Gas Sellers Reaped $11 Billion Windfall During Texas Freeze (bloomberg.com) 120
The official autopsy of the great Texas winter blackout of February 2021 quickly established a clear timeline of events: Electric utilities cut off power to customers and distributors as well as natural gas producers, which in turn triggered a negative feedback loop that sunk the state deeper and deeper into frigid darkness. It's now becoming clear that while millions of Texans endured days of power cuts, the state's gas producers contributed to fuel shortages, allowing pipelines and traders to profit handsomely off them. From a report: Interviews with energy executives and an analysis of public records by Bloomberg News show that natural gas producers in the Permian shale basin began to drastically reduce output days before power companies cut them off. As the flow of gas cratered, everyone scrambled to secure enough supply, sparking one of the wildest price surges in history. Power producers were forced to pay top dollar in the spot market for whatever gas they could find. Soon customers will be saddled with the bill.
And it's a big one: The total comes to about $11.1 billion for a storm that lasted for just five days, according to estimates by BloombergNEF analysts Jade Patterson and Nakul Nair. The cost of gas for power generation alone was about $8.1 billion, or 75 times normal levels. A further $3 billion was spent by utilities providing gas for cooking, heating and fireplaces. The BNEF estimate is based on spot prices at major hubs assessed by S&P Global Platts rather than private contracts, so is likely an upper limit of the total cost. Millions of Texans are now faced with the prospect of paying higher gas prices for years as utilities seek to spread the cost over a decade or more. Texas lawmakers have set aside $10 billion to help natural gas utilities cover their natural gas costs from the storm through low-interest, state-backed bonds.
A special legislative session convened Thursday but the agenda did not include any measures to fix the power grid. This week, Governor Greg Abbott appeared to double down on his early assessment that wind and solar were prime culprits of the freeze. Even though gas failed in its role as a reliable backup fuel during the freeze, Abbott pushed regulators in a letter to strengthen incentives for fossil fuel and nuclear generators while increasing "reliability costs" for intermittent renewable power sources. What Abbott didn't mention was the massive windfall key industry players made during the freeze. Energy Transfer posted its highest quarterly net income on record, more than three times its previous best quarter.
And it's a big one: The total comes to about $11.1 billion for a storm that lasted for just five days, according to estimates by BloombergNEF analysts Jade Patterson and Nakul Nair. The cost of gas for power generation alone was about $8.1 billion, or 75 times normal levels. A further $3 billion was spent by utilities providing gas for cooking, heating and fireplaces. The BNEF estimate is based on spot prices at major hubs assessed by S&P Global Platts rather than private contracts, so is likely an upper limit of the total cost. Millions of Texans are now faced with the prospect of paying higher gas prices for years as utilities seek to spread the cost over a decade or more. Texas lawmakers have set aside $10 billion to help natural gas utilities cover their natural gas costs from the storm through low-interest, state-backed bonds.
A special legislative session convened Thursday but the agenda did not include any measures to fix the power grid. This week, Governor Greg Abbott appeared to double down on his early assessment that wind and solar were prime culprits of the freeze. Even though gas failed in its role as a reliable backup fuel during the freeze, Abbott pushed regulators in a letter to strengthen incentives for fossil fuel and nuclear generators while increasing "reliability costs" for intermittent renewable power sources. What Abbott didn't mention was the massive windfall key industry players made during the freeze. Energy Transfer posted its highest quarterly net income on record, more than three times its previous best quarter.
You sow deregulation you reap a shafting (Score:5, Insightful)
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Darn. Who knew Comcast was so harsh.
Re:You sow deregulation you reap a shafting (Score:5, Insightful)
Executive summary - that is why normal countries regulate utilities. If you do not regulate them, they rape you, skin you, dump you to freeze and then you pay for this privilege.
But I don’t understand... They saved tens if not hundreds of millions not equipping their systems with basic winterization options that would have avoided all this! At least they then made a years profit in a day or two, got totally let off the hook for everything including all the damage to houses, and still can still charge more than average - that ought to teach em’ a valuable lesson they won’t soon forget.
Re: You sow deregulation you reap a shafting (Score:2)
Re:You sow deregulation you reap a shafting (Score:5, Insightful)
They saved tens if not hundreds of millions not equipping their systems with basic winterization options that would have avoided all this!
The companies that reaped the biggest profits were those that DID winterize and were prepared to continue delivering energy while their competitors failed and dropped out of the market.
Wind companies that continued to operate also reaped generous profits, but a headline that says "Evil renewable energy companies raped Texans" isn't as politically popular as demonizing gas companies.
Re:You sow deregulation you reap a shafting (Score:5, Insightful)
Unlike the crooked gas companies (note, I am not claiming that ALL of the gas companies were crooked), the renewable producers didn't choose to cut production in advance to drive a price spike.
Re:You sow deregulation you reap a shafting (Score:4, Informative)
You aren't paying attention. "Evil renewable energy companies raped Texans" is the claim of Texas Republicans.
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This highlights one of the biggest problems we have these days. People get into a new bubble and believe this stuff, even though it's been widely debunked. The debunking simply doesn't enter their personal news feed, or if it does it tends to be via right wing commentators claiming that it's false.
The Republicans and some other right wing parties (like the Tories in the UK) have found that they can manipulate people this way and we don't have an effective response to it.
Re: You sow deregulation you reap a shafting (Score:3)
Wind companies that continued to operate also reaped generous profits, but a headline that says "Evil renewable energy companies raped Texans" isn't as politically popular as demonizing gas companies.
Dude, chill. You're mixing things up, this story isn't about gas generators making a profit, it's about gas producers. Sure, the remaining online gas generators, like the remaining wind and solar were on the selling end of those high power prices and made some profits I guess.
So when gas demand is low because gas generation is severely diminished, why would gas prices spike? We've heard that wells were freezing, and the article mentions they also had problems with the power blackouts too that created a n
Re:You sow deregulation you reap a shafting (Score:5, Informative)
Because their fossil fuels and no one is Texas is allowed to criticize them. They will refuse to see natural gas as "intermittent" energy even though the wind power was performing very well compared to them during that time. Politics is more important than lives here, better some people freeze to death than admit that diversified power options are a good thing. The laisse-faire free market at work.
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Ain't the fantabulous free market great?
[barf]
Re:You sow deregulation you reap a shafting (Score:5, Insightful)
This is a very American story. An uncontrolled free market performs poorly, the government provides free money to the corporations involved and everyone goes back to espousing the wonders of the free market.
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Normal countries regulate commodities markets and producers as well
This artificial shortage affected other states beyond the one with no regulation.... New Mexico... Louisiana.... ALL Of these states the local utilities here have a HUGE Fuel adjustment that is being spread out over a long period of time.
IMO There should be an investigation into and possible lawsuits against the Gas Producers Over this flagrant margket manipulation.
Artificially cutting their output --- Who is our market reg
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In order for things to be dependable, they need to be regulated. Otherwise greed and stupidity takes over. If you do not regulate important infrastructure, you will eventually find yourself on 3rd world-levels.
Not a negative feedback loop! (Score:5, Insightful)
Sounds like a positive feedback loop. A negative feedback loop would have reduced the problem.
Re: Not a negative feedback loop! (Score:2)
Aren't there laws... (Score:1)
surrounding things such as price gouging during emergencies?
Oh ya, this is the Retardicans... Taking any company to court, especially one that gives a politician a five'er and a Hinkelman is an anthima to them. All regulations are bad! Renewables are Bad! Big Oil/Gas can never do wrong! All Hail the Orange One - for only he can save us from ourselves (while he pockets the profits).
Re: Aren't there laws... (Score:5, Insightful)
Re: Aren't there laws... (Score:4, Interesting)
Liberals are the Washington Generals to the conservatives' Harlem Globetrotters. Both have the same owner, the wealthiest .01%. The Washington Generals are paid to lose, to make the Globetrotters look like a legit team. But you'll never see the ref call them for carrying, or hiding the ball. Liberals only look weak if you think they are playing to win. They aren't.
Re: Aren't there laws... (Score:4, Insightful)
Yeah, most voters aren't as polarized as the political class likes to pretend. We want many of the same things. But unfortunately for said political class, neither republican voters nor democratic voters want what the donor class wants. And since the donor class finances all political campaigns, what they want trumps what we want. Until we reform campaign finance laws, we will continue to get only the politicians that the very rich select for us.
Re: Aren't there laws... (Score:2, Funny)
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Hey, somebody's got to play by the rules, otherwise there are no rules and we go straight to civil war. I'm not sure what strategy you'd recommend, but if it involves large amounts of bloodshed, I'm against it.
Re: Aren't there laws... (Score:5, Interesting)
Liberals play by the rules because to do otherwise is to reinforce the very lawlessness and kleptocracy they oppose. Gaming the system ultimately breaks the system.
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Everyone agrees that "all regulations are bad". It is a question of what is worse, the regulation or what the regulation is trying to prevent / odds of it occurring.
The only difference between Democrats and Republicans are their priorities. But even their priorities do not differ by that much. However the media consumed by Republicans tends to be controlled corporate entities that are more interested in pushing the "regulations are bad" point of view then actual truth. It is self serving and dishones
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So liberals play by "the rules," but conservatives don't because the only rule they have is do whatever you can get away with.
If you lower yourself to your opponent's level, you will lose.
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You might want to read this. [deseret.com]
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The Mormons? Really?
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Well, this whole topic is about faith based energy policies, so it sort of fits.
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All removing the anti gouging laws would do is change the headline to "Couldn't afford toilet paper during the pandemic?" or perhaps "Still paying off the toilet paper you bought during the pandemic?".
Arguably the problem would have been worse due to added incentive to make toilet paper appear scarce to collect that sweet gouging windfall.
Well enforced anti-gouging laws discourage the horde and profit model. Notye that a few of the jackasses that bought thousands of dollars worth of toilet paper were prosec
Re: Aren't there laws... (Score:2)
JiT-V (Score:1)
A special legislative session convened Thursday but the agenda did not include any measures to fix the power grid.
Did all the Democrats [youtu.be] make it back in time?
They sure do make them bigger in Texas. (Score:4, Insightful)
Allowing the price to fix the supply/demand problem when there is no supply is kind of stupid. S T U P I D.
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Least you all can get GPUs now.
Re: They sure do make them bigger in Texas. (Score:5, Insightful)
Re: They sure do make them bigger in Texas. (Score:2)
Re: They sure do make them bigger in Texas. (Score:5, Interesting)
Cali has an equally crazy price scheme I've been told by many EV owners here.
California flex pricing is OPT-IN. It only applies to you if you request it.
I have an EV, and I am on flex pricing. I charge the vehicle from 2 to 4 am when prices are lowest. I avoid using excess energy from 2 to 7 pm when prices spike.
It works well for me.
If you don't want flex pricing, don't sign up for it.
Re: They sure do make them bigger in Texas. (Score:2)
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In addition, in California you can opt-in and opt-out. After a year, whichever turned out to be cheaper is the plan you pay for.
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You're talking Time Of Use? That was opt-out for some utilities, but that's about end-users (home-owners). Whereas the Texas energy market was about the utilities and power suppliers, a completely different game. The TOU means higher prices at certain peak hours and lower prices at other times. So do the laundry in the evening, etc.
In California the rates are fixed for the year, assuming some estimated usage and a sliver for profits. Then the utilities get extra profit by cutting costs. They cannot ju
Re: They sure do make them bigger in Texas. (Score:5, Interesting)
Whut.
Everyone in Texas basically chooses their power plan.
You can go with short term contracts. ( ~3 months )
You can go with longer term contracts. ( up to 36 months )
You can even go with variable rates if you are inclined to do so.
Some simple math ( or some spreadsheet formulas ) will show you what the plans actually cost.
( Just plug in the numbers and see for yourself )
Most go with a flat rate. None of this " tiered " or " peak / off peak " bullshit.
( Unless you just really feel the need to )
For example, I'm on a fixed plan for three years at 12 cents per KwH. Summer, Winter, middle of the day or three am.
Doesn't matter. 12 cents / KwH ( Yes, even during the big freeze )
Don't take my word for it, go look yourself.
( http://powertochoose.org/en-us [powertochoose.org] )
Feed it a Texas zip-code and pick your plan.
It's pretty much that simple.
What was unamusing during the freeze was while the power was getting turned off to the suburbs, the downtown metro
areas were lit up like a Christmas tree burning power like nothing was going on at all.
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Some simple math
Have you seen the education system in America? What you propose isn't viable for most.
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I know, it's a stupid question but: why is there no utility price cap?
Because a price cap isn't going to magically make extra energy appear.
For a fixed supply, you need either high prices or rationing. There was no infrastructure in place to implement rationing. Texas doesn't have an extra 30 million police officers to stand guard and watch everyone's electric meter.
FFS even the stock market halts trades when shit hits the fan.
What? Are you saying the electric companies should have shutdown? How would that have helped?
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"Because a price cap isn't going to magically make extra energy appear."
An uncapped price isn't going to magically make extra energy appear either.
"For a fixed supply, you need either high prices or rationing. "
If the supply is fixed, then changing the price does nothing. A price increase is only market-efficient if that means you can bring new supply online that was unprofitable at the market-clearing price before the shock and do it before the shock goes away.
This is all uncontroversial to actual capitali
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If the supply is fixed, high prices mean that the people who most want power, get it. The price increases until the demand (at that price) matches supply.
The free market is about allocating resources. The alternatives are schemes where an authority decides who gets what, lotteries, etc.
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Not necessarily. For example those affected could form an organization or a voting bloc to decide these things. Very similar to the way a credit union works, all the members pay in, all the members get a say.
This is how "socialism" actually works in most countries with mixed economies.
In the USA, the question boils down to, would you rather be bossed around by the government, or bossed around by some private companies that are in it only for money?
(it's funny to watch nut jobs start frothing at the mouth wh
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would you rather be bossed around by the government, or bossed around by some private companies that are in it only for money?
I definitely prefer private companies.
I can cut my electric bill by using less electricity.
I can't cut my tax bill by using less government.
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That would be an authority. The authority can be a person, an organization, an algorithm, whatever.
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"For a fixed supply, you need either high prices or rationing. "
If the supply is fixed, then changing the price does nothing. A price increase is only market-efficient if that means you can bring new supply online that was unprofitable at the market-clearing price before the shock and do it before the shock goes away.
That's not entirely true. A price increase can also trigger rationing by making power companies with smaller nest eggs shut down entirely rather than go bankrupt. It's not a very equitable kind of rationing, but it is rationing. :-)
Also, some industrial companies that buy bulk power almost certainly shut down rather than go bankrupt for the same reason. So that's also rationing triggered by price.
And EVs and Powerwalls and other systems that decide whether to charge based on the price also would have sto
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The price cap would protect against bankrupting a portion of the companies that provide for the infrastructure, infrastructure meant for the good of the public. Alas c
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What you need is nationalized generation. Electricity is a basic necessity of life now, it's infrastructure like roads and water supply.
Either private companies have to be heavily regulated to keep the lights on, or you have to nationalize it. Anything else just means they will find some way to fuck you.
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I know, it's a stupid question but: why is there no utility price cap?
Price cap! GET OUT SOCIALIST! This is CAPITALISM. The free market can solve all problems, and if it doesn't then Jesus will. We don't need your gubbmint here.
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Because the regulatory agency is the definition of cronyism. It’s staffed by political appointees and has no real power to regulate anything. All they can do is make recommendations.
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"why is there no utility price cap?"
Because the median businessman has no idea how capitalism works and at the 90th percentile they are actively opposed. They don't care about making the market efficient and they still believe every transaction is zero sum. A price cap makes it harder for us to lose so they think that means it makes it harder for them to win.
I am shocked gambling was happening here (Score:4, Insightful)
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Oh not surprising [apnews.com] at all. [deseret.com]
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Government limits greed of retailers (price-gouging): Ivory-tower elites complain shortages of merchandise occurred and refuse to blame greed of consumers (panic-buying).
Concluding bad stuff happened so the law doesn't work, is dishonest. Claiming 'X happened instead, so we should go back to the old system' is demanding perfectionism. That is impossible because businesses and people will arrange themselves to minimize the effect of the law (Eg. misdemeanor fines). Many times, in economic policy, the b
Re: I am shocked gambling was happening here (Score:2)
Comment removed (Score:5, Informative)
Re: Deaths now at 210 (Score:2)
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How much money did gas sellers make per citizen death?
I'll do it. $52.4 million in windfall profits for every citizen death.
I'm not so firm with US laws (Score:4, Insightful)
What do you call it in that country when you kill people for profit?
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China calls them organ donors. What do you call them?
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-Next question!
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If you're poor, middle class, or on the lower to middle rungs of the highly affluent, there are a variety of laws with which to charge you.
If you're super rich, it's called "leadership."
France once had a "leadership" purge. I think they were ahead of their time.
Re: I'm not so firm with US laws (Score:1)
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Business as usual. So long as nobody that died had enough money in their family to be able to afford to sue the entity making the profit into the ground, it's nothing and matters not one little iota.
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What do you call it in that country when you kill people for profit?
American Healthcare is the colloquial term.
ERCOT MAX was too high (Score:2)
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...or pass the price on to consumers and give the consumers the choice to reduce consumption or pay $9+ per kwh.
Or make price gouging of energy during a crisis a felony with harsh penalties that start and the top and roll downhill, and watch this particular problem exist only in history textbooks.
Re: ERCOT MAX was too high (Score:2)
Re: ERCOT MAX was too high (Score:2)
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" The consumers would not consume as much if they had to pay 100X more. "
This is Texas we're talking about. Air Conditioning is pretty much a mandatory thing where Summer temps typically hover close to triple digits and the humidity ( especially near the coast ) likes to hang around 75%. Put it this way, just walking to the end of your driveway to get the mail and you'll be sweating before you get back inside.
Make no mistake, we wouldn't run the AC if we didn't have to but, that's not how it works down h
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Emergencies cost money (Score:1)
News at 11.
Blood money (Score:5, Interesting)
A special legislative session convened Thursday but the agenda did not include any measures to fix the power grid.
From the looks of things, it looks like Texas views 16 total cases of voting fraud in 2020 [washingtonpost.com] as a much bigger priority than a few hundred people dying [houstonpublicmedia.org] from stormy weather every once in a while (or more, depending on who's counting [buzzfeednews.com]).
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There's an easy way to fix that. Just make sure the dead post ballots after they die. Then republicans will take notice.
One way to keep Texas in perspective... (Score:1)
Strangely quiet (Score:2)
Any slashdot conservatives wish to speak up on how this was all the fault of windmills?
Nothing wrong (Score:2)
If there are 10 customers wanting to buy 10 gallons each and you have only 40 left, why not sell to highest bidder? What next, force supermarkets sell live lobsters for 5 dollars a pound because most people can't afford 20-25 dollars a pound?
Re:Strangely quiet -NO (Score:5, Informative)
Wind power actually produced only slightly less energy than expected for that week of the year. Solar produced considerably more energy than expected. Natural gas provided a fraction of the energy expected. But please, tell us how gas "saved the day". You don't become the hero of the story by finally doing what you should have been doing all along.
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The graphs don't tell the story. The amount of wind power is somewhat seasonal. That's why each ISO (ERCOT, in this case) has a specific power budget that they expect to get from each type of power in any given week, and it varies from week to week. In that week's case, wind underperformed by IIRC single-digit percent from the target, and solar was double-digit percent above the target.
The percentage that it provided is completely irrelevant. What matters is whether it provided more or less than it sho
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The wind absolutely stopped during the cold weather? What a strange phenomenon. Someone better alert the nordic countries.
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The wind absolutely stopped during the cold weather? What a strange phenomenon. Someone better alert the nordic countries.
No, wind increased during the storm. Wind production declined somewhat because of wind turbines that weren't prepared for the cold and froze up. The bigger problem, though, was natural gas pipelines freezing up. Texas is heavily dependent on gas for electricity generation, and gas power plant outages were the primary cause of the shortfall in generating capacity.
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gas saved the day (state).
Gas didn't "save the day", gas was the main problem [utilitydive.com]. Gas was the energy source that suffered the most outages, and the most-impactful outages.
Meanwhile Greg Abbott is blaming windmills (Score:2)
TL;DR; they're actively ignoring reality.
Fuel prices. (Score:2)
As the flow of gas cratered, everyone scrambled to secure enough supply, sparking one of the wildest price surges in history. Power producers were forced to pay top dollar in the spot market for whatever gas they could find. Soon customers will be saddled with the bill.
During the same period the price of wind and sunlight remained rock steady at USD 0.00 per unit for anybody foresightful enough to be an operator of weather proofed wind and solar based electricity generation equipment.
Remember Enron (Score:2)
See Enron, which had headquarters in Houston, Texas. [investopedia.com]
Enron / Ercot.
Kenny Boy is dead, but the CEO, Jeffrey Skilling, did 14 years in prison and was stripped of his wealth. [reuters.com]
Such a thing is inconceivable today for a senior executive.
Why no interstate HVDC transmission lines? (Score:2)
Hint: It wasn't freezing everywhere in the continental US that week.
Is it, by any chance, because the powers that be can't get their f**king act together?
Power grid reliability is a national-level national security concern. It's frankly both sad and hilarious that this is exclusively managed locally in little fiefdoms these days.
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As I understand it, Most all of the country *is* interconnected, and does just fine. Texas chooses not to interconnect with anyone because "Muh freedoms!!" (e.g they don't want any Federal "interference" in their state)
I have long since concluded that perhaps the Feds ought to come up with a minimum acceptable standard of living that anyone can aspire to. And then make that standard a prerequisite to be a part of the union.
That was the intent of the original Fair Labor and Minimum Wage acts. Roosevelt ac
Private equity (Score:2)
{SUCH AND SUCH PUBLIC COMPANY} posted its highest quarterly net income on record, more than three times its previous best quarter.
Insights like this are a reason some private equity targets quasi-monopolies. No market reporting means data like this stays private and hidden from public view.
Austin TX here (Score:2)
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Whoa, whoa, whoa, let's not go overboard. Murder, yes, but treason?
Re:Treason. (Score:4, Insightful)
I took your post to refer to "the enemy" as ratepayers.
More than anything it's the result of the big game of 'Executive Musical Chairs'. When executives change companies every 7-8 years there's no value to them, personally, for long term investments like winterization. A storm like that is a once in a decade event, and they'll be off looting some other company by then so why would they want to lower the value of their stock grants by spending money that will only benefit the next guy to sit in the corner office? This is also the reason why R&D spending by US corporations has cratered over the last two decades.
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Indeed. They are public utilities, which means that they receive special protections from the government, i.e., the people, in order to operate as a monopoly in exchange for providing cheap, stable energy. Clearly, they are not honoring their contract.
Only in Texas would people applaud industry for reneging on its contract with customers, i.e., the people.
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That's not a choice most of us get to make. There's a certain point on the economic scale where you are allowed to make those sorts of decisions, and well over ninety percent of us are far below that line. If you're above the line, you absolutely do not see people below that line as people. People below that line are expendable, so long as it leads to bigger profits.
That's not a popular thing to say, but it is absolutely 100% true.
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This is why authoritarian regimes are bad.
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Yes it is.
( As typical Texas Summer weather decides to take up residence in places like Oregon, California and Canada(!) instead )
-Texas