As watchers of the capacity market debate await ERCOT’s long-delayed forecast of future reserves, the Wall Street Journal reported today that Energy Future Holdings (EFH) is nearing bankruptcy.

For supporters of imposing a $3.2 billion “electricity tax” on Texas consumers through a centralized capacity market, EFH’s pending bankruptcy has been used as evidence that Texas’ world-class electricity market isn’t able to maintain a reliable supply of electricity. 

The truth, however, is captured in the opening of the article by the WSJ’s Emily Glazer and Mike Spector:

One of the biggest leveraged buyouts of an American company is preparing to file for bankruptcy protection, brought to its knees by heavy debt and a misguided bet on the direction of natural gas prices.

In today’s market with low prices, it is no wonder that some companies are struggling–especially those companies that borrowed heavily to build new generation in anticipation of high natural gas prices over the long term. But other companies are investing in Texas, both in new and exiting generation. 

ERCOT’s upcoming projections are expected to confirm wha the Foundation has been saying for two years: free markets work as well for electricity as they do for everything else.