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Texas is a haven for catastrophe capitalism with a system that ensures catastrophe

When Naomi Klein wrote The Shock Doctrine in 2007, she described a system of "disaster capitalism" in which neoconservative free markets took advantage of extraordinary situations. With excuses ranging from hurricanes to government falls, systems were put in place for the Chicago School economy. With a laissez-faire, everything goes into the politics of the rich and that the government does nothing to help the poor. The forces behind this movement recognize that neither nations nor individuals in the midst of a crisis are able to negotiate fair long-term solutions. The whole point is that disasters uniquely open people, both economically and emotionally, to being manipulated by scammers. They can be people who haggle water for ten times its normal price. These can be companies that sell electricity for 27,000% of the usual price. Those who impose neoconservative market systems are simply at the forefront of the scammers' food chain.

Such systems insist on “austerity” when it comes to social programs designed to lift people out of poverty or to protect them from the next disaster. This is because these buffers make people less vulnerable, and therefore less likely to agree to the terms and conditions imposed by the disaster capitalists when the screws are turned again. These systems also insist that the other end – the end where billionaires gamble with options and financial instruments – must be essentially unlimited. That makes every disaster an opportunity for a fat payday.

The Texas energy market as managed by the Texas Electric Reliability Council (ERCOT) is not just a market designed to protect investors and harm consumers in any disaster. It's a market that is tailor-made to cause disaster.

The incentives of this market are meant to keep the difference between supply and demand in Texas paper thin. The way in which the pricing is carried out within the framework of ERCOT means that the price of electricity can fluctuate significantly in a very short period of time with very small changes in the available supply. These “price spikes” are the main means by which the system creates incentives to expand the electricity supply. And it really is an incentive. It provides an incentive to create more peaks.

This doesn't require electricity suppliers to be "bad". It only requires them to reflect the economist's ideal of a "rational actor" when faced with a system where limiting supply leads to higher profit. If less electricity makes more money, why not?

Texas is not alone in this issue. In 2000 and 2001, California's power grid was brought to a point where supply and demand were very close when a drought restricted hydropower generation in the northwest. Savvy private power producers in California then discovered that this was the perfect time to “service” multiple systems at the same time. These outages then forced the grid managers to buy electricity from the spot market at rapidly increasing rates.

As the energy industry is closely intertwined, some of the companies that speculate on electricity also had a major impact on the natural gas market. Some particularly smart companies found that by simultaneously manipulating the price of natural gas using the California formula, they could increase the maximum spot price for electricity even further. One of these companies was called Enron. The other was Reliant Energy. Reliant is now part of NRG Energy, which powers 2.9 million homes in several states, including Texas.

Which is certainly a pure coincidence, California had previously asked for changes to its market rules, which would have set a hard upper limit for the spot market prices. The Federal Energy Regulation Commission refused.

Texas suffered massive blackouts in 1989 after a cold snap drove demand well above supply. This happened again in 2011, leaving many Texas without power for days. This led to a federal investigation that indicated the urgent need to winterize the system and prepare for future events. That didn't happen. And the Dallas Morning News can explain exactly why it didn't happen. Not only did electricity companies make more money in two days than they did in a year, but there was a real effect. Just not for consumers.

This week is like hitting the jackpot with some of these incredible prizes ”(Comstock Resources) CFO Roland Burns) said. "To be honest, we were able to sell for a material production volume at super premium prices."

This last sentence can be translated as "we killed while selling far less gasoline". That's easy in a market where prices are up 30,000% in a week.

For the energy industry, this really hit the jackpot, and the celebrations are being held by speculators at all levels, as well as analysts in the drilling industry who expect the gas industry failures to be met with demands for more of the same source that just failed. Not only are they confident that Texas Republicans like Gregg Abbott will not be able to make significant changes to the market by attributing the problems to "green energy," but that Fox News' megaphone will fund more gas exploration fracking will stir up.

Even so, consumers enjoy some kind of trickle. (Though "enjoyment" is far from the proper term.) As the Washington Post reports, it only serves to shed light on the growing extent of Texas' water crisis when power comes back.

Because of the poor insulation in many homes and water pipes, often barely buried under the surface, the multi-day cold snap causes water problems to arise in many areas of Texas, both at the personal and community levels. Over 13 million Texas residents live on an order for boiling water Friday morning – an order that is especially difficult to fulfill for hundreds of thousands who don't yet have electricity. Houston residents have queued in parks to have city officials distribute water, and bottled water is even being delivered to hospitals in the area that are also facing non-working taps.

One thing is clear: with more than 40,000 megawatts of electricity still in the event of a “forced failure”, the fault is not a wind turbine. Both wind and sun developed during the crisis from just under to well above the forecast production level. Electricity generation from wind is expected to exceed 11,000 megawatts on Friday evening as a new weather system brings additional wind to the region. Solar energy is expected to exceed 5,000 megawatts at noon. This contributes to the fact that the spot prices for electricity on Friday are nearly normal again in many areas, although the prices for short-term energy futures are still close to the maximum allowable value.

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