Note to the reader - this is not a well written piece about electric companies in Texas filing for bankruptcy nor is it a piece on regulation. It is a repository for my thoughts, jokes and the links that I find on information regarding the ongoing developments with Texas Power Companies. I was completely clueless about the Texas grid until my power went off and my pipes froze (they even burst for me).
Hell, I didn't even know what ERCOT stood for and that the Texas grid is on an island that is backed up by power from Mexico. I failed CFA level 1 and barely know what I am talking about with financial statements. Google answers most of my questions and sometimes I use Grammerly (get it...i spelled it wrong on purpose). I feel like I have been over-posting on LinkedIn in regards to this subject so here are my thoughts.
PS - I am on a fixed rate plan but I know I will not be happy about my gas bill.
The simple explanation of Electricity in Texas in 2012 was the following -
"In Texas, most electricity is fueled by natural gas and coal. Natural gas will not flow for long, however, without electricity. Coal will not arrive by railroad without diesel. Diesel cannot be refined without electricity. If any variable of the equation is removed for a sustained period, cascading failures could take the entire system down." 2012 Texas Energy Assurance Plan
The reality is not simple at all and below is the visual of that explanation. Offensive play diagrams by Jon Gruden or Mike Leach are easier to understand.
Now, I love having a few laughs when the wheels completely fly off and they are off right now with the power situation in Texas. Some big laughs could take place and I thought if Dua Lipa scheduled a tour in Texas, it would be an absolute riot.
A Dua Lipa Electricity tour would be a cheeky maneuver that would rival Turkey's tweet during the January 6th insurrection.
An Electricity tour of Texas will probably not happen in 2021, her schedule looks pretty busy -
If not this year, then definitely the next time Texas legislature is in session in 2023. Possibly "drop by the yacht club" during South By Southwest........
I have a feeling that any company on the Texas grid forced to buy power the week of February 15th will be getting some hefty bills in the mail this week. Every citizen in Texas should be irate about what happen and know what power companies were told in 2012. Yes, records were set but studies from 2012 show that companies should have prepared for another winter storm like 1983, 1989, 2003 & 2011.
Supply Chain vs. Regulation Discussion
Local media has an amazing opportunity to teach the public about the supply chain of power and they should not waste it with stories on who didn't follow regulations (not many to follow). Also...I could care less about the Green New Deal or Clean Coal or whatever when it is 40 degrees Fahrenheit inside of my house, I just want heat. This is an opportunity to inform the public of the warnings that the industry received in 2012.
For example, electric providers told the media that they just distribute the power and can't control supply. So that tells me that electric providers are:
responsible for minimizing the risk of a disruption in the supply chain
responsible for auditing the winterization of their power generation suppliers
The sad part about all of this is that a group of individuals in the industry knew or had a feeling that this was going to happen. An electric grid doesn't get seconds away from failure without some warnings. Some red flags were raised and a power hungry executive brushed it aside. I watched Chernobyl so I am a resident expert on this topic.
Laughing & Crying
If you live in Texas, then those emotions will hit you when you skim thru the reports (yes multiple) that contained all of the warnings that this would happen and will happen again if we don't do anything.
The link embed on the picture takes you to a report issued in 2012 by Public Utility Commission of Texas, the Railroad Commission of Texas and the State Energy Conservation Office. BTW....thank you to the governors office for the picture....so important to note that. Did I read this document in full.....NO. Did I skim it....YES. Use the find function (CTRL F or Command F) and type in the word winter.
After skimming thru this report, I hope that we don't have to bailout these bombastic simpletons that went to these hearings, workshops and boondoogles with taxpayer money.
The SIZZLE REEL of the Joint PUC-RRC Interdependency Comments -
The PUC and RRC had a war games scenario for a winter storm! NFW! No! So a playbook must be somewhere! Wow!
And then..........the scenario played out during Super Bowl week in 2011! I wonder if Jerry Jones knew that this war game event happened and nothing was done.
The statement about ENCOURAGEMENT is amazing. This is the supply chain for the electric providers, the communication should resemble Les Grossman negotiating with Flaming Dragon in the movie Tropic Thunder.
Also.....Who is Black and Veatch and what is this study.....
Who are the 100 people that attended this workshop.....the afternoon session was pretty important...I might have to watch this one.....
maybe not...either that video was taken down OR The Texas PUC hasn't called Squarespace or WIX to help with the link.
The Black & Veatch Study
It's all here. All of the warnings. All of the studies. All of the recommendations. If your the recipient of an outrageous power or gas bill this month, then try reading the Black & Veatch "Gas Curtailment Risk Study" to make that vein in your forehead pop out a little bit more. Black and Veatch detail several scenarios that are way above my head but the charts look cool.
That yellow triangle is the storm from 1983 and Black & Veatch projected a 30% loss in gas production. If 1983 is a recorded event then wouldn't you want to prepare for an event that is a few standard deviations away. I failed level 1 of the CFA so I might be wrong.
We're Texas! We don't need no Feds.
(Yeah but what if they give us good advice)
The staffs of the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation wrote a damn good report in 2011.
I think this is what Ted Cruz was reading on the flight down to Cancun.
Let'em Fail & Don't Believe The B.S. Press Releases
Brazos Electric Power was the first to file for bankruptcy and reading their press release made me sick to my stomach.
"Let me emphasize that this action by Brazos Electric was necessary to protect its Member cooperatives and their more than 1.5 million retail members from unaffordable electric bills as we continue to provide electric service throughout the court-supervised process,”
Instead of protecting us, maybe you should have prevented a disruption in the supply chain. You can't prevent a polar vortex but you can prepare for it. Some bright people are either advising Brazos Electric or work at Brazos Electric b/c they did a damn good job hedging financial risk. Interest rate swaps & power derivatives are not easy instruments to understand. Look at their counterparties for their interest rate swaps, all tier 1 shops: J. Aron & Company (That's Goldman Sachs) Morgan Stanley Capital Group Bank of Tokyo (That's Mitsubisihi) JP Morgan
If you look at Fitch's commentary, you should be very afraid. Brazos Electric was financially sound. Fitch Ratings of Long Term Issuers Electric Companies Serving Texas (Fantastic Excel Downloads!!!) https://www.puc.texas.gov/industry/electric/directories/Default.aspx List of Transmission and Utility Companies after some pivot table magic.