Prices spike limit up to $3000 per megawatt hour Wednesday
Huge electric bill spikes because speculative commodity traders took advantage of the power emergency on Wednesday to bid electric commodity prices up from an average of about $40 per megawatt hour to as high as the legal ceiling of $3000 per megawatt hour. Starting around 5 a.m., prices in the wholesale market surged to the market cap, $3,000 per megawatt-hour, and stayed there, off and on, until around noon. Just another one of the benefits Texans enjoy from having a fully deregulated electric commodity market to power Texan's homes.
The Texas power grid is usually only taxed in the middle of summer when air conditioners run almost continuously. Yet on Wednesday Texans woke to news of rolling blackouts statewide. ERCOT imposed rare rolling blackouts as frigid sub-zero wind chill temperatures swept across the state, leaving nearly one million homes without electricity for periods lasting from 15 minutes to over 2 hours.
Texas transmission utility companies, including American Electric Power Co., CenterPoint Energy Inc. and Oncor Electric Delivery Co., picked the locations and durations of the outages. Hospitals, nursing homes and other critical-need customers were not to have been included. In Dallas hospitals were blacked out, but Cowboys Stadium, where Superbowl preparations continued as planned, downtown Fort Worth, downtown Dallas and Hotels providing accommodations for Super Bowl officials and attendees were spared the rolling blackouts.
The rolling blackouts were imposed before sunrise Wednesday morning due to an imbalance in the state's electric grid between the power being demanded statewide and the generation capacity available in the morning hours of Wednesday.
The Texas power grid is mainly disconnected from the rest of the U.S. power grid, but the state does have limited connection to the electric grid in Mexico. By mid-day Wednesday ERCOT called off the statewide rolling blackouts after Mexico’s Federal Electricity Commission started supplying nearly 300 megawats to the Texas grid via the Sharyland Utilities interconnection, built and owned by the family of Dallas billionaire Ray Lee Hunt. However, the following day Mexico said it was suspending its offer to provide electricity to Texas to help the U.S. state weather an ice storm that forced rolling blackouts, because of severe cold and power grid strains in Mexico's own territory.
ERCOT manages Texas’ electricity markets as well as the state's electric power production and transmission for about 22 million customers on an electric grid that connects 40,000 miles of transmission lines to more than 550 power generation units. ERCOT blamed Wednesday's power shortfall on the unusually cold weather that rolled into Texas during the day on Tuesday.
On Wednesday night, Lt. Gov. Dewhurst said that ERCOT reported that 50 of the state's 550 power plants had been knocked off line by the severe cold conditions, causing a loss of 8,000 megawatts to the power grid. Dewhurst said the problem appeared be inadequate weatherization and that the trouble centered on two new coal-fired plants owned by Luminant (a subsidiary of Energy Future Holdings, formerly TXU) which suffered frozen valves and broken pipes.
"This is unusually cold weather for Texas, but we obviously need to ensure that we are adequately prepared," Dewhurst said. "That's why we will continue to work with state agencies and energy providers to find out where problems occurred and how to prevent them in the future."In fact, 82 power plants were offline on Wednesday. How did the cold weather knocked the other 80 power generating plants off the grid. Did pipes and valves freeze all at the other 80 plants? Some of those 80 plants were natural-gas-fire plants, but was natural gas in short supply at all gas fired plants?
To supplement coal-fired electric plant power generation during periods of high demand, generating companies will fire more of their natural-gas generating plants to fulfill demand. Unfortunately, natural-gas fired plants reportedly couldn't fire up Wednesday morning. That was because Atmos, the natural gas supplier in Texas, had curtailed delivery of natural gas to industrial customers, including natural-gas-fired power plants, in order to maintain gas delivery to residential customers. That left Texas homeowners with natural gas, but no electricity, to run furnaces.
State Sen. Troy Fraser, R-Horseshoe Bay, chairman of the Natural Resources Committee, said some of Texas' power problems Wednesday was the policy that allowed Atmos Energy reduced natural gas pressure to industrial customers, including natural-gas-fired power plants.
Ron Kitchens, retired executive director of the Texas Railroad Commission and current chairman of the Texas Energy Reliability Council said at a Railroad Commission hearing that the gas industry delivered the gas that was guaranteed by contract to its electric-power customers. But, he said, an unknown number of electricity generators had opted for contracts that allowed their gas service to be interrupted in exchange for cheaper gas. Without gas, the generators couldn't produce electricity.
Complicating the electricity outages, Kitchens said, was a "substantial loss" of gas well production because many gas producers were not exempt from the rolling blackouts. Electric gas wellhead pumps were blacked out along with the million Texas homes. Gas utility operators tapped natural gas reserves stored underground, including from salt domes, to make up for substantial production losses in the field. But, Kitchens warned, that the industry would have struggled to meet the state's gas needs if the cold weather had continued for three or four more days.