The Texas Summer Thrill Ride Grinds to an End

Six Flags Fiesta Texas amusement park in San Antonio debuted a new roller coaster this past summer. The world’s steepest dive coaster, dubbed “Dr. Diabolical's Cliffhanger,” promises patrons that, “Once you are exposed to this menacing machine, you shall live forever…IN FEAR!”

It sounds not entirely unlike the deregulated Texas electricity market, another machine that has been delivering white-knuckled rides to the state’s residents.  Fortunately, for riders of both coasters, it appears the summer season has concluded without major incident other than leaving customers with lighter wallets and possibly a lingering bout of motion sickness.

In the case of Dr. Diabolical’s Cliffhanger, there is no doubt that a lot of behind-the-scenes engineering, planning and safety regulations help keep visitors protected from danger.  In the case of ERCOT, let’s just say that a whole lot of regulatory safety interventions were imposed to keep Texas up-and-running.

Texas free-market advocates may be loath to admit it – but it was not much of a “market” that kept the AC blowing this summer in Texas.  It was a conscious decision by grid operators and regulatory officials to intervene and use prescriptive mechanisms to funnel money to generators to ensure reliability.  Texas called it “conservative operations,” but make no mistake, it is just another name for “market failure.”

How much did this market failure cost consumers?  At some point the figures will be tallied, but we have some sense of the magnitude already.  As reported by Reuters, ERCOT’s Independent Market Monitor has suggested it has already cost Texans $1 billion in just the first seven months of 2022.  Other observers, including PFT Expert Ed Hirs, calculate that it is costing average Texans $10-$15 per month in additional charges.

Compared to the catastrophic consequences of widespread blackouts in the heat of summer (or the depths of winter), it’s understandable why Texas is turning to regulatory interventions to ensure reliability.  The longer-term matter for Texas to resolve is how to design a more straight-forward regulatory structure that acknowledges reality: a successful utility grid of the future will require planning for reliability, not just reflexive talking points about “markets” that are failing at their most important function.

The sooner that planning begins, the better, lest the Texas power grid end up like two other coasters at Six Flags: the Iron Rattler and the Poltergeist.  As of the writing of this blog, both are listed as “currently closed because of power supply issues.”