Texas freeze mess was no accident

"Efficiency" is dangerous.

The Texas mess is not an Act of God. It was a choice.

After a week of false starts and finger-pointing, people are settling in on the reality of what went wrong in Texas. Simply put: Their system was designed to fail when it did. Texas policy-makers wanted their energy grid to be efficient and low-cost, and it was. It was market-based, with energy providers competing with each other. The system incentivized matching load with resources, to avoid waste. Utility companies made investments that pencilled out to bring value. 

Click: Texas Tribune

Texans were proud of their system, one that was independent of the rest of the federal system. They avoided the regulations that would have required redundancy and waste. The system was an example of no frills government and the genius of private enterprise and free markets.

The problem is that a system like that isn't robust against unusual events. It wasn't supposed to get to zero degrees Fahrenheit in Texas, and then stay there for a few days. It was something that could happen, of course, and they had earlier experience with something near it, but Texas did not respond by hardening its energy infrastructure. There was no incentive to do so. Market competition does not reward unproductive backup systems.

When the unusual happened, the system broke. Millions of people lost power. They got cold. The water system failed. Interior pipes froze, and then broke. As water begins flowing again, buildings are being flooded.

Risk transfer. Consumers were unaware of it, but they were paying a hidden price. The utility system transferred the risk of failure in a cold spell to consumers. Some of those risks--the discomfort, the inconvenience, the injury and deaths caused by carbon monoxide as people tried to keep warm--were borne directly. Some of the property damage costs were re-transferred to property-casualty insurers. 

If the property-casualty insurers priced the risk correctly, then some of the low cost of energy was regularly showing up in higher cost to insure against hazards like water damage. People blamed the insurer, not the energy companies. Someone always pays the price: the consumer, other consumers, stockholders, someone. Risk managers at insurance companies are re-calculating right now, re-pricing homeowners' and landlords' insurance. Texans will pay next year and thereafter, seen in higher rates. There is no free lunch. 

Improbable events have giant consequence precisely because they are unguarded against. Systems with a giant flaw can work perfectly well--until they don't. That was Texas. 

That lesson may be lost in the flurry of excuses and efforts to shift blame and costs. People who bought less-expensive homeowners' insurance policies will finally, to their dismay, read the fine print on exclusions.

Austin Newspaper

Politicians are pointing fingers. Texas Governor Greg Abbot and GOP rising-star U.S. Representative Dan Crenshaw both went onto Fox to say it was primarily the fault of the Green New Deal and windmills that iced up. Blame Alexandria Ocasio-Cortez. That explanation is falling apart--wind turbans work great in Antartica and Greenland--but they got the idea out there early and the villain is plausible to GOP voters. It is an easier target to understand than how natural gas pipelines can solidify and gages in nuclear power plants freeze and fail. 

Ted Cruz's trip to Cancun and back is another distraction. Cruz did not make the temperature cold, but he serves as an example of a politician leaving his presumed duty post, to go to a Ritz Carlton, no less. He is an easy target, and a more comfortable one than looking into the mirror.

The Texas event was not an accident. Failure was built into the system as an intentional tradeoff between efficiency and cost. It was a policy choice.