Deregulated Energy Oligopolies Bristle at Bad Press
As this blog has noted before, the electricity markets in deregulated utility states trend towards oligopolies with unrestrained market power, rather than pro-consumer competition. More evidence of this fact came to light this week in filings before the Texas PUC.
As reported by Bloomberg, Texas regulators revealed that according to the ERCOT Independent Market Monitor, “[t]he ability for certain suppliers of grid services ‘to effectively control the price’ caused the price of those reserves ‘to exceed competitive levels,’ tacking on between $285 million to $380 million over the course of the year, according to a filing.”
Catch that? In the aftermath of Winter Storm Uri, large retail energy oligopolists have engaged in a pattern of behavior in which they control prices in the Texas market, which resulted in consumers paying in a single year more than a quarter billion dollars above what a competitive market would yield.
In case you’re wondering if you’ll soon see Enron-style perp walks on your TV, you need not hold your breath. In terse statements released by the deregulated utility oligopolies, they bristled at the suggestion they’ve done anything wrong. Take for example, NRG, whose spokesperson said, “NRG has not been accused of market power abuse by the PUC, nor is NRG under investigation for market abuse.” It is a clever way of dodging the real issue.
What the Texas PUC is saying happened is a near textbook definition of an exercise of anti-competitive market power. But the oligopolists can claim they aren’t under investigation for it, or for breaking any laws or rules because, as Bloomberg explains, the companies operated under Commission approved contracts that gave “them an ‘absolute defense’ [against] any allegations of market manipulation.” Those contracts have now been partially changed going forward, but not before a lot of economic damage was done.
In the case of NRG, Texas regulators, on their own, partially terminated the “absolute defense” provision, since, according to the filing, NRG was, “not interested in negotiating a modification.” And why would it be? As Mel Brooks’ Louis XVI said in A History of the World Part I, “It’s good to be the King.” And that is what Texas’ leading deregulated utility oligopolies have become in Texas: kings of the hill. As noted by Bloomberg, a small cadre of merchant generators wield enormous influence in ERCOT.
It’s ironic, because supporters of the deregulated utility model like to portray themselves as plucky pro-consumer white knights, in contrast to traditionally regulated utilities. Turns out, the deregulated oligopolies are more than capable of securing the sort of anti-competitive, anti-consumer sweetheart deals that they accuse other companies of seeking.