Mostly just thinking out loud

You may be right- it's very hard to imagine that normal people really wanted to be exposed to that kind of downside.

But also it reminds me of the kind of articles you see from time to time where someone bought a cut-rate airfare, and then got bumped or had some other inconvenient change and was upset that they had no recourse. But of course the whole reason that fare existed was because the buyer was agreeing they could be bumped.

So if the options are fixed rate power that is cut when the utility doesnt want to pay the spot price, or wholesale power that stays on but exposes the buyer to the spot price and is usually cheaper than the fixed rate, I start to imagine that there is a market for that. And that like the airfares, people are happy to take the upside but cry not fair when stuck with the downside.

It depends on the product. It's viewed as perfectly fine to buy and sell futures contracts on global commodities without protection, because the people doing that know what they're doing. It's likewise OK to sell win chances on lottery or slot machine payouts, because the customer is presumed to understand the risks well.

But not everything is like that. In particular household utilities aren't elastic things: people need them in a way they don't need to gamble. So the government needs to be regulating this on our behalf, because it's not reasonable to assume everyone knows the weatherproofing state of the Texas power grid.

That doesn't mean that no consumer ability to exploit spot power should exist. I mean, there are similar products envisioned like "charge overnight" for EVs that seem safe.

But the idea that somehow consumers were going to be so sophisticated as to manage their risk to tolerate a $10k electric bill is just bananas.

Another option would have been to require to have a sensible cost cutoff point (smart grid). It would have been more expensive to implement, but a great compromise.

It's basically the problem of tail risk aka "picking up pennies in front of a steam roller". I'm not against it per se, but it does make sense that consumers be informed of it when making a decision, be it writing options or buying electricity at spot rates.

Griddy claims[0]—a claim I don't have the knowledge to verify—that this price spike was a political intervention, not a natural consequence of the market, and thus something they couldn't have predicted.

[0]: https://www.griddy.com/post/griddy-update-why-energy-prices-...

Griddy is being a bit disingenuous here, IMO.

ERCOT operates a power-only market, unlike most grid operators. No producers get paid "for capacity" (for agreeing to be ready to provide power, even if they're not currently doing so). To provide a motivation for producers to have excess capacity, ERCOT allows the wholesale price of electricity to rise as high as $9000/MWh in shortage conditions.

During the past week when massive amounts of supply went offline ERCOT forced the downstream utilities to disconnect customers (shed load) to avoid bringing down the entire grid. This is what the "EEA 3" in Griddy's graphic means. After vast swathes of Texas were disconnected from the grid and prevented from buying power at any price, the market clearing price for those remaining on the grid was around $1200/MWh.

The Texas PUC ordered ERCOT to raise the price to the cap of $9000/MWh to accurately reflect that demand was vastly exceeding supply at that moment.

So was it an intervention? Yes. But the intervention was there to make the market function more like it was intended to. Shedding load from the grid was also (an earlier) intervention in the market. It's not really possible to operate a completely "free market" in electricity because of physical and moral constraints (are you really going to turn off electricity to the water treatment plant before some guy's mansion?) as we're seeing.

Right... the wholesale cost was artificially being held low during that time because ERCOT was load shedding by disconnecting consumers.

The algorithm just sees load < available power and sets the price.

This means that as the load continued to shed, wholesale price would have continued to plummet, which would have caused more generation to go offline (as there's no demand for it, and price per kWh is dropping), which is the exact opposite of what was required to stabilize the grid.

Generation needed to be brought back online, and wholesale customers still connected to the grid (think large industry) should have pulled their load off the grid to restore capacity for the retail consumer.

On the contrary, the price likely would have gone higher without the regulatory cap...

The article shows the real time supply and demand price at the time being 300x lower. It wasn’t a price cap but more like a mandatory price increase. At least that’s how the linked post from Griddy describes it.

When demand exceeded supply and load had to be shed, the fair market price likely would have been much higher.

Griddy is advocating for having their cake and eating it too here, I think.

The political intervention was done using the mechanism described in the rules (according to my reading of your link).

They relied on conditions staying static when the rules say things can change a lot in an emergency.

Thankfully we have the uncontroversial non-partisan non-lobbied monopolistic government-backed actors (aka regulators) to save us feeble humans from making our own purchasing decisions in a free market

It doesn’t seem like anything unlawful, fraudulent, or even just shady happened here. Where is the threshold where you see the need for regulation superseding the freedom for people to transact with such risk exposure? Some people may want to pool into something amortizing risk as described but others may want to just reduce their usage. Shouldn’t they be permitted to do so? It’s like how some people may want to hold their savings as cash, some may want to invest in individual stocks, and some may seek mutual funds. The article’s final conclusion, that this episode highlights the necessity of collectivism over individualism, seems like a major logical leap.

Nothing unlawful, fraudulent, nor shady happened here.

But something very risky happened, and the people on the downside of that risk are not in good positions to weather the downside.

Whether that is deserving of regulation is a separate issue, but people set themselves up for a disaster on the basis that the downside would not hit them. Pow! Now they are in a world of hurt.