity has skyrocketed. The news story gave one example of $9000 per unit on that market with a usual seasonal price of $50 per unit. This happened from the removal of all extra energy from the market to run heaters and what not, creating a scarcity of supply. Electrical prices paid from regular utility companies will probably double or more, but not get that ridiculous. There may also be some form of government help out in this situation. From what I’ve seen people on that system are urged to get off of it immediately even by that company itself. The guy that is in the story had his bill go from $150 to over $3200 for a month.
Short version, his supplier buys power at wholesale rates and resells to customers at a fixed percentage over market. Usually saving quite a bit of money. However, with unprecedented demand, the market rate shot up, and the company is working like normal, just with highly elevated prices.
Think of it like the egg shortage we had a while back if you want. You want three fried eggs, usually the price of a carton of 6 eggs is 50 cents. Someone buys the carton and gives you three, gives someone else three. Then they charge each of you 30 cents. They make a little money, and each of you customers get your eggs at least price than buying a whole carton and wasting the other three eggs. Now there is a shortage, that same carton now costs $5, same deal happens automatically. Now you pay them $3 for the same thing you used to get for 30 cents because the price shot up.
Latest Answers