Democrats Should Learn From Texas’ Energy Debacle
This week, Chairman of the Energy and Commerce Committee, Congressman Frank Pallone, released legislation to reform our national energy policy, and specifically, ensure that we secure power from ever cleaner sources. A laudable goal. But one component of Pallone’s Clean Future’s Act, is to try and deregulate electricity markets around the country to spur the development of wind and solar power. But as a Texas resident, I, like millions of others across the state, just bore witness to the “benefits” of deregulation, suffering through a power outage during a cold snap that cost lives and destroyed billions of dollars in property.
Given this recent deregulation debacle in Texas, Democrats would be making a mistake rallying around legislation to spur the deregulation of electricity markets elsewhere in America.
I know that Texas didn’t deregulate our electric grid to secure more clean power. Rather, the state deregulated to introduce market competition and let energy traders drive down utility prices for Texans. This strategy of deregulation, which led to last week’s disaster, was concocted by the now defunct Enron Corporation, then Governor George W. Bush and his successor Rick Perry.
If you’re not from Texas, you have to understand that there is a fierce independent streak in our state, and deregulation offered us freedom from being regulated by the federal government. And, energy traders could make millions of dollars by creating a new marketplace to commoditize electricity. It was supposed to combine everything Texans’ cherish: free markets, states’ rights and profits.
But deregulation blew up in our faces, because the companies which provide generation, have no incentive to develop enough electricity to power everyone on either the coldest or hottest days. After all, why invest tens of millions or billions of dollars into a new power plant that will only be at full capacity just a few days a year? Or, why weatherize your windmill for the same reason? The agency in charge of our deregulated electric system, known as ERCOT, has been deservedly panned in the media in recent weeks. In fact, five out-of-state ERCOT board members resigned in the wake of the energy crisis. Yet, Pallone’s legislation actually calls for the creation of an ERCOT-like entity in every state.
Alternatively, a government regulated vertically integrated electric utility – or one that owns both power plants and the infrastructure to deliver that energy to homes and businesses – can be incentivized by the government to invest in that energy production for 365 days a year. In addition, regulators require utilities to hedge against big swings in electricity prices for customers. Without such a mandate, Texas utilities took no such steps. Hence, when that cold weather hit Texas, the spike in electricity prices was passed directly onto Texans.
Unfazed by what just happened in Texas, Pallone’s legislation hopes to nationalize deregulation to spur more investment in renewables like wind and solar. I support the Chairman’s goal of cleaner power, but what happened in Texas last week was not a fluke. Last summer, California had widespread power outages across the state during a heatwave, because they too wanted to force the adoption of clean energy by undercutting the vertically integrated electric market structure.
Keep in mind, there really is no evidence that deregulated electricity markets reduce the cost of power or spur the creation of more clean energy. When it comes to the price of electricity, a piece in the Wall Street Journal just ran titled: “Texas Electric Bills Were $28 Billion Higher Under Deregulation.” There is also academic research which compared electricity costs for customers in regulated versus non-regulated states and found that: “in fact rates increased in restructured states.
Also, as of year-end 2019, investor-owned electric companies across the nation have reduced their carbon emissions approximately 45 percent below peak 2005 levels. This transition away from carbon emissions significantly outpaced the U.S. power sector’s overall 33 percent reduction during the same period. In just the last 8 years, more than half of new electricity generation capacity was wind and solar and utilities in regulated states created a vast majority of that clean power.
Democrats must also not fall into the environmental trap that cost them control of Congress in President Barack Obama’s first term. Obama’s premier climate legislation — the American Clean Energy and Security Act of 2009 — passed the House, but died in the Senate. Republicans used it as an example of job-killing policies that suggested Democrats cared more about polar ice caps than the working class. The legislation cost many Democrats their seats in Congress, and helped usher in Republican control of Capitol Hill.
So, while I support clean energy and lower prices for electricity, I think it would be a mistake for Democrats to rally behind Pallone’s legislation.
Roosevelt “Trey” Daniels is the president of the Daniels Group, a political consulting firm in Houston and serves on the Board for Centrist Democrats of America