energy prices

 A week or two ago, Texas experienced some unusual weather which, by means of a couple different mechanisms, reduced the supply of electricity while increasing its demand.  The wholesale price of electricity shot up to $9 per kWh, where it is capped, and many people had their power shut off altogether as they were sacrificed to preserve electricity for priority customers (e.g. hospitals).  Other people kept receiving power; some of them have retail providers who pass along the wholesale price of the power, and many of them are now seeing very large power bills, some over $10,000.

There are a few things that I've been thinking about related to this.

• If you were to draw an actual "marginal benefit" curve, based on some plausible measure of customers' own valuation of marginal units of power, it doesn't seem to me like it would be as inelastic as these price dynamics imply. My impression is that a lot of the people who were shut off would have been unwilling to pay $10,000 to instead have power through the week, and especially that, given the choice between paying $10,000 to use that much power or $5,000 to have half as much, they would have opted for the latter. Perhaps I'm simply wrong here; suppose I'm not.
  • How well were the customers paying variable rates able to track and control their use of electricity? Presumably they have some kind of smart meter that at least knows when they used power; are their meters able to communicate the price in real time, maybe shut off appliances or change thermostats? (Did these people take steps to lower thermostats themselves?)
  • What is it about the way the market is structured that caused the price to get well ahead of marginal benefit (assuming, again, that that's what happened)? Perhaps if more consumers had been on variable-rate plans the system would have been more robust. Any power that was used that was not worth the price to the customers was presumably used either in ignorance of the price or under an arrangement in which the person deciding to use the power was insulated from the cost.
• The supply side, on the other hand, does seem really to have been quite inelastic; the marginal cost, I'm guessing, was well under $1 per kWh up to a very high percentage of the amount actually being supplied, with a sharp upturn at that point. Classical Marshallian welfare analysis suggests that, in such a context, "producer" surplus will be very high. In a rational expectations model with free entry, sellers would expect these kinds of episodes and the surplus would be used to cover fixed costs and/or induce entry. In the real world, it does look like a nice reward for the producers that were able to keep producing power, perhaps because they had prepared better for a situation like this, or perhaps because they were lucky. (Usually there's some of each.) I don't know whether it's likely to induce local improvements to robustness or not.
• Some of the drop in supply seems to have been that gas-fired plants weren't able to get natural gas. Few if any retail gas customers seem to have lost gas, however; it was apparently prioritized first to households, with power plants lower in priority. I have heard the word "obviously" attached to this decision, perhaps because cutting off gas to households that use gas during a cold snap would mean those houses would lose heat, yet what did happen is that many houses that use electricity for heat had their heat cut off during a cold snap. I don't know that the physics of the gas pipes would allow households to have some throttled quantity of gas, but it seems likely that some alternation — rolling gas-outs designed to provide gas to households when it's likely they're dropping below some temperature like 45 or 55 degrees, but provide some gas to the plants producing the power to heat other houses — would have been better on the whole.