The architect of Texas' electricity market says it's working as planned. Critics compare it to late Soviet Russia.

The Texas power grid, entirely contained within the state to avoid federal regulation, is facing renewed scrutiny after buckling under four days of sub-freezing temperatures. "Far too many Texans are without power and heat for their homes," Texas Gov. Greg Abbott (R) said Tuesday. "This is unacceptable," and the Texas government and legislature must find ways "ensure that our state never experiences power outages like this again."

This isn't the state's first rodeo with widespread blackouts amid unseasonable cold, however. The Texas power grid is designed to independently manage hot summers, not really cold winters. But "what has sent Texas reeling is not an engineering problem," Will Englund reports at The Washington Post. "It is a financial structure for power generation that offers no incentives to power plant operators to prepare for winter. In the name of deregulation and free markets, critics say, Texas has created an electric grid that puts an emphasis on cheap prices over reliable service."

Matt Breidert, a portfolio manager at TortoiseEcofin, calls it a "Wild West market design based only on short-run prices."


"For years, energy experts argued that the way Texas runs its electricity system invited a systematic failure," The New York Times elaborates. "In the mid-1990s, the state decided against paying power producers to hold reserves, discarding the common practice across the United States and Canada of requiring a supply buffer of at least 15 percent beyond a typical day's need." Instead, Texas gas-powered plants rely on steady flow from in-state natural gas pipelines.

"The year 2011 was a miserable cold snap and there were blackouts," University of Houston energy fellow Edward Hirs tells the Houston Chronicle. "It happened before and will continue to happen until Texas restructures its electricity market." Texans "hate it when I say that," but the Texas grid "has collapsed in exactly the same manner as the old Soviet Union," or today's oil sector in Venezuela, he added. "It limped along on underinvestment and neglect until it finally broke under predictable circumstances."

William Hogan, the Harvard global energy policy professor who designed the system Texas adopted seven years ago, disagreed, arguing that the state's energy market has functioned as designed. Higher electricity demand leads to higher prices, forcing consumers to cut back on energy use while encouraging power plants to increase their output of electricity. "It's not convenient," Hogan told the Times. "It's not nice. It's necessary."

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