Optim Energy, a Texas electricity generating company, filed for bankruptcy on Wednesday because it couldn’t service its large debt.
Other generators are also struggling with debt. It appears that Energy Future Holdings’ (EFH) high debt will lead to its bankruptcy, and NRG’s operating profit for the first nine months of 2013 turned into a net loss after servicing its debt. But these struggles don’t mean the competitive Texas market can’t keep the lights on.
Instead, these companies debt problems were caused by heavy borrowing around 2007, the first year that competition was fully operative in Texas. Some companies thought the high prices of that year would continue, and so borrowed heavily to build new generation.
Prices soon fell, however, as competition increased the efficiency of the market and the Great Recession slowed down the economy. With today’s lower prices, some companies can’t pay off their debt.
Other companies, however, are busy making new investments in Texas. Calpine, the Blackstone Group, and even NRG are looking to increase their generation capacity.
The same free market that ensures we don’t run out of computers, gasoline, and gummy bears will ensure we won’t run out of electricity. We don’t need a capacity market or a $3.2 billion electricity tax to keep the lights on in Texas.