On the Texas outages and “free market” economics for essential public goods - a thread. /1

In 2000, I was in CA during their energy crisis. At the time, many media outlets blamed it on the state’s capping of retail costs for electricity - I.e. the lack of a free market, which helped hide the true cost of providing a megawatt in the desert. /2

I see many familiar conservative folks doing the same in Texas, along with a heaping dose of whatever wind/ solar/ “alternative energy” left-wing villains. Again, never change, guys. /3

It was only sometime after the crisis that the real reason for the price spikes became clear - Enron and market manipulation of energy. /4

Prior to Enron and energy market deregulation in the 90s, power companies made surge power available for companies in neighboring states or regions as needed - because they knew that if they ever faced a surge in demand, there would be reciprocity. /5

In December 2000, Phil Gramm pushed the Commodities Futures Modernization Act, which explicitly created the market for energy futures. The act specifically benefited Enron an energy futures trader - Gramm owned significant stock and his wife was on the board. /6

You may remember Phil Gramm from Gramm Leach Bliley, another piece of disastrous commodity deregulation legislation that led to the 2008 financial crisis. Gramm was a champion of @NaomiAKlein’s disaster capitalism at its finest. /7

In any case, the energy futures market stopped the practice of reciprocal sharing between power companies. Enron now bought and sold energy futures, with zero regulation on price gouging in the event of, say, weather-related demand surges. /8

In the six months before the passage of the act, there were comparable demand surges in California, but only one rolling blackout. In the six months following the act - until federal regulators imposed price controls in June 2001 - there were 38. /9

Anyway - price controls were imposed, Enron collapsed under the weight of its own grift, so old news, right? Of course not.

Rolling blackouts mean two things: first, outdated energy grid. We need more federal investment in infrastructure for power sharing across grids. /10

But more importantly, baseline price controls from FERC don’t walkways apply to states with their own grid, like Texas. So cost and price regulation can vary wildly by state. /11

News shows that in Texas, the energy futures market hit their price cap at $9,000/ megawatt hour, a 3,466% increase since Friday. /12

So why rolling blackouts? Since the advent of the energy futures market, rather than saying “there’s not enough power to meet demand,” it would be more accurate to say “thanks to price gouging by traders, power companies can’t afford to buy power to meet demand.” /13

We’ve subjected power companies, and by extension consumers, to energy market traders that make money by waiting for the opportunity to price gouge desperate people for electricity. /14

But hey, free market, amirite?

What a silly fiction. There are high barriers to entry for power and power grid companies, and inefficient to have competing power grids. This is why we have consumer price controls - otherwise, opportunity to price gouge would be limitless. /15

We understand this at the service to consumer level. But meanwhile, folks like Phil and Wendy Gramm became multi-millionaires by allowing the traders and middlemen to price gouge on public goods to their heart’s content. /16

Why power companies would rather have rolling blackouts than provide Texans power during severe weather. /17

Relatedly, wind turbines can be less functional in cold weather, yes. But there are mitigating steps that can be taken when the weather is expected. So this isn’t about the “unreliability” of alternative energy sources. They can f*ck off, with that talking point. /18

This is about treating the market for public goods as a “free market,” when demand is totally inelastic. As with health care: price gouging from suppliers is rampant, and so the service provider - power company, health care system - make ugly choices about service provision. /19

It’s not a free market in any sense of the word, and Adam Smith and even Milton Friedman would roll over in their grave should you call it that. They believed in public goods. /20

That’s less a stirring defense of Friedman than a reminder that most Republican politicians, pundits, and think tanks subscribe to a system of economic beliefs - Austrian economics - that no real economist would take seriously. /21

Austrians believe that any consumer choice, including “no choice,” is sufficient, and thus any market is a functioning market. A monopoly is a functioning market. A theory that’s ludicrous on its face. /22

I reference because the vaunted conservative “economic” and “free market efficiency” bona fides are, again, a total fiction. It’s not Friedman. It’s not economics at all, any more than prosperity gospel is gospel.

They’re just grifters. /23

Fraud and grift is their real ideology. Is it any wonder Donald Trump found such a welcoming home in the party? /24

In any case, I’m deeply sorry for Texans living without power in this weather. And I hope people see the reason behind it for what it is - the fault of the politicians who enabled this price gouging. /end